UOB Kay Hian Private Limited
June 11, 2025

QL Resources Bhd: Navigating Mixed Outlooks Amid Policy Shifts and Growth Challenges

Company Overview and Investment Summary

QL Resources Bhd, a leading player in Malaysia’s Consumer Staples sector, operates across integrated livestock farming (ILF), marine products manufacturing (MPM), and palm oil activities (POA) with footprints in Malaysia, Indonesia, and Vietnam. The company is also the franchise holder for Family Mart in Malaysia, driving growth through rapid store expansion. As of June 2025, QL Resources commands a market capitalization of RM17.12 billion (US\$3.88 billion), with a Shariah-compliant share structure and a significant presence in the region.

UOB Kay Hian maintains a HOLD recommendation with a target price of RM4.80, representing a modest upside of 5.3% from the current share price of RM4.56. The company’s valuation reflects a stable, albeit unexciting, growth outlook with a 2026F PE of 35.1x, close to -0.5SD below its five-year mean.

Key Shareholders and Stock Data

• Major Shareholders: CBG Holdings (40.3%), Pelita Global (11.9%), Farsathy Holdings (11.6%)
• Shares Outstanding: 3,650.3 million
• 52-Week High/Low: RM6.60 / RM5.28
• 3-month Average Daily Turnover: US\$2.4 million
• FY25 NAV/Share: RM1.36
• FY25 Net Debt/Share: RM0.22

Integrated Livestock Farming (ILF): Facing Subsidy Removal and Margin Pressures

The ILF segment is set to encounter headwinds following the Malaysian government’s rationalization of egg subsidies. The subsidy was reduced from 10 sen/egg to 5 sen/egg in May 2025 and will be completely removed by August. Under the full subsidy, QL earned an estimated 10 sen/egg, but profitability is expected to drop to 3-5 sen/egg post-removal. To counter margin compression, the company is shifting focus toward its higher-margin branded eggs, now accounting for 20% of total egg sales.

The broiler segment, however, is expected to improve in FY26, benefitting from increased productivity in East Malaysia and rising demand in Indonesia, supported by nationwide food programs.

Marine Products Manufacturing (MPM): Mixed Performance with Surimi Bright Spots

MPM’s outlook remains mixed. The fishing and fishmeal sub-segments are likely to face continued challenges due to weak demand in global aquaculture and a higher fishing quota in Peru (2.5 million vs 1.9 million previously), which may pressure fishmeal prices. On the positive side, surimi and surimi-based products are positioned for an improved FY26, thanks to stable prices, sustained low input costs, and increased production capacity. The commissioning of the PT Hasil Laut plant adds 25,000 MT/year, while Figo’s new warehouse boosts capacity by 7,000 MT/year.

Palm Oil Activities (POA) and Renewables: Diversifying for Stability

Amid moderating crude palm oil (CPO) prices, which have trended down to RM3,800 from above RM4,200 in 4QFY25, QL Resources is pivoting towards renewable energy. Plus Xnergy, its renewable energy and ESG solutions subsidiary, is expected to drive growth, even as palm oil contributions moderate alongside stagnant fresh fruit bunch production and oil extraction rates.

Family Mart Malaysia: Expansion Continues, But SSSG Faces Hurdles

Family Mart remains a key growth driver. In FY25, QL opened 50 new stores and 50 FM Mini vending machines, bringing the total to 445 outlets. The management maintains its ambitious FY27 target of 600 stores, implying an accelerated rollout in the coming years. However, same-store sales growth (SSSG) has been muted for three consecutive quarters, and the company anticipates higher rental and wage costs in FY26. These challenges may be partially offset by deploying more self-service kiosks and expanding halal certification across outlets. A potential tailwind is the government’s RM1.7 billion cash aid program, expected to boost consumer spending in FY26.

Insulation from Global Trade Tensions; Minimum Wage Impact Manageable

• Less than 0.5% of QL’s total sales are US exports, mainly surimi-based products. Thus, the US-China trade war has minimal direct impact, though indirect effects via supply disruptions or subdued consumer spending are possible.
• Approximately 27% of QL’s 12,000-strong workforce will benefit from Malaysia’s minimum wage revision, costing the group an additional RM10 million (1.4% of FY26 pre-tax earnings). Management expects to mostly absorb this cost, with some pass-through to customers.

Financial Highlights and Performance Outlook

• Turnover is projected to grow steadily through 2028, with net profit margins remaining stable around 6%.
• Net debt is forecast to turn into net cash by FY27, while dividend yields remain modest at around 1.5%.

Environmental, Social, and Governance (ESG) Commitments

• Environmental:
  • Reduced greenhouse gas intensity by 7% from FY20 baseline.
  • Generated 977,507GJ of renewable energy (solar, biogas, biomass), meeting 45.2% of total energy needs.
  • Water withdrawal intensity reduced by 0.7% year-on-year in FY24.
• Social:
  • Balanced workforce: 60% male, 40% female.
• Governance:
  • Board composed of a majority of Independent Non-Executive Directors (7 out of 13), with 38% female representation.

Valuation and Recommendation

With current valuations reflecting its growth prospects, QL Resources is rated HOLD with a target price of RM4.80. The company’s core businesses are valued at 34.0x FY26F PE—a 25% discount to Nestle’s historical PE. The Family Mart business is valued on a discounted cash flow (DCF) basis (WACC: 6.9%, terminal growth: 3.0%), capturing its long-term value potential.

Risks to the outlook include adverse weather impacting fishing yields, potential poultry disease outbreaks, and a sharp decline in CPO prices.

Conclusion: Resilient But Facing Growth Hurdles

QL Resources remains resilient amid policy shifts, trade tensions, and wage hikes, supported by its diversified business and robust financials. However, the current valuation appears fair given the mixed outlook across its segments and the challenges in maintaining growth momentum. Investors are advised to monitor policy changes, input cost trends, and execution in Family Mart expansion for future updates on QL’s investment thesis.