Olam International Limited (Olam) saw 3QFY13 revenue climb 12% YoY (but decline 4% QoQ) to S$4.72b, such that its 9MFY13 revenue of S$14.31b (+20%) met 72% of our FY13 forecast. Reported net profit gained 10% YoY (but fell 30% QoQ) to S$108.5m, while core earnings (excluding bio-asset revaluation gains etc) rose 13% YoY (down 22% QoQ) to S$92.8m. Core 9MFY13 earnings of S$240.3m met about 79% of full-year forecast. Meanwhile, net gearing remains high at 2.2x as at end-Mar, unchanged from end-Dec; this after it further increased borrowings to S$9.3b from S$8.8b. But Olam intends to reduce its gearing boundary condition from <2.5x to <2.0x. Still, we could continue to see some overhang from its high net gearing. We also opt to keep our FY13 estimates unchanged. But our fair value improves from S$1.50 to S$1.73 as we push our valuations out from blended FY13/14F EPS to FY14F EPS. Maintain HOLD.
9MFY13 results slightly ahead
Olam International Limited (Olam) saw 3QFY13 revenue climb 12% YoY (but decline 4% QoQ) to S$4.72b, such that its 9MFY13 revenue of S$14.31b (+20%) met 72% of our FY13 forecast. Reported net profit gained 10% YoY (but fell 30% QoQ) to S$108.5m, while core earnings (excluding bio-asset revaluation gains etc) rose 13% YoY (down 22% QoQ) to S$92.8m. Core 9MFY13 earnings of S$240.3m met about 79% of full-year forecast.
Growth led by Food Staples and Packaged Foods segment
Business-wise, its Food Staples and Packaged Foods was the star performer, with 3Q revenue rising 55% YoY, aided by both volume growth (+90%) and increased profitability (gross contribution +123%). We expect this segment to continue to perform – Olam had recently entered into a JV with Sanyo Foods to manufacture and distribute instant noodles in Nigeria; this after selling a 25.5% stake of its instant noodles business to Sanyo for US$20m.
Net gearing still high at 2.2x
Meanwhile, net gearing remains high at 2.2x as at end-Mar, unchanged from end-Dec; this after it further increased borrowings to S$9.3b from S$8.8b. However, Olam recently completed its strategic review, where it intends to take a rebalanced approach to growth and cashflow generation. Olam has since guided to be FCF positive by FY14 and also reduce its gearing boundary condition from <2.5x to <2.0x.
Meaningful impact may take time
While the review has identified “concrete actions”, we believe that any meaningful impact may still take some time to realize. For now, we could continue to see some overhang from its high net gearing. We also opt to keep our FY13 estimates unchanged. But our fair value improves from S$1.50 to S$1.73 as we push our valuations out from blended FY13/14F EPS to FY14F EPS. Maintain HOLD.
Olam International Limited (Olam) saw 3QFY13 revenue climb 12% YoY (but decline 4% QoQ) to S$4.72b, such that its 9MFY13 revenue of S$14.31b (+20%) met 72% of our FY13 forecast. Reported net profit gained 10% YoY (but fell 30% QoQ) to S$108.5m, while core earnings (excluding bio-asset revaluation gains etc) rose 13% YoY (down 22% QoQ) to S$92.8m. Core 9MFY13 earnings of S$240.3m met about 79% of full-year forecast.
Growth led by Food Staples and Packaged Foods segment
Business-wise, its Food Staples and Packaged Foods was the star performer, with 3Q revenue rising 55% YoY, aided by both volume growth (+90%) and increased profitability (gross contribution +123%). We expect this segment to continue to perform – Olam had recently entered into a JV with Sanyo Foods to manufacture and distribute instant noodles in Nigeria; this after selling a 25.5% stake of its instant noodles business to Sanyo for US$20m.
Net gearing still high at 2.2x
Meanwhile, net gearing remains high at 2.2x as at end-Mar, unchanged from end-Dec; this after it further increased borrowings to S$9.3b from S$8.8b. However, Olam recently completed its strategic review, where it intends to take a rebalanced approach to growth and cashflow generation. Olam has since guided to be FCF positive by FY14 and also reduce its gearing boundary condition from <2.5x to <2.0x.
Meaningful impact may take time
While the review has identified “concrete actions”, we believe that any meaningful impact may still take some time to realize. For now, we could continue to see some overhang from its high net gearing. We also opt to keep our FY13 estimates unchanged. But our fair value improves from S$1.50 to S$1.73 as we push our valuations out from blended FY13/14F EPS to FY14F EPS. Maintain HOLD.
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