Indofood to offer $1.12 per China Minzhong share

PT Indofood Sukses Makmur Tbk is offering to acquire a total of 25.6 million China Minzhong Food Corporation issued shares or 3.9% at the price of $1.12 each. Following the acquisition, PT Indofood has agreed to acquire an aggregate of 219.5 million shares or 33.49% of the total issued shares.

Indofood Agri's Brazil sugar buy positive: CIMB

CIMB is positive on Indofood Agri's (5JS.SG) acquisition of 50% in Brazil sugar mill and estates player CMAA for around US$71.7 million ($88.6 million).

"We believe that the acquisition will boost future earnings and help the group to partially shed its image as merely a holding company of SIMP (SIMP.JK)."

It expects the acquisition will allow the group to expand into Brazil's sugar and ethanol businesses and boost its earnings base.

"We continue to favor the stock due to its attractive valuations in terms of assets."

It rates the stock at Outperform with $1.51 target. The stock is down 0.4% at $1.32.

Oct 31: SIA Engineering, CapitaLand, GLP, Wing Tai, Indofood Agri

Singapore stocks to stay subdued as investors wait for US markets to reopen.

The benchmark Straits Times Index ending the day higher by 9.12 points or 0.3% at 3,038.73. Here are some stocks and factors to watch:

SIA Engineering posted a 5.8% decrease in net profit at $67.1 million for the second quarter ended 30 Sept.

CapitaLand said it has entered into an agreement with four Chinese banks for a credit limit allocation of up to 50 billion yuan ($10 billion) for CapitaLand's China businesses.

Indofood Agri Resources said its net profit registered an increase of 22% to 257.86 billion rupiah ($32.71 million) for the third quarter ended Sept 30, 2012.

Wing Tai Holdings surged 187% in its first quarter ended Sept 30, 2012, aided by a strong performance from its property arm.

Creative Technology finished its first quarter ended Sept 30 with a net loss of US$4.5 million, narrowing the loss of US$29.6 million made in the same period last year.

Global Logistics Properties has acquired an additional 20% stake in GLP Park Suzhou from its joint venture partner SEALL for 392.3 million yuan (US$61.9 million), raising its stake to 70%.


 

Palm-oil stocks stabilise, But Phillip eyes more volatility

Most Singapore-listed palm-oil plays stabilise after Wednesday’s sharp drops on CPO prices’ recent plunge. “For the long term, the outlook for CPO will still be stable,” says Lee Kok Joo, head of research at Phillip Securities, “but in the short term, there might still be some volatility.”

He notes CPO prices depend on a lot of factors, including the spread with soy oil. While the Malaysian commodity ministry’s plan to cut CPO export taxes to 8–10% from 23% currently may help CPO sentiment, most Singapore-listed plantation plays are Indonesia-focused.

First Resources (EB5.SG) is up 1.6% at $1.965 after Wednesday’s 5.6% drop, Golden Agri (E5H.SG) is up 0.8% at $0.64 after falling 3.1% Wednesday, Wilmar (F34.SG) is flat at $3.16 after Wednesday’s 1.3% fall and Bumitama (P8Z.SG) is flat at $1.035 after falling 4.6% Wednesday. Indofood Agri (5JS.SG) is down 1.2% at $1.285, extending Wednesday’s 3.3% decline for an around 6.6% drop month-to-date; Credit Suisse says IFAR (Indofood Agri) is among the plantation plays most sensitive to CPO prices and will suffer most from declines.

Golden Agri falls on tumbling palm oil futures

Singapore-listed Golden Agri-Resources dropped as much as 3.8% after Malaysian palm oil futures plunged to their lowest in more than three years on Tuesday.

By 9:17 a.m., shares of palm oil firm Golden Agri were down 2.3% at $0.64 with 42.3 million shares traded, making it the most actively traded stock.

Smaller rival Indofood Agri Resources also lost 3.4% at $1.30, with 2.8 million shares traded, equivalent to its full-day average volume over the last five sessions.

Malaysian palm oil futures dived to their lowest in more than three years on Tuesday, hurt by slowing demand from Asia and a drop in the edible oil’s appeal as a substitute for soy oil, with the U.S. soybean harvest progressing at a record pace.

CIMB Research said recent export figures and its channel checks on last month’s crude palm oil (CPO) harvest suggest that stocks could have risen to a higher-than-expected 2.5-2.6 million tonnes as of the end of September.

