For 1HFY14, Olam’s revenue fell 8% to S$8827.8m, but still met 38% of our full-year forecast, while net profit eased 9% to S$180.5m; underlying net profit of S$186.1m met around 54% of our previous FY14 estimate. In view of the latest results, we opt to bump up our earnings forecast for FY14 by 14.5% and FY15 by 9.1%. As we are also pushing out 10x valuation from FY14F to blended FY14/FY15F EPS, our fair value improves from S$1.45 to S$1.76. Given the total return of nearly 18% from here, we upgrade our call from Hold to BUY.
1HFY14 earnings tracking slightly above
Olam International Limited (Olam) posted 2QFY14 revenue of S$4506.7m, down 8% YoY, affected by both lower commodity prices and lower sales volumes. Nevertheless, EBITDA grew 12.3% to S$279.3m, reflecting margin expansion from upstream and midstream initiatives. Although reported net profit fell 13% to S$134.9m, underlying earnings (excluding exceptional items) improved 31% to S$143.4m. For 1HFY14, revenue also fell 8% to S$8827.8m, meeting 38% of our full-year forecast, while net profit eased 9% to S$180.5m; underlying net profit of S$186.1m met around 54% of our previous FY14 estimate.
EBITDA margins are recovering
Thanks to previous restructuring efforts, we note that its overall EBITDA margin has improved to 7.0% in the quarter versus 6.4% a year ago. By segment, Confectionary turned in the highest EBITDA margin of 10.7% (versus 8.2% in 2QFY13), while the biggest improvement came from Industrial Raw Materials, which jumped to 6.0% from 3.6%. Edible Nuts inched up slightly from 7.7% to 9.0%. But Food Staples saw a dip in margin from 7.8% to 5.8%.
Expects to be FCFF cashflow positive this FY
In 1HFY14, Olam completed five initiatives, which added S$36.1m to its bottom-line and released S$134.1m. And with another five initiatives expected to be completed in 2H14, which will add another S$39.8m to its bottom-line and free up some S$312.4m of cashflow, management is confident that it can turn FCFF cashflow positive in this FY.
Upgrade to BUY with new S$1.76 FV
In view of the latest results, we opt to bump up our earnings forecast for FY14 by 14.5% and FY15 by 9.1%. As we are also pushing out 10x valuation from FY14F to blended FY14/FY15F EPS, our fair value improves from S$1.45 to S$1.76. Given the total return of nearly 18% from here, we upgrade our call from Hold to BUY.
Olam International Limited (Olam) posted 2QFY14 revenue of S$4506.7m, down 8% YoY, affected by both lower commodity prices and lower sales volumes. Nevertheless, EBITDA grew 12.3% to S$279.3m, reflecting margin expansion from upstream and midstream initiatives. Although reported net profit fell 13% to S$134.9m, underlying earnings (excluding exceptional items) improved 31% to S$143.4m. For 1HFY14, revenue also fell 8% to S$8827.8m, meeting 38% of our full-year forecast, while net profit eased 9% to S$180.5m; underlying net profit of S$186.1m met around 54% of our previous FY14 estimate.
EBITDA margins are recovering
Thanks to previous restructuring efforts, we note that its overall EBITDA margin has improved to 7.0% in the quarter versus 6.4% a year ago. By segment, Confectionary turned in the highest EBITDA margin of 10.7% (versus 8.2% in 2QFY13), while the biggest improvement came from Industrial Raw Materials, which jumped to 6.0% from 3.6%. Edible Nuts inched up slightly from 7.7% to 9.0%. But Food Staples saw a dip in margin from 7.8% to 5.8%.
Expects to be FCFF cashflow positive this FY
In 1HFY14, Olam completed five initiatives, which added S$36.1m to its bottom-line and released S$134.1m. And with another five initiatives expected to be completed in 2H14, which will add another S$39.8m to its bottom-line and free up some S$312.4m of cashflow, management is confident that it can turn FCFF cashflow positive in this FY.
Upgrade to BUY with new S$1.76 FV
In view of the latest results, we opt to bump up our earnings forecast for FY14 by 14.5% and FY15 by 9.1%. As we are also pushing out 10x valuation from FY14F to blended FY14/FY15F EPS, our fair value improves from S$1.45 to S$1.76. Given the total return of nearly 18% from here, we upgrade our call from Hold to BUY.
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