Losses from Petra Foods’ discontinued cocoa ingredients division in 2Q13 were smaller than expected, and PATM came in at US$4.8m with management declaring an improved interim dividend of 2.36 US cents (vs. 2.11 US cents in 2Q12). However, sales growth for the quarter was a bit disappointing and that leaves us concerned over a possible slowdown in consumption growth in Petra’s core markets for 2H13. As a result, we maintain HOLD on Petra on account of the limited upside at this juncture. Our fair value estimate increases to S$3.95 (based on 28x FY14F PE) from S$3.88 previously following the much smaller cocoa losses.
Smaller than expected 2Q13 cocoa loss
Petra Foods’ 2Q13 results saw a smaller-than-expected cocoa ingredients loss. Operating profit improved 8.8% YoY to US$21.5m, and with losses from its discontinued cocoa ingredients business only half of what we expected at only US$10.0m, PATMI came in at US$4.8m. Management declared an improved interim dividend of 2.36 US cents (vs. 2.11 US cents in 2Q12).
Slowing consumption?
Smaller cocoa losses aside, 2Q13’s revenue growth of 3.5% YoY to US$125.6m was a tad disappointing. Its core market of Indonesia only mustered a minimal 0.1% YoY increase in sales to US$91.4m although the regional markets (including the Philippines) helped to pick up the slack with a decent 13.9% increase to US$34.3m. As previously communicated, we are concerned over a possible slowdown in consumption demand in Petra’s key markets given the recent spate of weaker economic data and regulatory changes (e.g. fuel hikes). Therefore, we view the smaller top-line growth as a possible confirmation of this concern, and as a trend that could extend into 2H13.
2H13 forecasts adjusted
While Petra’s heritage brands will continue to perform well in its core markets, we temper our revenue growth targets for 2H13 slightly by about 4%. However, we balance this decline with slightly higher operating margins on account of the favourable raw material cost environment and higher margin product mix.
Maintain HOLD
In our view, the possible overhang from slowing consumption in its core markets limits upside at this juncture and we maintain HOLD on Petra. Our fair value estimate increases to S$3.95 (based on 28x FY14F PE) from S$3.88 previously following the much smaller cocoa losses.
Petra Foods’ 2Q13 results saw a smaller-than-expected cocoa ingredients loss. Operating profit improved 8.8% YoY to US$21.5m, and with losses from its discontinued cocoa ingredients business only half of what we expected at only US$10.0m, PATMI came in at US$4.8m. Management declared an improved interim dividend of 2.36 US cents (vs. 2.11 US cents in 2Q12).
Slowing consumption?
Smaller cocoa losses aside, 2Q13’s revenue growth of 3.5% YoY to US$125.6m was a tad disappointing. Its core market of Indonesia only mustered a minimal 0.1% YoY increase in sales to US$91.4m although the regional markets (including the Philippines) helped to pick up the slack with a decent 13.9% increase to US$34.3m. As previously communicated, we are concerned over a possible slowdown in consumption demand in Petra’s key markets given the recent spate of weaker economic data and regulatory changes (e.g. fuel hikes). Therefore, we view the smaller top-line growth as a possible confirmation of this concern, and as a trend that could extend into 2H13.
2H13 forecasts adjusted
While Petra’s heritage brands will continue to perform well in its core markets, we temper our revenue growth targets for 2H13 slightly by about 4%. However, we balance this decline with slightly higher operating margins on account of the favourable raw material cost environment and higher margin product mix.
Maintain HOLD
In our view, the possible overhang from slowing consumption in its core markets limits upside at this juncture and we maintain HOLD on Petra. Our fair value estimate increases to S$3.95 (based on 28x FY14F PE) from S$3.88 previously following the much smaller cocoa losses.
No comments:
Post a Comment