Wednesday, August 25, 2010

Elite KSB - Profit Up 41%, Declares 1.5 Cents Final Dividend

Elite KSB, a local meat processor, continued its growth track following the acquisition of Jordon International Food Processing. Revenue for its financial year ending 30 June 2010 increased 33.8% to $86.2m. Earnings however increased 41% to $7.3m. Elite KSB proposed a final dividend of 1.5 cents per share, a 50% increase from the previous year. This was mainly attributed to the consolidation of results from Jordon's existing distribution business.

The company said that the cost of live chickens and pork and its ability to fully offset cost increases to consumers remain a major performance factor in the year ahead. It added that while the Australian dollar appears to have stabilized against the Singapore dollar in recent months, it remains strong.

The stock remains thinly traded due to its small public float as well as outstanding ordinary share of about 135 million. One positive signal is that the acquisition of Jordon has improved shareholders' return tremendously. This is the second financial year in a row that it has raised its dividend - FY08 was 0.5 cents, FY09 was 1 cents and now it is 1.5 cents.

In my opinion, the currency problem is less of an issue and we should see the Singapore dollar strengthening as the global economy recovers, and interest rates reverting to pre-crisis levels. Hopefully, the company will either announce a bonus issue to increase its floats slightly, to give me chance to unload if the time ever comes. 

On the operations front, I will hope to see the company attempt to stream line its enlarged operations. My target price remains $0.40 by 2011-12.

Disclosure:  I have 16,000 Elite KSB Shares

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