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P H
Mar 07,2017 09:21:00

Japfa Comfeed Indonesia ($JPFA) - Weaker Growth Outlook

We lower our earnings estimates and downgrade Japfa to NEUTRAL (from Buy) with a lower TP of IDR1,750 (from IDR2,700, 3% upside). The downgrade reflects several margin limitations at its key business segments, imposed by the Government since Nov 2016, which have prematurely halted its margin expansion cycle. In addition, we do not see any major upside catalysts at this juncture. As expected, Japfa closed 2016 with a decent set of results, with EPS up sharply by 4.4x YoY.

Margin expansion limited by government intervention, including the announcement to cap day-old chick (DOC) prices at IDR4,800/bird (implemented in West Java so far) and broiler prices at IDR18,000/kg, when DOC was trading at close to IDR6,000/bird during Oct 2016. In addition, corn imports by feed millers are banned – with feed millers arguing over insufficient domestic corn supply, we believe this may increase feed production costs.

Favourable supply/demand dynamics and improved capital structure should support earnings. Notwithstanding the above, Japfa Comfeed Indonesia's (Japfa) earnings should be insulated by stable broiler/DOC prices on better supply/demand dynamics, after the implementation of the culling programme and limited parent stocks import since 2014. Furthermore, Japfa's interest expenses for 2017F should decline by 30% due to its USD bond buyback and debt refinancing last year. Japfa is also looking to raise feed prices if feed costs escalate, given supportive broiler prices.

Downgrade to NEUTRAL on weaker growth prospects. We lower our 2017- 2018F core profit estimates by 11-19.3% to account for flat YoY DOC and broiler gross margins, and 2% reduction in feed gross margins. This translates to a lower DCF-derived TP of IDR1,700, which implies 2017F P/E of 11x, -1SD vs 5-year historical mean. Main upside risk is an implementation shortfall of the regulations. downside risks are IDR depreciation and margins compression.

DOC still strong but lower feed margins. On QoQ basis, the DOC segment still delivered a high EBIT margin of 22%. However, the feed segment’s 4Q16 EBIT margins of 11% was the lowest in 2016 (Figure 2).

$CPIN $JPFA $MAIN $SIPD

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P H
Dec 14,2016 15:22:38

Poultry: Imports from 7 countries stopped

Quarantine Agency of Ministry of Agriculture banned imports of poultry and fresh poultry products from countries affected by avian influenza. The countries are Romania, Japan, Netherlands, France, Finland, India and Sweden. (Kontan)

$CPIN $JPFA $MAIN $SIPD

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P H
Dec 13,2016 16:56:24

Indonesia Poultry sector news flash
https://finance.detik.com/berita-ekonomi-bisnis/d-3364098/mentan-tetapkan-harga-bibit-ayam-rp-4800-per-ekor
 
There is an announcement by Ministry of agriculture that going forward, Day old chicken (“DOC”) price will be capped at IDR4,800 per bird while farm chicken price will be capped at IDR18,000 per kg. If implemented from the beginning of FY17, full year DOC margin will be slightly lower than FY16 (which DOC ASP at hovered at IDR5,100) and we will need to lower our FY17 estimate on DOC segment, although impact to FY16 number will be minimal.
 
The proposed regulation is subject to change depending on market condition. Further, we were told that poultry companies have yet to receive either soft/hard copy of the regulation and its detail.
 
Current DOC price is about IDR6,000/bird, versus the price ceiling of IDR4,800, we’ve performed a quick sensitivity to our current FY17F forecast on $CPIN, $JPFA and $MAIN, changing FY17F DOC ASP assumption to IDR4,800, net profit of the poultry companies will be roughly 10% lower across the board than our existing estimate, still growth but relatively flat, driven by 5% volume growth in feed and DOC.

