- 4QFY6/14 results in line. Revenue down 11.4% YoY but operational profit up 1.5% YoY.
- Raise EPS by 9-14% for lower gearing and cost of borrowing. Also raise TP to SGD2.52 from SGD2.35 (13x FY15E P/E).
- Trading at 15% premium over peers. Maintain HOLD.
4QFY6/14 earnings were in line with market expectation. Revenue dropped 11.4% YoY on lower sales volume, a change in its business mix and lower commodity prices. EBITDA, after adjusting for biological gains, was flat YoY. Excluding exceptionals, operational profit climbed by 1.5% YoY. Full-year performance benefited from upstream nut plantations, favourable coffee trading conditions, flour milling, packaged foods and sugar refining, attenuated by less favourable trading conditions for rice, grains and cotton. FY6/14 EBITDA grew 8%, excluding biological gains.
HOLD maintained
Olam secured a competitively priced USD2.22b short-term committed unsecured revolving credit facility in 4QFY6/14, which increased its portion of short-term debt. This will be partly used to re-finance its high-cost debt. It also issued SGD400m 5-year notes and USD300m 5.5-year senior notes under its USD5b MTN programme, priced at 4.25/4.5% respectively. We now expect its cost of borrowing to drop to 5.5-5.8% in FY15E-16E (previous forecast 6.5%). We also expect more divestments of non-core businesses for capital recycling and paring down net gearing to 1.6x by FY6/17 from 1.8x. Our FY6/15E-16E EPS has been raised by 9/14% for interest cost savings.
We believe its positives have been priced in as Olam is trading at a 15% premium over peers. Maintain HOLD. Our TP rises to SGD2.52 from SGD2.35 after our EPS adjustments, still at 13x FY6/15E P/E, its 5-year average.
No comments:
Post a Comment