KUALA LUMPUR (March 2): Leong Hup International Bhd's (KL:LHI) outperformed the broader market decline on Monday thanks to a set of stronger-than-expected results by the poultry producer.
Analysts scrambled to raise their earnings forecasts and target prices, betting on further margin expansion from lower import costs of inputs as the ringgit appreciates further. The consensus is also unanimously bullish on Leong Hup.
Revenue growth this year should remain stable with consistent poultry demand in Malaysia and continued average selling price uptrend for day-old chicks in Indonesia, said Maybank Investment Bank.
Shares of Leong Hup opened lower before rising as much as 5.2% or four sen to 80.5 sen. The stock was trading at 79.5 sen after more than one million shares changed hands at 9.25am. Leong Hup is valued at RM2.9 billion based on its last price.
All five analysts covering Leong Hup recommend ‘buy’ on the stock. The average target price, meanwhile, has risen to RM1.04 following the latest revisions from 85 sen before the results were announced.
Leong Hup has gained more than 18% in the last 12 months as investors banked on the stronger ringgit to help lower the costs of corn and soybean meal that account for more than 80% of the total production expenses for livestock feed.
The appreciating Malaysian ringgit against the US dollar could translate to lower feed input costs in the near term and, in turn, drive up Leong Hup’s operating margins, particularly at its livestock segment, the research house said.
Leong Hup is also “well positioned to navigate near-term geopolitical and tariff-related uncertainties, while ongoing cost discipline and operational optimisation are expected to sustain steady margin expansion and earnings growth ahead”, MBSB Research added.