KUALA LUMPUR (Oct 8): Yenher Holdings Bhd (KL:YENHER) is now entering a multi-year growth phase that could potentially see the animal health products maker’s earnings double or triple in the coming years, said Hong Leong Investment Bank (HLIB).
Earnings in the second half ending Dec 31, 2024 (2HFY2024) would pick up slightly, thanks to a gradual recovery in the swine segment, while sales for the poultry segment are also expected to increase, the research house said in its coverage initiation note. HLIB is now the sole research house covering the stock.
A factory explosion at a factory owned by Germany’s BASF, a key supplier of several vitamins, could disrupt supply and cause a shortage, the house flagged. “This may benefit Yenher’s distribution segment, as the prices of these ingredients are expected to rise following tighter supply,” it said.
Shares of Yenher have been volatile each year since its listing in 2021. So far in 2024, the stock had risen as much as 28% before losing nearly all of its gain, and is now up just 3% year-to-date.
HLIB, meanwhile, started coverage of Yenher with a ‘buy’ call and target price of RM1.42 for a capital upside of 67% from its last price. Together with the projected 3.5% dividend yield, the expected total return is over 71%, according to the house.
Yenher is also a beneficiary of recent strengthening of the ringgit, as a large chunk of its manufacturing cost is denominated in the US dollar, HLIB said, flagging that the company’s profit could rise to by nearly 14% if the ringgit appreciates to 4.30 against the greenback.
The strengthened ringgit should also lead to lower capital expenditure for imported machineries, the house noted.
For FY2024, Yenher is expected to rake in a core net profit of RM20.8 million, followed by RM24.1 million for FY2025 and RM29.2 for FY2026, according to HLIB’s forecasts.
In the longer term, Yenher’s manufacturing revenue could jump five times by 2030, with its factory running at full steam and post expansion of its joint venture (JV) with Fermentationexperts A/S, HLIB said.
In September, a shareholders’ agreement was signed with the Danish firm to manufacture, market and sell plant proteins and fermented palm kernel meal. Yenher will hold a 60% stake in the JV, with the remaining 40% held by Fermentationexperts.
Yenher is also in the midst of building a new RM65 million factory in Batu Kawan, which is expected to be operational in phases from the second half of 2025. Manufacturing accounts for 56% of Yenher’s gross profit, while the distribution business accounts for the rest.