“We believe there is sufficient storage capacity but the concern is that buyers may defer purchases,” said CIMB. However, it expects CPO price to rebound by the end of the year due to its attractive pricing relative to soybean oil, and has a ’trading buy’ rating on the sector.

Its top picks are Sime Darby, Indofood Agri and Astra Agro Lestari.

Indofood Agri Resources rated 'hold' by Maybank-Kim Eng

Maybank-Kim Eng Research in a Mar 1 research report says: "Indofood Agri's (IFAR) FY2011's numbers were in line with expectations. It recorded a net profit of Rp.1,489 billion. Headline 6.3% net profit growth was unexciting due to the reduced stake following PT SIMP's listing.

"Looking ahead, FY2012 earnings will be driven by higher CPO prices, a progressive output rise from maturing estates, and growing sugar contributions. On balance, we therefore expect a steady 10% improvement in FY2012 core net profit.

"Current PER multiples of its main operating subsidiary PT SIMP is trading in line with market peers, and the derived SOTP valuation from this indicates that IFAR is fully valued, near our target price of $1.53 (applying a 10% holding company disc). MAINTAIN HOLD."

Indofood Agri Resources rated 'trading buy' by CIMB

CIMB in an Oct 31 research report says: "At its 3Q results teleconference, we gather the weak 3Q results were partially due to one-off expenses including Rp63 billion founder tax relating to the listing of PT Salim Ivomas Pratama (SIMP) and Rp19 billion share transfer fees relating to the amalgamation of a wholly-owned subsidiary, Indofood Oil and Fats Pte Ltd with the company.

"We continue to like the stock due to its cheap valuations against peers and potential of its sugar division. 4Q earnings should improve with the absence of one-off costs and as inventory levels normalise.

"We lower our net profit forecasts by 12% to account for the one-off costs and our earnings cuts at SIMP. Unchanged target price of $1.56 (10% discount to sum-of-the-parts). TRADING BUY."

Indofood Agri Resources rated 'buy' by DMG

DMG & Partners Securities in a June 27 research report says: "We revise Indofood Agri's (IFAR) FY2011 earnings downwards by 13.8%, on the back of a dilution of its stake in 72%-owned (down from 90%) subsidiary, PT Salim Ivomas Pratama (PT SIMP) post listing.

"The stock had been sold down on concerns over earnings dilution and the implied lower valuation of IFAR with PT SIMP's listing. However, there are re-rating catalysts in sight, such as earnings accretive acquisitions. We are lowering our FY2011 earnings by 13.8% from IDR1.9t to IDR1.6t, on the back of shareholding dilution in PT SIMP post listing.

"However, valuation is looking inexpensive with IFAR trading at 10x FY11 EPS, against its peers of around mid teens. Target price of $2.41, based on 15x FY11 EPS and a CPO price assumption of RM3,200/tonne. MAINTAIN BUY."

Indofood Agri Resources upgraded to 'neutral' by CIMB

CIMB in a June 10 research report says: "Indofood Agri's 72%-owned PT Salim Invomas Pratama (PT SIMP) gained 14% to Rp1,250 a share during its trading debut. PT SIMP now offers cheaper and direct exposure to Indofood Agri's assets. This could result in investors switching their holdings, potentially creating a share overhang for Indofood Agri.

"We are leaving our earnings forecasts unchanged but have downgraded our target price for Indofood Agri by 2% to $1.90 as we switch our valuation method to a 10% discount to its sum-of-the-parts valuation from 12x forward P/E.

"We believe its share price has adjusted for the negative impact, having shed 19% since we downgraded it to underperform on May 23. We recommend investors to switch to PT SIMP which offers higher (37%) upside to our target value of Rp1,713 a share. UPGRADE TO NEUTRAL."

Indofood Agri Resources downgraded to 'underperform' by CIMB

CIMB in a May 23 research report says: "IFAR has announced that PT SIMP will be listed at Rp1,100 a share. We are negative as: (1) the offer price represents only 8x P/E; (2) earnings dilution is higher than expected; and 3) the implied value for IFAR is only $1.42 or 30% below its current share price.

"We are cutting our earnings forecasts to account for the shareholding dilution. We also cut our target price to $1.94, now based on 12x forward P/E, from $2.73 (14.5x), representing a 20% discount to our target for Golden Agri.

