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QL Resources' net profit falls on lower margin of fisheries business

KUALA LUMPUR (NewsRise) - QL Resources, a Malaysian poultry producer and food processor, said its net profit declined 8.4% in the fiscal second quarter as fisheries products margin shrank and palm oil output fell.

Net profit for the three months ended September 30 totaled 50.5 million ringgit ($11.4 million) compared to 55.2 million ringgit in the same quarter a year earlier, QL Resources said in a stock exchange filing. Quarterly revenue rose 5.7% year-on-year to 729.7 million ringgit from 690.4 million ringgit.

Analysts said QL Resources' earnings will likely improve in the second half on the back of robust crude palm oil prices and stronger U.S. dollar that will boost income from exports despite a weaker-than-expected second-quarter performance.

"Earnings growth on quarter-on-quarter basis should kick in stronger on seasonality as well as the strengthening of U.S. dollar" that will benefit its marine product manufacturing business, said Kenanga Investment Bank's analyst Soong Wei Siang.

Soong forecasts "healthy earnings growth" of between 8.2% and 10.5% for the next two years, but kept the stock's Underperform rating due to its "rich" valuation.

QL Resources is Asia's biggest manufacturer of surimi, a fish-paste ingredient used widely in processed food. The company also produces fishmeal, frozen fish and surimi-based products with total annual output of about 140,000 tons.

The company is also one of the largest egg producers in Southeast Asia with daily output of over 4.5 million eggs and operates plantation that produces some 80,000 metric tons of palm oil.

QL Resources has recently ventured into convenience store business with partner FamilyMart of Japan as part of a long-term investment to expand its businesses. QL Resources has agreed to a 20-year franchising deal to operate FamilyMart-branded stores in Malaysia in a move that could provide a foothold in the retail business, helping it to expand its marine products and livestock value chain.

For its first six months, net profit slipped 3.6% to 92.6 million ringgit from 96.1 million ringgit over the same period last year. Year-to-date revenue meanwhile climbed 3.7% to 1.40 billion ringgit from 1.35 billion ringgit in the preceding year's corresponding period.

QL Resources' fiscal first-half results have been generally slightly weaker and accounted for less than half of full-year earnings, said UOB Kay Hian in an investors note.

However, the brokerage expects a stronger second-half for QL Resources partly due to the recent strengthening of U.S. dollar against the ringgit, while its palm oil production, which has been impacted by poor weather conditions, will likely recover as its trees in Indonesian estates reaches maturity.

Shares of QL Resources ended Tuesday unchanged at 4.40 ringgit, while the benchmark FTSE Bursa Malaysia KLCI ended 0.1% higher.

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