Yee Lee Corp Bhd
(Nov 29, RM2.15)
Maintain neutral with a lower target price of RM1.96: The manufacturing division revenue fell by 4.4% year-on-year (y-o-y) due to lower sales of corrugated carton boxes and palm kernel. Nevertheless, the palm oil mill continued to perform well, chalking higher fresh fruit bunches processed as well as higher oil extraction and palm kernel recovery rates. The trading division revenue dropped by 5% y-o-y as turnover for energy drinks, Ribena, and cooking oil was lower.

The manufacturing division profit before tax (PBT) fell as much as 80%, mainly attributable to the intense competition faced by Yee Lee Corp Bhd’s aerosol can and palm oil refinery business which affected Yee Lee’s margins for the manufacturing division (third quarter of financial year 2019 [3QFY19]: 1.8%; 3QFY18: 8.2%). On the other hand, the trading division’s PBT was down by 45% due to higher advertisement and promotion cost as more marketing campaigns were carried out to boost sales.

Yee Lee’s outlook remains challenging as consumers are likely to be more prudent on spending due to the weaker consumer sentiment. Nevertheless, Yee Lee strives to stay competitive via cost control and improving on its operational efficiencies. — PublicInvest Research, Nov 29