Existing FY17F net profit
FY17F net profit after revision
Existing EPS growth
EPS growth after revision
CPIN
IDR3,524bn
IDR3,165
17.5%
6%
JPFA
IDR2,257bn
IDR1,900
12.0%
-5% (due to non- recurring gain of IDR200bn in FY16)
MAIN
IDR312bn
IDR294
16.0%
9%
 
Sector valuation after the revision is still undemanding. But the resulting relatively flat earnings growth compared with FY16 and Rupiah depreciation bias might deter valuation from reverting to mean, upside risk are dependent on stronger than expected volume growth, whether feed ASP will be increased by the producers to compensate their lower DOC margin. Will stay tuned and review our sector call, pending more development. (Norman Choong, CFA)

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P H
Dec 05,2016 09:59:19

Indonesia Poultry: Dollar concerns
 
Poultry: Indonesia
 
Currency sensitivity: 1% IDR depreciation = -5.6% earnings decline

Due to the strong dollar, we downgrade the poultry sector from Neutral to UNDERWEIGHT as we look for the continued strong dollar to undermine sentiment, despite expected strong 4Q16 results. This is particularly true as the Fed is expected to increase interest rates at its next few meetings. Our currency sensitivity analysis suggests that, for every 1% IDR depreciation, weighted-average sector earnings would decline by 5.6%, with the most sensitive to IDR currency movement being JPFA (-6.7%), followed by CPIN (-5.2%) and MAIN (-5.0%) (exhibit 12). Most sensitive within the poultry sector would be JPFA due to its high 9M16 USD debt amounting to USD212mn, around 54% of its total borrowings.

Pro-grass roots government rulings to hurt large poultry players

In addition to the new government regulation on monitoring DOC supply and demand signed by the Ministry of Agriculture in May 2016, the government is proposing a regulation that requires large poultry players to build a slaughterhouse for every 500k of weekly broiler production capacity and sell more than half of their DOC production to independent farmers at suggested fair prices. Note that companies under our coverage have only 10-12% of total broiler production that is sold internally. CPIN uses all of its internal farm production for its processed food segment, CP Food. JPFA also only utilizes 10% of its total 550mn annual DOC production capacity internally. This is equal to just 1mn weekly of on-farm broiler production, translating into just 2 slaughterhouses as per the regulation, while JPFA already has 9 slaughterhouses operating. Based on preliminary information about the new regulation, all the companies under our coverage have met the necessary requirement. We think the only overhang is the suggested DOC price cap, which should be negative for large poultry players as government plans to set the DOC price cap to protect small broiler farmers.

4Q16 earnings preview: Strong results for exit mechanism
In October and November 2016, we are seeing another anomalous quarter, with DOC and broiler prices continuing to strengthen. Based on our channel checks, there are some indications of DOC undersupply in various areas. DOC and broiler prices in October and November saw another anomaly of high DOC and broiler prices (4Q16 DOC: +19.2% q-q; broiler: +6.3%) (exhibit 4). That said, we should see another solid quarter for poultry stocks with high DOC and broiler margins, although there may be some margin contraction for feed, as domestic corn prices spiked to the IDR4,500/kg level (vs. imported corn price: IDR3,000/kg). Thus, investors concerned about negative sector sentiment following the recent dollar trend could use the expected strong earnings results to exit the sector.

Earnings reductions, with CPIN least preferred, JPFA most preferred
Given our weaker USD:IDR assumption for 2017, we lower our 2016-18 earnings forecasts for the three poultry stocks under our coverage by about 1-11% (exhibits 9-11). We maintain our HOLD rating and target 17x 2017F PER for CPIN with a lower 12M TP of IDR3,400, making it the least preferred in our coverage group. For JPFA and MAIN, we retain our BUY ratings and target 2017F PERs of 15x, with lower TPs of IDR2,400 (JPFA) and IDR2,000 (MAIN) (exhibit 2). Our latest sensitivity analysis suggests that JPFA is the most sensitive to broiler prices given that it has the highest broiler revenue contribution compared to the others (+27% net profit for every +5% in broiler price). Although JPFA is the highest USD-leveraged stock, it remains our top pick as we are still of the view that broiler prices should remain stable until 1H17 before experiencing some weakness post-Lebaran in 2H17. Additionally, as domestic corn prices have risen another 5-7% to IDR4,500/kg in 4Q16, we think JPFA will be most immune due to as it has the lowest revenue contribution from animal feed relative to its two listed poultry competitors. Risks to our calls: Sooner-than-expected DOC and broiler price corrections and IDR depreciation against the USD.

