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Wednesday, April 29, 2015

BIMB Research has Buy call on Kawan Food

KUALA LUMPUR: BIMB Securities Research has a Buy call on Kawan Food with a target price of RM2.10 as its prospects will get better once its unrivalled facility in Pulau Indah comes on-stream.
It said on Wednesday the target price was based on 22 times price-to-earnings ratio (PER) over FY15 EPS.
“We therefore re-introduce our FY15 and FY16 earnings forecast higher at RM25.0mil (+15%) and RM29.7m (+10%) respectively plus a new target price at RM2.10,” it said.
BIMB Research said Kawan Food will consolidate its operation from Shah Alam Section 15 and Section 16 to a new factory in Pulau Indah. The new factory will have a production capacity five times that of its existing plants in Shah Alam.
“Kawan Food is constantly innovating its products for healthier and tastier food and beverages, and are now active in the United State, United Kingdom, India and the Middle East. 
“Currently Kawan Food derives 60% of its sales from overseas markets and we expect this to improve further once their capacity is enhanced,” it said. 
BIMB Research expects Kawan Food to register net earnings of RM25.0mil and RM29.7mil for FY15 and FY16 respectively.
“Balance sheet is strong with net cash position of RM30.2m as at FY14. With steady cash pile, solid cashflows and benefits from the weak ringgit, we believe the company is able to support its regular dividend payments and capex moving forwards,” it said.
The research house expects revenue to grow further upon completion of the new production site which will produce five times as much as the existing production figures.

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