AnalysisBursa

6 things I learned from the 2020 QL Resources AGM

Listed in 2000 on Bursa Malaysia, QL Resources is an agri-food producer with operations across Malaysia, Indonesia, Vietnam, and China. It is involved in marine products manufacturing (MPM), integrated livestock farming (ILF), and palm oil activities. It is, however, more well-known for its FamilyMart convenience store chain in Malaysia although it is just a small part of the business for now.

The convenience store chain is currently grouped under the ILF segment as the reporting threshold has not been met to be separately reported. It will be interesting to see how the store chain will pan out in the future for QL given its relatively asset-light and scalable operations compared to other segments.

Here are six things I learned from the 2020 QL Resources AGM:

1. Revenue increased 14.8% year-on-year to RM4.2 billion in 2020 while net profit excluding extraordinary items increased 22.1% year-on-year to RM199.2 million. The better performance was due to the improved results of the MPM and ILF segments. QL also saw higher contributions from its convenience store chain. The company’s revenue was offset by the lower volume of fresh fruit bunches processed by the palm oil segment.

2. In Q1 2021, the MPM segment achieved strong positive results because of abundant fish catches and higher selling volume of fishmeal and surimi-based products. Its operations were enhanced by lower raw materials and fuel costs. The managing director Chia Song Kooi shared that domestic and overseas business accounted for 55% and 45% of the group’s segmental revenue in 2020 respectively.

3. Minority Shareholders’ Watch Group pointed out that the poultry layer farm in Raub, Pahang was infected with low pathogen avian influenza in 2020. Chiaanswered that approximately 500,000 infected birds were culled, and the production would normalise by the end of the year. In Q1 2021, revenue from the ILF segment declined because of lower raw material trading volume. Egg prices are expected to drop in 2021 due to falling demand and persistent excess supply in Peninsular Malaysia and Indonesia.

4. In Q1 2021, the palm oil segment benefited from higher crude palm oil prices and a strengthening Indonesian rupiah. The currency is foreseen to stabilise by 2021. Its Indonesian plantation is projecting a higher production of fresh fruit bunches as more of its oil palm matures. It anticipates that crude palm oil price will trend marginally higher.

5. The number of FamilyMart stores across Peninsular Malaysia doubled from 90 in 2019 to 184 in 2020. Chia is optimistic that the company remains on course to achieve its target of opening 240 stores by 2021 and 300 by 2022. QL is actively expanding its chain in Peninsular Malaysia with no plans to venture into Singapore and spin off the chain as a listed entity. The chain currently employs about 2,600 employees across its stores and central kitchen. It turned to catering and online delivery recently as footfall to the stores fell due to the pandemic. Thirty stores were temporarily closed during the movement control order period in Malaysia. The chain incurred losses in April and May 2020 but has been back to the black since June.

6. Chia mentioned that QL is not affected much by the appreciation of the U.S. dollar as the company hedges its foreign exchange exposure. The company most likely exports and imports in U.S. dollars, which provides a natural hedge to the company. On a separate note, QL has set aside RM20 million to invest in solar energy at its MPM plants in 2021. The payback period is within five years.

Liked our analysis of this AGM? Click here to view a complete list of AGMs we’ve attended »

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Shak Chee Hoi

Chee Hoi is an investor and research analyst at The Fifth Person. He was previously involved in wildlife conservation work with a non-governmental organisation as well as sustainability consultancy work. He personally believes in impacting society and the environment for the greater good.

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