MIDF Research says government subsidies and grants for livestock farming in Malaysia could potentially help sustain Leong Hup’s margin by reducing the impact of price controls on chicken and eggs.earnings recovery momentum is expected to be sustained in the fourth quarter of this year , but margin compression will persist in the near term with raw material costs for livestock and poultry still high.
MIDF Research said government subsidies and grants for livestock farming in Malaysia could potentially help sustain Leong Hup’s margin by reducing the impact of price controls on chicken and eggs. However, the operating environment in Indonesia has remained challenging and should continue to be a drag on Leong Hup’s earnings, thereby offsetting some of the growth from other markets, said RHB Research.
Additionally, the subsidy for price-controlled chicken eggs was raised to eight sen per egg, effective Oct 12, 2022, from three sen per egg previously.Prices of main raw materials such as corn and soybean meal are both down about 18% and 16%, respectively, from their peaks and have since stabilised.