Introduction
Companies which operate in poultry business is feed
birds such as chickens, duck, gooses and etc for their egg and meat. In
Malaysia chickens is the main bird. The public companies which listed in the
Bursa which operate in poultry business are in the consumer staples segment.
The main raw material for the poultry business is
the food use to feed chicken such as grains, corns and etc. The two main raw
material corns and wheats have drop dramatically since June 2016 the will
reduce the operating cost of the company as the animal feed cost had reduce.
The revenue of for poultry business is selling the
product, chicken meats and eggs to the consumer. Since the holiday season,
Christmas and Chinese New Yew is around the corner, the demand for meat and egg
increase hence the price might increase.
In Malaysia there are 13 companies listed in these
segment the company are:
1) CAB Cakaran Cooperation Berhad (CAB 7174)
2) CCK Consolidated Holding Berhad (CCK
7035)
3) D.B.E Gurney Resources Berhad (DBE
7179)
4) Farm’s Best Berhad (FARMBES 9776)
5) HB Global Limited (HBGLOB 5187)
6) Huat Lai Resources Berhad (HUATLAI
7141)
7) Lay Hong Berhad (LAYHONG 9385)
8) LTKM Berhad (LTKM 7085)
9) PPB Group Berhad (PPB 4065)
10)
PWF Consolidated Berhad (PWF 7134)
11)
Saudee Group Berhad (SAUDEE 5157)
12)
Teo Seng Capital Berhad (Teo Seng 7252)
13)
TPC Plus Berhad (TPC 7176)
A value investor shall avoid company that having
problem in their financial statement. In Malaysia, Bursa name them in the PN 17
list, investor shall avoid PN 17 companies as much as possible unless they had
done substantial risk assessment and willing to take the risk. From the 13
companies mentioned above 2 companies HBGLOB 5187 and TPC 7176 are in the PN 17
list hence the company are remove from these industry comparisons. Although TPC
had just got away from the PN 17 list, it is still taken out from this
comparison because the company still need some time to prove it is still
valuable for investment.
Besides that PPB 4065 is removed from this study
although it has the largest market shares in poultry business because the group
is too diversified. This study mainly focuses on poultry business itself as
there might be an opportunity coming from the sharp decrease in the raw
material price.
Finally the other company that remove from this
study is Saudee Group. This is because Saudee Group is mainly a trading company
which does not have advantage on low corns and wheat price.
2015
Revenue from Poultry Business
The 9 companies had combined revenue of about RM
3,691,112,520.00 from poultry segment for the year 2015 base on their latest annual
report. The 9 companies are arranging from the highest market share to lowest
as show below:
1) HUATLAI – 32.67 %
2) CAB – 19.00%
3) LAYHONG – 13.87 %
4) FARMBES – 9.09 %
5) PWF – 7.88 %
6) TEOSENG – 7.16 %
7) LTKM – 4.5 %
8) DBE – 3.24 %
9) CCK – 2.59 %
Some companies have diversified to other business
segment such as retails, fish product, fertiliser and etc. Below show the
percentage of the revenue earn from poultry segment from the total revenue.
1) DBE – 100 %
2) PWF – 100 %
3) LTKM – 98.26 %
4) FARMBES – 96.79 %
5) HUATLAI – 85.37 %
6) LAYHONG – 79.26 %
7) CAB – 78.66 %
8) TEOSENG – 64 %
9) CCK – 19.37 %
Market
Shares
Usually company with larger company had the
advantages over small company. Below arrange the company based on 29 NOV 2016
market value of equity:
1) HUATLAI – RM 386,994,080.00
2) TEOSENG – RM 295,295,341.63
3) CAB – RM 242, 185,520.29
4) LTKM – RM 163,931,047.56
5) CCK – RM 95,472,884.75
6) PWF – RM 56,470,404.64
7) LAYHONG – RM 48,762,875.00
8) FARMBES – RM 43,369,116.73
9) DBE – RM 31,479,335.60
.
Asset
Comparison
a)
Intangible Asset
Intangible asset or Goodwill is form when there is
an acquisition. Intangible assets can remove from the financial report anytime
if the management think the intangible asset is not worthy anymore. Therefore
company with lower intangible assets is a better company. Below show the
percentage of asset a company had as intangible asset in ascending order:
1) DBE – 0 %
2) LTKM – 0 %
3) TEOSENG – 0 %
4) CCK – 0.11 %
5) LAYHONG – 0.47 %
6) FARMBES – 0.57 %
7) HUATLAI – 1.07 %
8) PWF – 1.33 %
9) CAB – 3.49 %
Average – 0.78 %
b)
Trade and other receivable
Trade receivable is sales that had sold to the
customer and will only collect the cash from the customer in the later stage.
