KTC : Fundamental Outlook

Kim Teck Cheong Consolidated Berhad (KTC)

KTC was recently listed in ACE market in second half of November 2015. The IPO price was 15 sen.

Prospects

·        Embarking major expansion in Sabah, Sarawak and Brunei with the intention to list in main board in 2 years timeframe, expansions include expanding warehouse facilities in Sabah, Sarawak and Brunei and purchasing 3 new bakery production line.

·        In FYE 30^th June 2015 sales into Sarawak account for mere 4.51%, combining the expanded warehouse and relatively untapped market, Sarawak will be the key driver to KTC’s increase in sales revenue and profitability.

·        Most of the expansion will materialize in FH of 2016, therefore contribution from the expansion likely will only contribute in June 2016 onwards.

·        Projected revenue and gross profit from the expansion are expected to increase KTC revenue to RM400m - RM450m by FYE 30^th June 2017 base on the following :-

o   New warehouse facility in Kota Kinabalu will increase around 38% of its current capacity in Kota Kinabalu.

o   Larger warehouse facilities in Sarawak, (Miri, Sibu & Kuching) will increase around 77% its current capacity.

o   Adding 3 new production lines to manufacture new bakery products with the expected capacity of 40,000 pieces per day will double its current production and effectively doubling revenue as well.

·        Basis 14% gross profit margin, RM400m – RM450m revenue will yield RM56m to RM63m gross profit margin while its profit after tax will be in the region of RM12m – RM13.5m.