$CPIN $JPFA $MAIN $SIPD

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P H
Nov 29,2016 10:17:36

Poultry: New rule to stop monopoly

On top of the new government regulation signed in May 2016, the government is proposing another rule to dismantle the domination of large poultry corporations. These companies will be required to sell at least half of their DOC (day-old chicks) to independent farmers at a fair price and they will have to run a slaughter house for every 500k broilers of their weekly production capacity. In this way, they can slaughter at least 30% of the live birds and store them in cold storage. The new arrangement is pending for approval from the agriculture minister. (Jakarta post).

Bahana comment: This is a huge step-back for the poultry stocks under our coverage, however, there are still a lot of gray areas in terms of implementing the new rule.

$CPIN $JPFA $MAIN $SIPD

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P H
Sep 29,2016 20:53:00

Indonesia Poultry: 3Q16 results preview: Strong DOC & broiler ASPs; Weak feed margins
Poultry: Indonesia

Unusually strong chicken ASPs helped by culling & lower import quotas

For the poultry sector, post-Lebaran period this year has been unusually strong (exhibit 4) with the July-August 2016 DOC ASP at around IDR4,911/DOC (+3.1% from 2Q16 average), and the broiler ASP at IDR17,356/kg (-0.6% from 2Q16 average). DOC and broiler prices have remained relatively robust despite the historical trend of DOC and broiler prices falling 10-25% post Lebaran. In our view, price support is due to the 3mn parent stock (PS) culling (reducing about 15% of the nation’s DOC supply) and lower import quotas, which reduced grandparent stock (GPS) in 2015 by 45k to 665k, down 6.3% y-y. With DOC oversupply conditions being close to be eliminated, we believe 3Q16 DOC and broiler margins should remain well supported, although we may see some q-q sales volume contractions, mainly due to Idul Adha, a religious festivity causing higher consumption of beef and lamb.

2Q16 soybean meal ASP +40% q-q = Feed margin contraction

With the 40% q-q rise in 2Q16 soybean meal prices, a stable 3Q16 feed ASP is likely to result in a feed margin contraction, particularly given that soybean meal accounts for some 25% of COGS. On a more positive note, poultry players are requesting a 3% hike in the feed ASP to the Association (GPMT), which we believe is likely to be granted in October 2016.

Corn-price decoupling post import restrictions
At this stage, the government is targeting zero percent corn imports in 2017 by allocating 1mn ha of new land for corn, as well as machinery and price controls. The 7M16 corn imports fell 60% y-y, in line with government efforts to protect local farmers. This has led to undersupply conditions for the domestic corn market, evidenced by the decoupling of local corn prices vs. the global indicator price (local: IDR4,000/kg vs. imported: IDR3,200/kg). Earlier this month, the Indonesian Trade Ministry announced minimum and maximum reference prices, including corn, which are to be valid for four months and reviewed periodically thereafter. We believe poultry players will not benefit from stocking up during big harvests, when corn prices are at their lowest (i.e., possible drop to IDR2,000/kg).

Top pick pre-3Q16 results season: JPFA on high poultry prices

We expect JPFA to post the strongest earnings in the sector due to high poultry prices. JPFA has the highest contribution to sales from the DOC & broiler divisions (1H16: 45% vs. CPIN: 28% and MAIN: 27%). Thus, we raise JPFA’s 2016-18F earnings (exhibits 9-11), particularly on our stronger IDR outlook. We expect JPFA to see leverage improvement and synergies due to the recent KKR investment, and look for JPFA to trade close to MAIN’s valuation. We cut CPIN from Buy to HOLD with a lower 12M TP of IDR3,400, based on a lower 2017F PER of 17x (from a 20.4x 2016F PER) mainly on the consolidation of the broiler divisions, which should cause earnings volatility. Thus, we believe JPFA and MAIN deserve valuation discounts to CPIN, with JPFA’s new TP higher at IDR2,000 and MAIN’s lower at IDR2,300, both based on a 15x 2017F PER. Risks to our calls: DOC and broiler price drops and a weaker IDR.

