BUY
Price S$0.189
Previous S$0.290
Target S$0.290
Consciencefood reported a 194% YoY rise in 3Q11 PATMI to Rp32.2b (+194% YoY) which was achieved on the back of a 30% rise in revenue to Rp183.4b. Results were above expectations. 9M11 PATMI of Rp94.6b accounted for 87% of our FY11F while revenue of Rp563.8bil accounted for 80% of our FY11 forecast. We increase our FY11F revenue and earnings forecast by 2% to take into account higher sales of instant noodles which would be offset by the delayed production of its beverage line. With two new avenues of sales coming on stream next year and growing instant noodle sales, we remain optimistic on the stock. Maintain BUY with unchanged TP of S$0.29, pegged at 7x FY11F earnings.
Fall in operating expenses. While 9M11 GPM dipped by 1ppt, PATMI margins have expanded by 3ppt YoY to 17% due to a fall in admin, finance and other expenses. Admin expenses fell 54% YoY as IPO expenses of Rp14.3bil were incurred in 3Q10.
Further delay in beverage line. Our last report highlighted a delay in the commencement of its beverage line from Oct2011 to 1Q12. Management has now announced it aims to commence production in 2H2012. As for its cup noodle line, efforts are now being carried out promoting it with commercial sales to begin in 1Q12. We adjust our beverage sales contribution for FY12 from Rp174bil to Rp151bil based on a capacity utilisation of 26% for the year which would generate 30m bottles at an ASP of Rp5,000.
Jakarta plant under negotiations. The Group currently caters to the Jakarta market via OEM production. Based on annual production of 144mil packs, that market is expected to generate Rp144bil in sales. Management is in negotiations to acquire that OEM plant which would help to improve margins and venture into Jakarta more aggressively.
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