SINGAPORE (Oct 28): DBS Group Research is maintaining its “buy” call Japfa with higher $1.18 target, encouraging investors to take advantage of the attractive valuations offered by the Indonesia-based supplier of animal protein.
(See also: Japfa’s 3Q earnings surge to US$48 mil on higher sales and margins)
In a Friday research note, analyst Ben Santoso says Japfa’s EBITDA is projected to expand by 16% to US$464.8 million ($648 million) next year from nearly US$400 million, driven by continued growth in all segments.
Over the next 12 months, Santoso expects resilient demand in Indonesian live broiler and Day-Old Chicks, further improvements in Consumer Food products through new product launches, better productivity/raw milk price in Dairy segment, as well as lower borrowing costs.
DBS has revised its FY16/17 earnings forecasts by 40% and 32% respectively after Japfa reported a sixfold increase in 3Q earnings to US$48 million. Excluding the impact of changes in fair value of biological assets and translation forex gains, 3Q core earnings came in at US$42 million.
This is far ahead of the DBS’ expectations on an annualised basis, given strong contribution from subsidiary Japfa Comfeed Indonesia (JPFA).
“While JPFA remains the largest contributor, the group’s Dairy and Animal Protein segments outside Indonesia are expected to deliver respectable double-digit growth annually,” adds Santoso.
Shares of Japfa are up 2 cents at 83 cents.