AMINVESTMENT Bank Bhd has maintained a buy call on Power Root Bhd with a higher fair value (FV) of RM2.55 from RM2.27 previously.
It continues to like the beverage company because of its strong earnings recovery from streamlining of costs and expected growth in export sales.
“Also, Power Root’s scarcity premium for exposure to the instant coffee segment as it is the closest to a pure play in the segment, and a decent estimate dividend yield of 4.5-5.8% for the financial year 2020 forecast (FY20F) to FY2022F,” the research house said in a note today.
It also estimated the company’s margins to grow around four percentage points year-on-year in FY20F.
However, it said the company’s advertising and promotion (A&P) spend is expected to decline in FY20F as advertisements and product launches were pushed to a later date due to the Movement Control Order (MCO).
The company also experienced some minor disruptions to its supply chain and with its distributors at the initial stages of the MCO but the issues have since been resolved.
“Hence, we do not expect a significant negative impact on its costs,” said the research bank.
Meanwhile, it said Power Root’s expansion plan in Dubai is now put in the back burner.
It also noted that key risks to its forecast call were a slowdown in export sales; a sharp rise in commodity prices; and political unrest in its export markets.
At 11am, the counter was up two sen to RM2.29 with 53,600 shares traded. — April 30, 2020, Bernama
