BUY S$0.895 STI : 2,708.13
Upgrade from HOLD
Price Target : 12-Month S$ 1.28 (Prev S$ 2.03)
Reason for Report : Company update
Potential Catalyst: Higher sales of high margin products
DBSV vs Consensus: Below consensus on more conservative farmland acquisition
• Sell-down overdone. Current valuation gap unjustifiable
• Fundamentals remain intact
• Farmland acquisitions and sales of high margin products to drive growth
• Lowered TP to $1.28 to reflect cautious mood. Still 43% upside deserves upgrade to Buy
Attractive current valuation. In our view, MINZ is oversold. MINZ’s share price has fallen 52% from its peak of S$1.85 in 28 February 2011. The stock currently trades at 3.8x FY12 PE and 0.7x FY12 P/BV, at about –2 standard deviation from its average valuations of 7x PE and 1.3x P/BV.
Fundamentals are intact.4QFY 06/11 and FY06/11 results were within expectations. Going forward we expect fundamentals to be intact supported by favourable operating environment. Based on China’s latest CPI data, vegetable prices increased 0.1% yoy. Amid steady demand, there is no sign of vegetable prices falling. Volume demand from customers should remain resilient to the slowdown in general market conditions as MINZ is an upstream producer of staple food in fresh and processed vegetables.
Growth via sales of high margin products and farmland acquisition. Key growth drivers going forward would be increasing sales of high margin black fungus and king oyster mushrooms as they ramp up production, as well as from farmland acquisitions.
Upgrade to Buy, TP S$1.28. In view of the strong earnings visibility, the current valuation gap is unjustifiable. Based on lowered target valuation of 5.5x FY12 PE (in line with valuation of S-chip companies under our coverage), we revised our TP to S$1.28, representing P/BV of 1.0x. With an attractive 43% upside to our TP, we upgrade the stock to BUY.
No comments:
Post a Comment