Delloyd Ventures Bhd
(Nov 30, RM3.13)
Maintain buy at RM3.13 with target price RM3.90: Delloyd Ventures (DV) registered a core net profit of RM13.3 million for the quarter on the back of revenue of RM99 million, with quarter-on-quarter (q-o-q) growth of 10% and 30.7% respectively. Revenue growth was witnessed across all segments, as DV reaped the benefits from its robust Indonesian autoparts division and higher output from its plantation side, which saw earnings more than double q-o-q as we expected.
While the results were lower at the PBT level (as minority income was somewhat distorted by translation losses), representing 71% of our full-year forecast (in line with consensus nonetheless), we deem the results in line as we expect to see another uptick in earnings in 4Q in view of the uptrend in crude palm oil (CPO) prices and the delivery of its buses.
DV’s margins continued to expand, with earnings before interest and tax (Ebit) margin rising to its highest level of 17% owing to significant yield improvement in its plantation division amid surging CPO prices in the past few months. However, auto margins during the period were relatively lower as the lower volume generated from its Malaysia operation affected margins, while its distribution division has become operationally profitable given the increase in number of vehicles sold.
We remain optimistic on DV’s prospects and diversification into the plantation business, which have proven the naysayers wrong. DV also benefitted from the growth of its automotive autoparts segment in Indonesia,which capitalised on the robust demand for vehicles in that country, and increasing orders for its elongated buses. With our earnings unchanged, we retain our target price of RM3.90 and “buy” call. — OSK Investment Research, Nov 30
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