's prospects on the back of resilient demand for its products and elevated average selling price (ASP) despite the disappointing earnings in the first nine months of its financial year.The research firm said it is optimistic over the group's ability to fulfil the strong demand for its products, maintain elevated ASP's on the higher resin prices in 2H21 and further ramp up its utilisation rate.
"Recently, resin prices have risen to the peak level seen in March 2021, and we expect ASPs will remain elevated.
"We assume that increase in ASPs will allow SLP to maintain its superior margins in the subsequent quarters while resin prices fluctuate.
"We continue to assume an average resin cost of USD1,100/MT for SLP in FY21, in line with SLP’s average resin cost YTD," it said in a Monday note.
Kenanga lowered its FY21 revenue by 5.5% and core net profit by 10% to adjust for the lower revenues and production disruption in 3QFY21.
However, it maintained its FY22 estimates and dividend per share forecast of 5.5 sen each in FY21 and FY22, implying 5.9% yield.
It reiterated "outperform" with a higher target price of RM1.18 from RM1.14 previously as it rolls forward its valuation to FY22 earnings per share of 7.1 sen with an ascribed forward price-earnings ratio of 16.6 times, which is minus-0.5 standard deviation to its five-year mean of 20 times.
For 9MFY21, SLP Resources's core net profit of RM13.6mil came below expectation at 63% of Kenanga's full-year estimate due mainly to the production disruption.
Its 3QFY21 dividend payout of 1.5 sen brought 9MFY21 dividend per share to four sen, which was in line with Kenanga's estimate of 5.5 sen.