$CPIN $JPFA $SIPD $MAIN

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P H
Jul 27,2016 08:50:23
EARNINGS CALENDAR (Half Year 2016 - Estimated)

JULY 2016

Jul 25, 2016 :
$BBTN (Bank Tabungan Negara (Persero) Tbk PT)

Jul 26, 2016
$BDMN (Bank Danamon Indonesia Tbk PT)
$BMRI (Persero) Tbk PT Earnings Release - 4:00PM GMT+7

Jul 27, 2016
$AALI (Astra Agro Lestari Tbk PT)
$HMSP (Hanjaya Mandala Sampoerna Tbk PT)
$LPPF (Matahari Department Store Tbk PT)
$MPPA (Matahari Putra Prima Tbk PT)
$PTBA (Bukit Asam (Persero) Tbk PT)

Jul 28, 2016
$ASII (Astra International Tbk PT)
$BEST (Bekasi Fajar Industrial Estate Tbk PT)
$BJBR (PT Bank Pembangunan Daerah Jawa Barat dan Banten Tbk)
$DOID (Bloomberg)
$NCO (Vale Indonesia Tbk PT)
$JPFA (Bloomberg)
$PSAB (Bloomberg)
$SSMS (Bloomberg)
$SMGR (Semen Indonesia (Persero) Tbk PT)
$UNTR (United Tractors Tbk PT)
$UNVR (Unilever Indonesia Tbk PT)

Jul 29, 2016
$ASRI (Alam Sutera Realty Tbk PT)
$ADHI (Bloomberg)
$BSDE (Bumi Serpong Damai Tbk PT)
$BNGA (Bloomberg)
$BNLI (Bloomberg)
$BNII (Bloomberg)
$BKSL (Bloomberg)
$BHIT (Bloomberg)
$BISI (Bloomberg)
$CPIN (Bloomberg)
$CTRA (Ciputra Development Tbk PT)
$CTRP (Bloomberg)
$ELSA (Bloomberg)
$GIAA (Bloomberg)
$GJTL (Bloomberg)
$GGRM (Gudang Garam Tbk PT)
$NKP (Bloomberg)
$INTP (Indocement Tunggal Prakarsa Tbk PT)
$INDF (Indofood Sukses Makmur Tbk PT)
$ICBP (Indofood CBP Sukses Makmur Tbk PT)
$INDY (Bloomberg)
$KARW (Bloomberg)
$KAEF (Bloomberg)
$KIJA (Bloomberg)
$KLBF (Kalbe Farma Tbk PT)
$KRAS (Bloomberg)
$LPKR (Lippo Karawaci Tbk PT)
$LSIP (Perusahaan Perkebunan London Sumatra Indonesia Tbk PT)
$MAPI (Bloomberg)
$PWON (Bloomberg)
$PNBN, $PNLF, $PNIN (Bloomberg)
$PTPP (Bloomberg)
$RALS (Bloomberg)
$SMRA (Bloomberg)
$TBLA (Bloomberg)
$TLKM (Telekomunikasi Indonesia (Persero) Tbk PT)
$TOTL (Bloomberg)
$WSKT (Bloomberg)

AUGUST 2016
Aug 1, 2016
$HRUM (Harum Energy Tbk PT)
$SSIA (Surya Semesta Internusa Tbk PT)

Aug 10, 2016
$ITMG (Indo Tambangraya Megah Tbk PT)

Aug 12, 2016
$EXCL (XL Axiata Tbk PT)

Aug 29, 2016
$ADRO (Adaro Energy Tbk PT)
$ANTM (Aneka Tambang (Persero) Tbk PT)
$BBRI (Bank Rakyat Indonesia (Persero) Tbk PT)
$ISAT (Indosat Tbk PT)
$PGAS (Perusahaan Gas Negara (Persero) Tbk PT)

