3A expects strong double-digit revenue growth in FY11

Three-A Resources Bhd (3A), a food and beverage (F&B) ingredient manufacturer, expects to register a “strong double-digit” revenue growth in its financial year ending Dec 31, 2011 (FY11) riding on major expansion of its plants in Sungai Buloh, said its director Fong Chu King.

He said the group’s third glucose plant, which would be ready by the fourth quarter of this year, would add a maximum of 8,000 tonnes per month of glucose production to supplement its first and second lines of output of 6,000 tonnes and 7,000 tonnes, respectively.

Fong said 3A was also on track to set up its second maltodextrin plant in the fourth quarter which could churn out some 2,000 tonnes per month of the powder product which is used as a bulking agent as well as a processing aid and texture improver in a variety of F&B products.

“The first maltodextrin plant is already in full capacity and it is reflected in our revenue growth,” he told The Edge Financial Daily recently.

In the first quarter ended March 31, 2010, the group’s revenue rose 85% to RM61.33 million from RM33.07 million a year earlier, while net profit jumped 178% to RM5.95 million from RM2.14 million. Basic earnings per share (EPS) rose to 1.61 sen from 0.69 sen. As at March 31, 2010, the group’s net asset per share stood at 38.47 sen.

According to Fong, 3A has invested between RM7 and RM8 million in its third glucose plant and about RM16 million in its second maltodextrin plant, adding that the group wanted to ensure consistent supply of products and on-time deliveries.

“We are still enjoying strong growth in 2010 from the utilisation of our second glucose plant since 2008 and successful upgrading of some plants to push output,” said Fong, adding that glucose could be applied to a variety of products such as confectionery, non-dairy creamer and sauces.

In the year ended Dec 31, 2009, the group posted a net profit of RM18.03 million, up 49% from RM12.13 million in the previous year while revenue climbed 17% to RM178.58 million. FY09 EPS stood at 5.7 sen. In FY09, 3A declared an 8% interim dividend less tax of 20 sen per share which was paid on Jan 9, 2010.

Fong pointed out that 3A was confident of posting satisfactory results with strong growth in the next few years as it was actively looking to expand its export markets in the Asia Pacific and penetrate new markets in the European Union.

“About 30%-35% of our revenue is derived from the export market. Our export figures are growing each month and so is our export market,” he said.

On whether 3A was looking at a dividend policy for shareholders, Fong said: “3A is still growing and we prefer to retain some of these profits for the purpose of generating growth.”

The stock rose seven sen to RM1.90 last Friday. The counter traded to a 52-week high of RM2.36 on Feb 17, 2010 and a low of 38.5 sen on July 9, 2009. Year to date, it is up 25.83%.

This article appeared in The Edge Financial Daily, July 12, 2010.