SINGAPORE (July 1): DBS analysts Andy Sim and Alfie Yeo are maintaining their “buy” calls on Japfa on the company’s geographically diverse portfolio.
Sim and Yeo are expecting a weaker 2Q20 performance from Japfa’s Indonesia poultry operations due to weak broiler and day-old-chick (DOC) prices, but they believe the company’s Vietnam swine and China dairy operations could offset the weaker performance, they write in a note dated June 30.
“We have just trimmed our JPFA recommendation to HOLD, from BUY, with a revised TP of Rp1,200. While we had earlier envisaged a weak 2Q20 operating performance for JPFA, and a sequential improvement in 2H20, we believe the broiler and day-old chicks (DOC) price rebound seen in Indonesia thus far in May/June could only partially mitigate the effects in April,” they add.
Sim and Yeo have also revised Japfa’s target price to 82 cents, previously 86 cents.
“Our sum-of-parts TP is revised marginally to $0.82 as we factor in a lower target price for JPFA of Rp1,200 (from Rp1,400) offset partially by stronger contribution from its Vietnam swine operations. Our TP implies c.10.5x FY21F PE, similar to its historical average,” say Sim and Yeo.
In line with the expected weaker performance, Sim and Yeo have reduced their forecasts by 12%/3% for FY20F/21F on the back of weaker contributions from Japfa Comfeed Indonesia (JPFA), mitigated partially by elevated swine prices in Vietnam.
The analysts also trimmed their FY20F earnings before interest, taxes, depreciation, and amortization (EBITDA) and net profit forecasts by 14% and 22% respectively.
As at 11.43am, shares in Japfa are changing hands 2 cents lower, or 2.9% down, at 66.5 cents.
