SINGAPORE (March 21): OCBC advises Delfi shareholders to put on “hold” their investment decisions as lower cocoa prices could translate into better ingredients prices for the manufacturer of chocolate confectionery.

Delfi buys forward its raw material needs and cocoa prices have tumbled by as much as 44% to levels seen in 2008 on plentiful supply due to favourable weather and weak demand.

Recently, Delfi entered into an agreement to sell a 50% stake in PT Ceres Meiji Indotama (CMI) to JV partners Meiji Co. and Meiji Seika (Singapore).

(See also: <a href="http://www.theedgemarkets.com.sg/article/delfi-dispose-entire-50-stake-meiji%E2%80%99s-indonesia-unit-116-mil" target="_blank">Delfi to dispose entire 50% stake in Meiji’s Indonesia unit for $11.6 mil</a>)

CMI was incorporated under a JV agreement in 2000 to engage in manufacturing and sale of confectionery products in Indonesia.

After an extensive review, Delfi believes CMI is best suited to continue growing under the stewardship of Meiji.

See also: <a class='gtm_see_also_1_inread' style='text-decoration: underline;' href='/capital/brokers-calls/uob-kay-hian-lowers-mpacts-tp-dpu-lower-contributions-china-and-further?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>UOB Kay Hian lowers MPACT’s TP, DPU on lower contributions from China and further depreciation on forex</a>

Exiting the JV will also allow Delfi to redeploy its funds and manpower to focus on growing their core business in Indonesia and regional markets.

The total consideration of the proposed disposal is US$8.3 million and Delfi will recognise a pre-tax gain of US$4.9 million.

OCBC also noted that private consumption in Delfi’s core market Indonesia has been largely supportive of overall economic growth.

See also: <a class='gtm_see_also_2_inread' style='text-decoration: underline;' href='/capital/brokers-calls/uobkh-maintains-overweight-rating-s-reits-after-seeing-healthy-signs?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>UOBKH maintains 'overweight' rating on S-REITs after seeing 'healthy signs' that inflationary pressures have moderated</a>

“Against this backdrop, we highlight that the group’s Own Brands segment has been growing, and higher sales of its premium products would reap better margins than the value products,” says lead analyst Jodie Foo.

Delfi has a fair value of $2.37. The counter is trading flat at $2.20.

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