Trade receivable usually non-interest bearing. Some trade receivable might not
be collected and will be impairs. A business want to collect money as soon as
possible hence the lower than average trade receivable and higher than average
revenue is preferable. Below show the percentage of asset a company had as
trade and other receivable in ascending order:
1) LTKM – 6.11 %
2) PWF – 8.11 %
3) CCK – 10.15 %
4) HUATLAI – 10.32 %
5) TEOSENG – 16.02 %
6) LAYHONG – 16.36 %
7) CAB – 18.76 %
8) DBE – 25.09 %
9) FARMBES – 45.10 %
Average – 17.34 %
c)
Inventories
Inventories are products for sale to customer in this
case it is eggs, chicken meat and etc. Company required to keeps certain amount
of inventory to make sure it able to cater the customer supply, high amount of
inventories means the product the company sell is going to be obsolete. However
low amount of inventories means the company is unable to caught up with the
demand and hence loss some sales. Below show the percentage inventories of the
company in ascending order:
1) DBE – 3.68 %
2) FARMBES – 4.59 %
3) HUALAI – 4.73 %
4) TEOSENG – 5.42 %
5) LTKM – 8.50 %
6) CAB – 8.67 %
7) LAYHONG – 12.44 %
8) PWF – 14.52 %
9) CCK – 17.23 %
Average – 8.86 %
d)
Cash and Equivalent
Company required cash for daily operation and
emergency. However too much debt is bad for company because it unable to invest
to cash to expend the company. Value investors love cash rich company because
cash is the liquid and can be use anytime when there is a great opportunities
such as acquisition of competitor. Below show the percentage of cash in
ascending order.
1) DBE – 0.38 %
2) PWF – 1.52 %
3) FARMBES – 1.53 %
4) CAB – 1.59 %
5) LAYHONG – 4.27 %
6) HUATLAI – 4.33 %
7) TEOSENG – 8.26 %
8) CCK – 8.36 %
9) LTKM - 15.19 %
Average – 5.05 %
Liability
Comparison
a)
Non Current Borrowing
Non current borrowing sometime is good for a company
provided that they can borrow and invest in investments that give back a
greater return. Below shows the percentage of non current borrowing over the
total liabilities:
1) CCK – 1.93 %
2) LTKM – 7.78 %
3) LAYHONG – 10.70 %
4) TEOSENG – 13.52 %
5) PWF – 17.12 %
6) FARMBES – 19.27 %
7) CAB – 23.73 %
8) DBE – 25.12 %
9) HUATLAI – 27.81 %
Average – 16.33 %
b)
Current Borrowing
Current borrowing is the borrowing that the company
had to settle by this financial year. Company had to make sure there is enough
cash to settle the borrowing or roll over. Below shows the percentage of current
borrowing over the total liabilities:
1) DBE – 10.71 %
2) LTKM – 26.25
3) CAB – 33 %
4) HUATLAI – 35.66 %
5) PWF – 40.68 %
6) LAYHONG – 44.62 %
7) CCK - 51.29 %
8) TEOSENG – 52.87 %
9) FARMBES – 54.13 %
Average – 38.85 %
c)
Trade Payable
Trade payable usually is the money the company owe
their suppliers and required to pay at the later stage. If a company can owe
the money for a longer term it is an advantage to them because they can use the
service or product from the suppliers and only pay back in much later stage.
Usually trade payable is interest free in other word it can be act as interest
free loan. Below shows the percentage of trade payable over the total
liabilities:
1) LTKM – 12.55 %
2) FARMBES – 20.40 %
3) LAYHONG – 22.40 %
4) TEOSENG – 23.66 %
5) CCK – 24.43 %
6) HUATLAI – 30.86 %
7) PWF – 31.07 %
8) CAB – 37. 24 %
9) DBE – 55.86 %
Average – 28.72 %
Cash
Flow
a)
Operating Cash Flow
Companies with positive cash flow mean that they are
able to sustain by themselves without any borrowing or addition cash from
investor. Below show the company operating cash flow in ascending order:
1) DBE – (RM 10,417,518)
2) FARMBES – (RM 2,505,000)
3) LTKM – RM 3,836,243
4) LAYHONG – RM 19,316,120
5) CCK – RM 23,327,504
6) PWF – RM 26,802,036
7) CAB – RM 34,289,505
8) TEOSENG – RM 36,757,980
9) HUATLAI – RM 144,948,000
b)
Investing Cash Flow
Companies with negative investing cashflow mean
their company invest in asset to expand the business with positive cash flow
usually show companies is selling asset or winding a subsidiaries. Below show
the company investing cash flow in ascending order:
1) CAB – (RM 79,557,155)
2) TEOSENG – (RM 55,244,618)
3) HUATLAI – (RM 29,964,000)
4) PWF – (RM 19,891,481)
5) CCK – (RM 18,812,409)
6) LAYHONG – (RM 18,572,182)
7) LTKM – (RM 12,041,490)
8) DBE – RM 6,210,524
9) FARMBES – RM 19,488,000
c)
Financing Cash Flow
Positive financing cash flow mean the company had increase
the cash either from borrowing or shareholder. Hence the financing cash flow is
usually negative unless the company had a good opportunity that it need cash
from external party to invest. Below show the company investing cash flow in
ascending order:
1) HUATLAI – (RM 96,768,000)
2) FARMBES – (RM 11,737,000)
3) PWF – (RM 4,735,048)
4) CCK – (RM 727,580)
5) DBE – RM 4,293,269
6) LTKM – RM 12,366,083
7) TEOSENG – RM 13,862,705
8) LAYHONG – RM 35,104,098
9) CAB – RM 61,136,413
Dividends
Every investment, the investor is looking for some
sort of return. In stock market there are two main type of return capital gain
and dividends. The poultry companies dividend record for the past 10 years is
shows below:
1) CAB – 0/10
2) DBE – 0/10
3) FARMBES – 0/10
4) HUATLAI – 4/10
5) LAYHONG – 6/10
6) PWF – 7/10
7) CCK – 10/10
8) LTKM - 10/10
9) TEOSENG – 10/10
Huatlai had been taken down by their founder, the Lim family on 30 December 2016. It is a waste because it is a good company to invest.