Clear growth story;
Price Target : 12-Month S$ 0.97
•Branded consumer play, with 60% of revenues from the Philippines
•Clear growth drivers in place to deliver a projected CAGR of 25% (FY12- 15F)
•Looking to manage loan maturities in view of potentially higher interest rates
•Maintain BUY, and S$0.97 TP
Branded Philippines consumer play. We see DMPL as a key branded consumer play with 60% revenue from Philippines with clear growth drivers in place, supported by its established brands. This, in our view, was the key message to about 40 institutional investors DMPL met in a day of meetings during our Pulse of Asia conference recently.
Clear growth drivers in place. Growth drivers in the near term will be from the Philippines market, expansion of S&W brands for processed and fresh fruits in Asia and Middle East, and management’s strategy to shift production of pineapple juice concentrates to RTD canned beverages. By FY15F, the changes in long term supply contracts and expiry of its PET toll packing contracts are further expected to lift earnings to US$62m, representing CAGR (FY12 – 15F) of 25%.
Cognizant of rise in rates, 1ppt increase to impact FY14/15F earnings by -2.2%/-1.6%.There were queries on the group’s net gearing which rose to a high of 62% as of 1Q13 given that interest rates could potentially rise. However, gearing is expected to taper down to c.0.4-0.5x. Management shared that 90% of its loans are short term in nature, and are cognizant of risks from a rise in interest rates. They would be looking to manage their loan maturities going forward. On our estimates, we estimate that a 1ppt rise in interest rates could impact FY14F/15F earnings by -2.2%/-1.6%.
Maintain BUY, TP at S$0.97. We maintain our BUY recommendation with a DCF-backed TP of S$0.97, implying FY14F PE of 22.5x. This is projected to decline to 16.3x by FY15F. We view DMPL as inexpensive, trading at c.17.6x PE on FY14F, compared to regional F&B peers’ trading at an average PE of 24x.
Publish date: 08/07/13