Japfa Ltd - OCBC Investment 2016-10-20: Pan-Asian Agri-Food company

Japfa Ltd - OCBC Investment 2016-10-20: Pan-Asian Agri-Food company JAPFA LTD. UD2.SI

Japfa Ltd - Pan-Asian Agri-Food company

  • Established since 1975
  • Operations in emerging Asian markets
  • Focused on three core business segments

Pan-Asian Agri-Food company

  • Japfa Ltd recently hosted a site visit to Myanmar. The trip included a briefing by the management of Japfa’s various subsidiaries, as well as a visit to one of the company’s poultry breeding farm and hatchery in Myanmar. 
  • Japfa is an agri-food company with operations in Indonesia, China, Vietnam, Myanmar and India. 
  • Its 51%-owned subsidiary PT Japfa Comfeed Indonesia Tbk is listed on the IDX, while Japfa was listed on the SGX in Aug-14.

Vertically integrated business model 

  • The group is mainly engaged in three business segments across the value chain. 
  • Firstly, the Animal Protein segment (85% of 1H16 overall revenue) covers the production of poultry, beef, swine and feed with presence in its key markets. 
  • The group also manages dairy farms and raw milk production in China and Indonesia under its Dairy business, which contributed 9% of 1H16 revenue. 
  • The group also has a Consumer Food segment (~6% of 1H16 revenue), whereby they produce and sell consumer meats and milk. 
  • As of FY15, the geographical sales breakdown of their key markets was as follows: Indonesia (71%), Vietnam (13%), China (8%), India (4%), Myanmar (3%).

Proxy to emerging markets growth 

  • Looking ahead, management believes demand would be driven by factors such as the rising affordability of consumers in their key markets. 
  • In addition, there is still ample room for growth in consumption of meat per capita in those markets especially in comparison to levels seen in other countries. For instance, according to OECD, Indonesia’s poultry consumption level in 2015 was at 6.6kg/capita vs. Malaysia’s at 41.4kg/capita. 
  • All considered, Japfa can be seen as a proxy to emerging markets growth. 
  • According to Bloomberg’s estimates, the stock is currently trading at 8.4x FY17F P/E, Japfa Comfeed Tbk (JPFA IJ) is trading at 13x FY17F P/E, while one of its peers, Charoen Pokphand Indonesia (CPIN IJ) is trading at 17.4x FY17F P/E. 
  • We do not have a rating for Japfa.

Jodie Foo OCBC Investment | http://www.ocbcresearch.com/ 2016-10-20
OCBC Investment SGX Stock Analyst Report NOT RATED Maintain NOT RATED 99998 Same 99998