*Chicken prices and squid prices increased c.6% and c.1% YoY respectively in 3Q17 (Source: CEIC)
Near-term headwinds but positive on the long-term outlook. New stores opening and product innovations will continue to drive topline growth. We revised our FY18e earnings lower by c.19% to account for higher raw material costs, and we do not expect selling prices to be raised to offset this. We also trimmed FY18-20e earnings by c.1-2% to account for the gestation period in the United Kingdom. Nonetheless, we are optimistic that the new factory will yield manufacturing efficiencies and new product offerings.
Maintained Buy with unchanged DCF-derived TP of S$0.98
The completion of its reconstruction work in 2 Woodlands Terrace and integration with the adjacent new factory by 3Q18 would be the inflection point for OCK. We remain upbeat that its new factory facilities will increase capacity to fuel their expansion domestically and regionally.