Final nod from Mexico to bring back Able Global to black

KUALA LUMPUR: Able Global Bhd should be profitable again once it obtains final approval to export its products from Mexico's Health Ministry, said Public Investment Bank Bhd (PublicInvest)

Able Global had obtained approval in-principle by the Mexian authority to export its products to the country, PublicInvest said.

PublicInvest noted that the company's management had targeted to obtain the final approval by the first quarter (Q1) of FY23. 

"We think that once Able Global obtains its export approval, it should be able to turn profitable in a few months as it requires achieving 20 per cent utilisation rate to break even. 

"The plant is currently running at 10-20 per cent utilisation, by supplying to smaller local chains. 

"As the Americas continent accounts for 20 per cent of Malaysia's exports (50-60 containers a month), the Mexico approval will free up Malaysia's production capacity whereby the company plans to divert the additional capacity to the Southeast Asian markets," it said in a note. 

PublicInvest continues to like Able Global as it sees its growth coming from robust demand for dairy products, new product launches (UHT milk) as well as an uptick in margins on softening major raw material prices. 

"Additionally, we think that Able Global's current valuations look appealing, trading at nine times forward price-to-earnings (PE) ratio," it said. 

The firm expects Able Global's profit margins to normalise going forward as its major raw material prices have softened while being supported by the robust demand for dairy products. 

Major raw materials like skim milk powder and palm oil have fallen by 30 per cent and 50 per cent from its peak respectively. 

"Meanwhile, we gather that dairy products demand has remained robust.

"With the US dollar weakening recently, we think there will be a pick-up in orders from customers who scaled back previously," it added. 

The firm maintained "Outperform" call on the company with a target price of RM1.55.