KUALA LUMPUR (Aug 14): Shares in Seng Fong Holdings Bhd (KL:SENFONG) rose on Wednesday to their highest in two weeks, after the rubber processing company reported record annual profit.
Seng Fong rose as much as 5% or six sen to RM1.25, its highest since July 30, 2024. The stock was trading at RM1.22 at 9.30am, giving the company a market capitalisation of RM880 million. More than 2.48 million shares changed hands, above the trading volume’s 200-day moving average.
“Earnings growth will be driven by a gradual increase in capacity and margin expansion via integration of biomass system and smart equipment,” said Apex Securities, the sole research house covering the stock, which maintained its ‘buy’ call on the stock with a target price of RM1.90.
Shares in Seng Fong — which mainly processes raw rubber into intermediate blocks to be sold to manufacturers such as tyre makers — have more than doubled so far this year, thanks to rising volume and average product prices. The company derives the bulk of its earnings in US dollars from export sales.
Rubber prices have risen, with the SMR 20 grade climbing about 12% so far this year to 781.50 sen per kilogramme, data from the Malaysian Rubber Board showed.
For the next financial year ending June 30, 2025 (FY2025), Seng Fong is expected to make a net profit of RM72.2 million, according to Apex Securities’ forecasts. The house also expects Seng Fong to gradually lift annual capacity to 200,000 metric tons in FY2025 and 210,000 metric tons in FY2026.
“Additionally, full utilisation of the biomass system and the integration of smart equipment into operations are expected to contribute to margin expansion through overhead and manpower costs savings,” the house said.
Net profit for FY2024 more than doubled to RM57.3 million, a new high since the company's listing in 2022, from RM22.6 million or 3.13 sen per share in FY2023. The company also credited the biomass system that helped lower diesel costs.
Seng Fong’s factories added a second working shift, which raised its production hours to 18 hours a day from 12 hours a day. Total annual production rose to 190,000 metric tons in FY2024 from 166,000 metric tons in FY2023.