UOBKayhian on 17 Feb 2015
FY15F PE (x): 8.2
FY16F PE (x): 3.8
Results within our expectations. Halcyon Agri Corp’s (Halcyon) adjusted net loss of
S$9.4m for 2014 was in line with our forecast of a US$6m loss. This was on the back of
a surge in cost of sales (+146% yoy) and finance costs (+537% yoy). The increase in
cost of sales was mainly due to higher sales volume (+265% yoy) while the higher
finance cost was due to the group’s issuing term loan and medium-term note (MTN) in
Jul 14 to partly finance the Anson acquisition.
GMP and margin pressures not letting off. Gross material profit (GMP) continued to be
suppressed. 4Q14 GMP was lower than the historical average of US$356. As a result,
gross margin fell 4.7ppt from 9.9% in 2013 to 5.2% in 2014. However, we note that as
HACL continues with its transformation into an integrated natural rubber supply chain
manager, the group will be able to sell its rubber products at a premium above market
prices and it is likely to capture upstream and downstream margins in the long term.
Maintain HOLD and target price of S$0.64, based on 9.4x 2015F PE after applying a
10% discount to Sri Trang’s historical mean PE of 10.4x. Entry price is S$0.51.
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