Johortin’s 9MFY12 net profit easily beat our estimates, accounting for 107.1% of our full-year numbers. As we expect demand for its dairy products to remain resilient, we are raising our FY12 and FY13 earnings forecasts by 26.3% and 7.2% respectively. As the share price has retraced from the high in September, it is now trading at a mere 5.3x FY13 EPS. We advise investors to accumulate on weakness. Our earnings revision pushes up our FV to RM2.50, premised on sum-of-parts valuation, based on the group’s enlarged share capital. Maintain BUY.
Ahead of our expectations. Johortin’s 9MFY12 net profit exceeded our expectations, accounting for 107.1% of our full-year estimates. The stronger-than-expected numbers were attributable to better margins from some products at its tin can manufacturing division as raw material prices softened, and sales in its dairy product manufacturing division stayed resilient. However, we do not think that the net margins seen during 3Q would be sustainable since the company will eventually be passing on the cost savings to its customers. As such, we expect net margins to normalize in the upcoming quarter.
Condensed milk the growth booster. We are raising our FY12 and FY13 earnings forecasts by 26.3% and 7.2% respectively to incorporate the stronger-than-expected earnings in 3Q12. We are of the view that the demand for Johortin’s dairy products will remain firm next year. That said, the rising price of milk powder and fluctuating price of sugar may affect profits. Hence, our net margin forecast next year remains at a conservative 7.0%.
Rights shares oversubscribed by 15.7%. The company’s recent rights shares exercise was oversubscribed by 15.7%. The exercise involved a rights issue with free warrants on the basis of one rights share and one free warrant for every three existing ordinary shares of Johortin held. The proceeds raised will be utilized to expand the warehouse, factory and production capacity for the company’s sweetened condensed milk business. We are projecting a 2011-13 CAGR revenue and net profit growth of 64.4% and 54.4% respectively in view of the new production capacity.
Lifting dividend forecast. In line with our earnings revision, we are revising higher our dividend forecast by 26.0%, based on the same dividend payout ratio. The stock is trading at a mere 5.3x FY13 EPS and offers a dividend yield of 4.4%, which we deem undervalued for a consumer stock. This is more so since the company’s earnings are growing at a whopping 2011-13 CAGR of 54.4%. In line with our revised earnings forecast, we are raising our FV to RM2.50 (previously RM2.38), premised on sum-of-partsvaluation, and based on the group’s enlarged share capital.
Ahead of our expectations. Johortin’s 9MFY12 net profit exceeded our expectations, accounting for 107.1% of our full-year estimates. The stronger-than-expected numbers were attributable to better margins from some products at its tin can manufacturing division as raw material prices softened, and sales in its dairy product manufacturing division stayed resilient. However, we do not think that the net margins seen during 3Q would be sustainable since the company will eventually be passing on the cost savings to its customers. As such, we expect net margins to normalize in the upcoming quarter.
Condensed milk the growth booster. We are raising our FY12 and FY13 earnings forecasts by 26.3% and 7.2% respectively to incorporate the stronger-than-expected earnings in 3Q12. We are of the view that the demand for Johortin’s dairy products will remain firm next year. That said, the rising price of milk powder and fluctuating price of sugar may affect profits. Hence, our net margin forecast next year remains at a conservative 7.0%.
Rights shares oversubscribed by 15.7%. The company’s recent rights shares exercise was oversubscribed by 15.7%. The exercise involved a rights issue with free warrants on the basis of one rights share and one free warrant for every three existing ordinary shares of Johortin held. The proceeds raised will be utilized to expand the warehouse, factory and production capacity for the company’s sweetened condensed milk business. We are projecting a 2011-13 CAGR revenue and net profit growth of 64.4% and 54.4% respectively in view of the new production capacity.
Lifting dividend forecast. In line with our earnings revision, we are revising higher our dividend forecast by 26.0%, based on the same dividend payout ratio. The stock is trading at a mere 5.3x FY13 EPS and offers a dividend yield of 4.4%, which we deem undervalued for a consumer stock. This is more so since the company’s earnings are growing at a whopping 2011-13 CAGR of 54.4%. In line with our revised earnings forecast, we are raising our FV to RM2.50 (previously RM2.38), premised on sum-of-partsvaluation, and based on the group’s enlarged share capital.
Source: OSK
No comments:
Post a Comment