CIMB initiates Mewah International (MV4.SG) at Outperform with a $1.41 target price. The house says Mewah is the second largest palm-oil refiner by capacity in Malaysia, the sixth largest globally and the owner of a stable of brands.

“We're bullish on its growth prospects from capacity and margin expansion, with earnings upside from acquisitions. Our target price of $1.41 is based on 13X CY12 P/E, a 10% discount to the plantation sector average to factor in its slimmer margins.” 

 

The house cites potential catalysts as better-than-forecast earnings, higher refining margins, and announcements of earnings-accretive acquisitions. 

 

It forecasts FY10-FY12 core EPS CAGR of 20%, supported by higher sales volumes and wider margins from economies of scale and expansion in downstream consumer pack products. 

 

It says the strong industry outlook, with palm oil the cheapest vegetable oil to produce and refine, is “contributing to its position as the biggest source of vegetable oils, at 37% of the world's vegetable-oil production.” 

 

Shares are up 1.8% at $1.14.