Petra Foods (PF) is one of the world’s largest producers and suppliers of cocoa ingredients, and it counts a stable group of chocolate confectionery conglomerates as its key clientele. It also has a Branded Consumer division, where it is a first mover into emerging Asia consumer demand. Given its competitive advantage via an extensive distribution network and strong brand equity, PF has achieved a dominant market share of more than 50% and 10% in the growing markets of Indonesia and the Philippines respectively despite a gradual influx of well-known international players. Combined, these two divisions form a formidable “twin-engine” growth strategy for the future. We initiate coverage with a BUY rating and a fair value estimate of S$2.98, based on 24x 12-month forward PE.
Global cocoa player with an edge
Established in 1984, Petra Foods (PF), through its Cocoa Ingredients division (~70% revenue contribution), is one of the world’s largest producers and suppliers of cocoa ingredients. PF also has a Branded Consumer division (~30% revenue contribution), where it is a first mover into emerging Asia consumer demand. Combined, these two divisions form a formidable “twin-engine” growth strategy for the future.
First mover into EM Asia consumer demand; poised to grow
Selling own-brand chocolates and distributing third party products under its Branded Consumer division, PF’s extensive distribution network and strong brand equity give it a competitive advantage and create high barriers of entry. As a result, PF has achieved a dominant market share of more than 50% and 10% in its key markets of Indonesia and the Philippines respectively despite a gradual influx of well-known international players. This segment has grown strongly with rising EM Asia consumer demand (FY2004-11 revenue CAGR: 20.2%), and is expected to continue posting double-digit growth figures going forward.
Stable conglomerate clientele
Utilizing its extensive technical expertise and high degree of sophistication in producing quality cocoa derivative products – which cannot be easily replicated – PF has kept international giants like Nestlé, Cadbury, the Mars Group, Meiji Group etc. as its key clients even with the emergence of increased competition, and this has formed a supportive base for its earnings.
Track record speaks for itself
Since its listing in FY04 to FY11, PF has achieved considerable growth momentum, attaining CAGR of 23.7% for revenue and 18.3% for EBITDA. With an experienced management team running the Group, PF’s core competencies should remain.
Initiate with BUY
We initiate coverage with a BUY rating and a fair value estimate of S$2.98, based on 24x 12-month forward PE.
Established in 1984, Petra Foods (PF), through its Cocoa Ingredients division (~70% revenue contribution), is one of the world’s largest producers and suppliers of cocoa ingredients. PF also has a Branded Consumer division (~30% revenue contribution), where it is a first mover into emerging Asia consumer demand. Combined, these two divisions form a formidable “twin-engine” growth strategy for the future.
First mover into EM Asia consumer demand; poised to grow
Selling own-brand chocolates and distributing third party products under its Branded Consumer division, PF’s extensive distribution network and strong brand equity give it a competitive advantage and create high barriers of entry. As a result, PF has achieved a dominant market share of more than 50% and 10% in its key markets of Indonesia and the Philippines respectively despite a gradual influx of well-known international players. This segment has grown strongly with rising EM Asia consumer demand (FY2004-11 revenue CAGR: 20.2%), and is expected to continue posting double-digit growth figures going forward.
Stable conglomerate clientele
Utilizing its extensive technical expertise and high degree of sophistication in producing quality cocoa derivative products – which cannot be easily replicated – PF has kept international giants like Nestlé, Cadbury, the Mars Group, Meiji Group etc. as its key clients even with the emergence of increased competition, and this has formed a supportive base for its earnings.
Track record speaks for itself
Since its listing in FY04 to FY11, PF has achieved considerable growth momentum, attaining CAGR of 23.7% for revenue and 18.3% for EBITDA. With an experienced management team running the Group, PF’s core competencies should remain.
Initiate with BUY
We initiate coverage with a BUY rating and a fair value estimate of S$2.98, based on 24x 12-month forward PE.
No comments:
Post a Comment