Leong Hup shares slide following earnings announcement

KUALA LUMPUR: Leong Hup International Bhd’s share price faced strong selling pressure following the release of its earnings in the fourth quarter of 2023.

The poultry producer’s trading stock dropped 6.5 sen or 9.1% to 65 sen a share at the start of Wednesday trading.

At its lowest, it was trading at 60 sen a share.

As investors digested the earnings announcement released after Tuesday’s trading hours, the share saw heaving trading interest with a turnover of 11.25 million units within the first 20 minutes, making it the ninth most actively traded counter.

According to Hong Leong Investment Bank (HLIB) Research, Leong Hup’s FY23 core net profit of RM321.4mil, which was up 31% over the previous year, beat expectations at 115.2% and 109.5% of its and market estimates due to a better-than-expected margin at its feedmill segment.

It said the core net profit was adjusted for exceptional items, comprising an impairment loss of RM22.8mil and RM3.1mil gain on disposals.

On a year-on-year (y-o-y) basis, however, the group’s 4Q23 core net profit fell 10.4% to RM101.9mil as higher subsidies received in Malaysia and margin expansion at the feedmill segment due to lower raw material prices were more than negated by weaker contribution from Indonesia.

The research firm maintained its forecasts pending more details from an analyst briefing.

However, it said it believes the strong FY23 performance would not be sustained into FY24 given the absence of subsidies and strong growth catalyst.

“While easing of feed input costs (particularly, corn and soybean meal) is positive for poultry players (including LHI), this is insufficient to mitigate the strong US dollar and weak poultry prices in major operating countries,” it said.

HLIB maintained its “hold” call on Leong Hup with an unchanged target price of 74 sen.