KUALA LUMPUR: Leong Hup International Bhd could be poised to stage a quick rebound from the final quarter of this year as average selling prices and consumption normalise following the end of the lockdown restrictions.

       "Feedmill operation margins should continue to recover on gradual cost pass-through, whilst commodity prices have tapered off from the peak," said RHB Research in a note.

       This comes despite disappointing 9MFY21 results, which was a result of the negative impact of lockdown measures in Indonesia and Vietnam.

       In addition, the research firm said the downstream venture via The Baker's Cottage has yielded positive results, and is projected to take up 30% to 40% of Leong Hup's broiler supply once the store count is ramped up to 300 stores in 2023 from 168 stores currently.

       Over the longer term, RHB expects Leong Hup's earnings sustainability to be underpinned by continuous capacity expansions and downstream ventures.

       The group's established market position in Asean poultry markets also places it in a good position to capitalise on demand recovery, it said.

       For 9MFY21, Leong Hup's core net profit of RM47mil came to only 25% to 26% of RHB's and consensus full-year estimates.

       "Post results, we slash FY21F earnings by 53%, but keep FY22-23F numbers materially unchanged.

       "Cukai Makmur impact to FY22F earnings is immaterial, according to management guidance.

       "Our discounted cash flow-derived target price is kept at MYR0.83 (inclusive of a 4% ESG discount), which implies 15 times price-earnings FY22F – close to its three-year mean," it said, while maintaining its "buy" call.