,But after a year of logistical and operational wrangling, analysts see firmer ASPs in 2021 with Covid-19 vaccinations spurring economic activity and see a return in consumer confidence and spending.
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PETALING JAYA: As eateries re-open for business with the easing of movement restrictions, the poultry industry should see a better year from improved demand for eggs and broilers or chickens raised for meat.
In 2020, growth of the sector was impacted due to Covid-19, which disrupted the distribution network owing to widespread closures of the hotel, restaurant and catering (Horeca) channel, reduction in tourism and travel alongside absence of corporate events and large-sized gatherings.
This had triggered a drop in the average selling price (ASP) of broiler day old chicks by about 8% year-on-year (y-o-y), while ASP of egg declined around 18% y-o-y, said TA Securities Research.
But after a year of logistical and operational wrangling, analysts see firmer ASPs in 2021 with Covid-19 vaccinations spurring economic activity and see a return in consumer confidence and spending.
From the supply side, it said that small farmers with weaker financial health would have also exited during the unprofitable period.
TA said it understands from channel check that ASPs of Malaysian day old chick (DOC) and broilers have shown uptick - with ASP up double-digits from end-2020.
However, ASP of Malaysian eggs remained low with the industry digesting through the initial shock from Singaporean ban on two Malaysian layer farms owing to presence of Salmonella Enteritidis.
Where listed stocks go, TA believes that earnings of Leong Hup International Bhd (LHI) and QL Resources Bhd in this calendar year 2021 (CY21) would surpass the level charted in 2019 before the pandemic outbreak.
“Our optimism on the profitability of LHI and QL lies in the improvement in product’s ASP alongside volume growth driven by their continued investment and market share expansion.
“An upswing of ASP would be a boon to earnings of poultry players given that ceteris paribus, the increase in ASP of livestock product flows directly to the bottomline, ” it said in a thematic report on the poultry sector.
It said this is akin to the glove makers’ supernormal profit during ASP surge, though on a smaller quantum, given that the government may opt to impose ceiling price on livestock products to ensure the nation’s food prices remain well managed.
Currently, the Malaysian government does set a price ceiling over live chicken and egg during festive period to minimise profiteering activities. That said, TA noted that the ceiling price set is typically high and remains attractive for poultry players.