SINGAPORE (Aug 29): Maybank KimEng likes Japfa, the agri-food company, as Asia’s middle class consume more meat protein as economic growth improves.

Japfa is the integrated industrialised farmer with emphasis on feed production across its key animal protein segments.

In a Monday unrated report for retail investors, analyst Simeon Ang says although the group is a price-taker in manifestly cyclical space, the group is focusing on three initiatives to smoothen out these cycles.

These include diversifying its animal protein portfolio across five geographies, stable feed component of the animal protein business along with tight cost management to keep breakeven points low and benefit from any ASP uptick as well as moving downstream towards consumer end-products, which can potentially allow it to set prices of its own products.

In 2Q17, Japfa recorded a loss of US$43.4 million ($4.6 million) compared to earnings of US$44.6 million a year ago as revenue grew just 1%.

The weak 2Q17 performance was due to weak operating environment across two of the group’s main markets – poultry in Indonesia and pork in Vietnam.

See: Japfa sinks into the red amid weak swine market in Vietnam

 “Japfa currently trades at 8.9x forward P/E with two (1 Buy and 1 Sell) street ratings and an average TP of $0.72,” says Ang.

As at 12.12pm, Japfa is trading 3 cents higher at 58 cents with a dividend yield of 1.8% in FY16.