"We are disappointed with its plan to proceed with the listing despite the low offer price for SIMP. Potential de-rating catalysts are a stock overhang following the listing and higher-than-expected earnings dilution. DOWNGRADE TO UNDERPERFORM."

Phillip Securities upgrades Indofood Agri Resources to Buy

Phillip Securities upgrades Indofood Agri Resources (5JS.SG) to Buy from Hold, and cuts its fair value to $2.73 from $2.91.

The house notes IFAR has grown in scale over the last five years, tripling its plantation size of 66,900 hectares in FY2006 to 205,000 hectares in FY10.

“Previously we actually used a gross margin of 30% for both FY11E and FY12E, but we are revising up the margin to 35% for both years, as we noted that the gross margin has grown and stayed relatively stable around 35% in the last 3 years.”

 

The house revises up its FY11 and FY12 core earnings estimates by 2.8% and 3.0% respectively to IDR1,384 billion and IDR1,368 billion, arriving at its new DCF-based target using a cost of equity of 10.54%. 

 

“Given the current trading price, we are seeing a potential upside of 20.9% and hence we are upgrading the call to a Buy.” 

 

Shares are down 0.9% at $2.28.

 

Indofood Agri +3.1%; 4Q results in line

Indofood Agri Resources (5JS.SG) is +3.1% at $2.33 after its 4Q results came in line with expectations, with net profit of IDR598 billion, +108% on year, +131% on quarter, helped by fair value gains on biological assets; revenue rose 31% on year, +30% on quarter to IDR2979 billion.

UOB KayHian, which places its Hold rating and a $2.85 target under review, says despite higher revenue in FY10, core net profit declined 2% to IDR1,200 billion, slightly higher than its forecast of IDR1,108 billion. 

 

It notes, lower core net profit was due to rising operating expenses due to higher salary and professional fees, lower forex gain and higher other operating expenses with lower operating income. 

 

Goldman Sachs, which has a Buy rating, says “palm oil production was relatively weak, down 2% on year and was 2% lower than our forecast, mainly driven by lower yields. However, this was largely offset by higher-than-expected CPO prices.” The house makes no changes to its forecasts.

 

Wilmar 4Q10 should surprise on upside - Daiwa

Daiwa expects palm-oil stocks under its coverage to mostly record higher on-year 4Q net profit, thanks to an increase in CPO prices. However, it expects net-profit margins to generally be compressed due to a progressive export tax on plantations in Indonesia. 

The house maintains its Positive sector rating. “We believe Wilmar International’s (F34.SG) 4Q10 net profit will surprise the market on the upside due to a rebound in the net profit for its China-based soybean-crushing operations, as we expect its soybean price hedging to have been accurate during the quarter.” 

 

It rates the stock at Buy with a $6.73 target. It expects Indofood Agri’s (5JS.SG) 4Q10 net profit to provide a negative surprise, “due to its rainfall-impaired fruit yields and weak EBITDA margin for its cooking-oil division.” 

 

It rates the stock at Neutral with a $2.50 target. “Wilmar remains our top sector pick, as it has less exposure to plantations (and therefore less price-risk exposure) than the other palm-oil stocks we cover, and because the market has low expectations vis-à-vis its 2011 net profit.” 

 

Golden Agri off 3.0% in heavy volume; CPO price fall

Golden Agri-Resources (E5H.SG) is down 3.0% at $0.655 in heavy volume of 221 million shares, falling for the seventh straight session and taking its year-to-date loss to 18.8%. 

Selling may be linked to speculation China may cut its soyoil import tax to 1% from the current 9%, while keeping the palm oil tax unchanged at 9%, which may weigh on palm oil prices as Chinese buyers might switch to soyoil; the talk drove CPO futures down as much as 2.6% in Malaysia Thursday. 

 

However, an analyst at a foreign brokerage says, “I’m not aware of anything specifically happening today...of course palm oil prices have been dropping and Golden Agri is a stock which is very highly leveraged to CPO prices, so I’m guessing that’s what is driving the shares down.” 

 

He adds, Golden Agri “is typically a very volatile stock. When it swings up, it swings up more than the others, and when it drops, if drops further.” Peer Indofood Agri (5JS.SG) is down 0.4% at $2.45.