PETRA FOODS LIMITED
P34.SI
Petra Food - Under pressure
- Lowered expectations amid disappointing performance.
- While Petra’s financial and stock price performances are playing out according to our earlier expectations, we still maintain our cautious stance on the counter.
- Maintain Fully Valued, with TP lowered to S$2.05.
3Q15 performance below expectations.
- 3Q15 headline net profit registered a net loss of US$20.7m, a stark reversal from a year ago. This was mainly due to a US$19.5m one-off charge relating to a dispute settlement with Barry Callebaut. Excluding this, core loss for 3Q15 stood at US$1.2m.
- The key downside surprise was from its Indonesian operations which slumped 16.5% in local currency terms. This was attributed to the weak consumer sentiment, which affected orders and inventory levels in the trade channels.
Expecting better FY16F but valuations are high.
- As a result of the dismal 3Q performance, we project FY15F to register a net loss and have revised our FY16F earnings down by 34%.
- Valuations remain lofty at 25x-37x PE on our FY16F/17F earnings forecasts, while the subdued consumer sentiment and volatile exchange rates could add further downside to our projected earnings turnaround in FY16.
- Our TP is revised to S$2.05, implying further downside to the stock.
Valuation:
- We peg our TP to 26x FY16-17F blended earnings. We have lowered our TP to S$2.05 in line with lower earnings.
Key Risks to Our View:
- Earlier-than-expected earnings recovery. Our view is premised on weaker earnings on the back of poor consumption demand and higher costs from a weak Rupiah.
- An earlier-than-expected earnings recovery will give rise to upside earnings
Andy Sim
DBS Vickers
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Alfie YEO
DBS Vickers
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http://www.dbsvickers.com/
2015-11-16
DBS Vickers
SGX Stock
Analyst Report
2.05
Down
2.40
