Hong Leong Investment Bank (HLIB) raised its rating for Leong Hup International Bhd (LHI) to 'buy' versus 'hold' before this following an increase in its short-term earnings outlook and more conformed valuation following its recent retracements.
According to HLIB, LHI's shares have decreased by more than 20% since the last six months.
The investigation firm however perpetuated a target price of 76 cents for the LHI.
In his note today, HLIB analyst Chye Wen Fei said that his party is becoming more positive about the prospect of LHI's short-term income following the recent increase in farm prices in Malaysia and Indonesia.
This situation has contributed to boosting performance in downstream segments such as The Baker's Cottage (TBC).
According to Wen Fei, LHI has successfully achieved its goal of opening 80 TBC branches by the end of last year and is on the ground to open approximately 150 branches by the end of 2021.
"We understand that this marketing strategy has increased the sales of LHI's bakery products, which have a higher margin compared to their farmed products and in turn help stabilize the company's Malaysian operating income in the long term," said Wen Fei.
At the time of writing this article, LHI's shares fell by half a cent or 0.73% to 68 cents, bringing the company's market capital to RM2.5 billion.
