YEELEE - Post Q3 2016

YEELEE had been in our radar since 15 August 2016. Since then, the share price had been in sideways, waiting for an outbreak. YEELEE had posted a satisfying Q3 report. In terms of revenue, YEELEE grew 25% yoy, declined 6% qoq; in terms of net profit, YEELEE grew 28% yoy and 8% qoq[1]. As mentioned in my post about YEELEE, the manufacturing division and the trading division are the main contributors. Since the CPO price is hitting new high in 2016 and with the contribution from Red Bull Energy Drink distributorship, YEELEE should be growing and luckily it didnt disappoint us. Let's look straight into the QR.

Snapshot from my previous post[2]

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1. Fundamental Analysis:

Quarterly Revenue and Net Profit of YEELEE 

From the chart above, the revenue had been growing quarterly. While net profit also had been growing since 2015. I will focus at the manufacturing division and trading division.

In the Q3 report, revenue for manufacturing division increased 5% yoy and 53% qoq due to higher selling price of palm based products coupled with higher sales of aerosol cans. The palm oil refinery and mill had continued to perform better in this quarter through improvement in CPO extraction rate ("OER") and higher selling price of bulk oils and palm kernel. A thing to take note, the palm oil mill had managed to turnaround in this Q3 due to improvement in its OER. 

CPO Price in November 2016 [5]

With the CPO price going uptrend, i believe it will directly prosper the manufacturing division for YEELEE[5]. If we monitor the plantation companies that had just recently released their QR, almost 70% are delivering good results. Examples like INNO, RSAWIT, GENP and other counters. Mostly is due to the higher selling price of CPO. Let's sidetrack a bit and look at the plantation chart. Currently, plantation chart is still in the uptrend after the bullish harami in the end of 2015. But in the month of November, the chart is showing a bearish engulfing. The chart normally precedes the actual economy by half to a year. 

Monthly Chart for Plantation Index

As for trading division, revenue increased by 53% yoy and 44% qoq. The reasons are similar like previous QR. Higher sales of Campbell products, bottled water and Red Bull Energy Drinks. Still remember that YEELEE obtained the distributorship Suntory Beverage & Food Malaysia Sdn Bhd on 23 September 2016[3][4]. The agreement will commence for 3 years till 22 September 2019. Therefore, the sales from Ribena and Lucozade had not been accounted in Q3 report and will be accounted in Q4 report, which will be reporting for October, November and December.

Snapshot from my FB page

In the prospects column, YEELEE mentioned that they will be able compete in an open market without quantity quota restriction and with reasonable profit margin after the removal of palm based cooking oil subsidy scheme on 1 November 2016. When the news is out on 19 October, YEELEE share price that day itself shoot up by 3%, from 2..25 to 2.32. With the elimination of the subsidy and consumers rushing to buy the cooking oil, the sales of cooking oil will increase a little bit.

YEELEE is confident the palm oil mill is going to be benefit because of its tightening quality control on its FFB (Fresh Fruit Bunch). As a result to that, the CPO OER shown improvements. 

However, YEELEE is aware and cautious of the consumer spending behaviour arising from the increasing cost of living. Therefore the trading division had adopted a more aggressive marketing strategy with creative marketing campaigns and innovative products to drive known brands. Upon the successful distributorship from Suntory Malaysia, the board believes YEELEE will continue to remain profitable. 

2. Technical Analysis:

YEELEE Weekly Chart

As mentioned earlier, YEELEE had been in sideways for the past few months. During the period, i would like to describe that YEELEE is just like waiting for a reason to be triggered and outbreak. With this, i think the good QR will be the reason for YEELEE to be triggered and hence break the resistance of 2.4. In the weekly chart, this week had shown a bullish engulfing, hinting that the share price can go even higher. The volume had been picking up too. In the daily chart, the SMA20 had crossed SMA40. The MACD is looking healthy

3. Projection Analysis:

I personally think that YEELEE will continue to grow. Let me share the reasons why i think it will continue to grow. The major reason will be the CPO price and also the sales from the trading division. But before that, let us look at some data.

Revenue and Gross Profit for Manufacturing and Trading Division

The chart above is the revenue and gross profit for manufacturing and trading division. If we look at the trend, in Q4 for manufacturing and trading will have the highest revenue and highest gross profit. Not to forget that both division are still growing. CPO price keeps on breaking a year high while the sales from the Ribena and Lucozade will pump into the trading division for Q4. 

Currently, the cumulative net profit for 3 quarters for 2016 (RM32,586k) had already surpassed the full year 2015 net profit (RM31,192k). As for revenue, 2016 just need another RM33,866k to beat 2015's RM799,208k, which i think should be easy, considering the above 2 factors (CPO price and Suntory sales).

Now, let me annualized the EPS for YEELEE and we try to project how high it can go.

Annualized EPS = (17.46 ÷ 3) × 4 = 23.28 sen

As for PE, i take the average of HARISON and DKSH, which is around 14.77, lets round it off to 15.

Peer Comparison among Distribution Sector

Target Price = PE × EPS = 15 × 0.2328 = 3.49

In order to be in the safe side, we can also assume the PE to be 13, hence the target price is 3.02. The target price is done based on the assumptions.

Summary:

YEELEE is definitely a little Red-Riding-BULL and will be big bullish bull in a year time due to:

- Riding on the wind of rising consumer power and CPO price
- YEELEE is a growing counter, its revenue and net profit grows each quarter.
- Distributes a lot of famous consumer products, Spritzer, Helang Oil, Neu Vida, Morning Kiss toothpaste, Red Bull energy drinks, Sabah Tea, you can name it, they got it~
- Well diversified with manufacturing division,  trading division, plantation division and hospitality division. The best thing is YEELEE had the complete business cycle for the palm oil. From plantation of the palm oil, to the processing from the CPO to cooking oil, as well as packaging and sell them at the consumer shelves.
- Both manufacturing and trading division is the biggest revenue contribution for YEELEE.
- CPO price had been uptrend and its higher than 2015. Hence the manufacturing division should record higher revenue and net profit than 2015.
- With the new distributorship license from Suntory, Ribena and Lucozade is expected to boost up the trading division's sales, coupled with the ongoing Red Bull Energy Drink sales, things are looking bright for YEELEE.
- Normally in Q4, both manufacturing and trading division will record the higher revenue and net profit than the rest of the quarters.
- The share price had been in sideways and being triggered when it released good QR. Next, it will be challenging the resistance of 2.40.

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Let's Ride the Wind and Gainvest

Gainvestor 10sai

28 November 2016
1.46am

Info Update: 

Currently i am preparing for a free sharing session and an investment workshop in Sibu in December. I will update the information HERE. Hope you guys can attend~

Sources:

[1]: http://www.bursamalaysia.com/market/listed-companies/company-announcements/5268557
[2]: http://gainvestor10sai.blogspot.my/2016/08/yeelee-little-red-riding-bull.html
[3]: http://www.bursamalaysia.com/market/listed-companies/company-announcements/5212745
[4]: http://gainvestor10sai.blogspot.my/2016/09/summary-of-august-2016.html
[5]: http://www.mpoc.org.my/dailypalmoilprices.aspx?catID=b4ad7d4e-d7d0-410b-be86-9a80af0f4693&print=&ddlID=28abbe06-f695-4fd0-8bde-85d8a2ee9ccd