SEPTEMBER

Sep 13, 2016
$SMCB (Holcim Indonesia)

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P H
Jun 07,2016 12:26:34
BERITA SAHAM 07 JUNI 2016


•PERTUMBUHAN EKONOMI : Pemerintah memberi sinyal penurunan asumsi laju produk domestik bruto dari usulan RAPBNP 2016 sebesar 5,3% menjadi 5,1%-5,2%. (BISNIS INDONESIA)

•REGULASI IMPOR PONSEL & KOMPUTER : Per 1 Juli, Importir Produsen Wajib Investasi
Mulai 1 Juli 2016, impor telepon seluler, komputer genggam (handheld), dan komputer tablet khususnya untuk perangkat yang berada dalam jaringan 4G LTE oleh importir produsen wajib menyertakan bukti investasi di dalam negeri. (BISNIS INDONESIA)

•INDUSTRI PAKAN TERNAK : Jagung Ditekan, Impor Gandum Melonjak, Pengetatan impor jagung berimbas pada meningkatnya impor gandum untuk pakan ternak. Penurunan impor jagung juga telah menyebabkan penyerapan komoditas itu dari petani lokal naik cukup signifikan. (BISNIS INDONESIA) Comment : good for BISI

•TAMBAHAN MODAL BUMN : PMN Cair, Rencana penerbitan saham baru oleh BUMN kembali mencuat setelah pemerintah mengusulkan Penyertaan Modal Negara (PMN) dalam Rancangan APBN Perubahan 2016 kepada DPR. (BISNIS INDONESIA)

•WTON : Perusahaan beton pracetak PT Wijaya Karya Beton Tbk. sudah mengantongi proyek infrastruktur HSR Jakarta-Bandung dan menggenggam total nilai kontrak baru hingga Rp1,3 triliun. (BISNIS INDONESIA)

•RI MASUK LIMA BESAR DUNIA - Ledakan Besar di Ritel : Lompatan peringkat Indonesia, dari 12 menjadi 5, dalam Global Retail Development Index (GRDI) 2016 kian mengonfirmasi terjadinya booming sektor ritel di Tanah Air. (BISNIS INDONESIA) Comment : Good For ACES, RANC

•STOK CPO MENURUN : Ramadan Kerek Harga CPO, Persediaan minyak kelapa sawit di Malaysia, sebagai produsen kedua terbesar di dunia, diprediksi menyusut ke level terendah dalam dua tahun terakhir. Harga pun berpeluang mencapai level 2.900 ringgit per ton pada bulan ini. (BISNIS INDONESIA) Good For LSIP, AALI

•TLKM : PT Telekomunikasi Indonesia Tbk mengaku sudah meraih pendapatan sekitar Rp 15 triliun dari segmen High End Market yang dikelola Enterprise Customer Facing Unit (CFU). (INDO TELKO)

•BBRI- BMRI : Bank BRI (Persero) Tbk dan Bank Mandiri (Persero) Tbk berkomitmen membiayai permodalan bagi distributor minyak pelumas buatan PT Pertamina Lubricants. (KOMPAS)

•BMRI : Bank Mandiri’s e-money solution provider PT Digital Artha Media (DAM) will sign partnership agreements with 13 e-commerce companies while Indonesian Agency for Creative Economy (BEKRAF) has joined hands with several venture capital firms to fund the 16 sub-sectors in the creative industry. (DEAL STREET ASIA)

•Harga Nickel Dan Timah
Tin 3M : 16945  +350  +2.11%
Nickel 3M : 8665  +165  +1.94%

$ERAA $TELE $TRIO $GLOB $BISI $CPIN $MAIN $JPFA $WTON $WIKA $ACES $RANC $AALI $LSIP $SIMP $SMAR $SGRO $TLKM $BMRI $BBRI

 -----------------------------------------

( OCBC, DISCLAIMER ON)
Bull
P H
Jun 03,2016 11:24:54
Development of poultry sector in 2Q16

The good:

- Due to better supply/demand dynamics and the breeding season for Lebaran, broiler (live bird) and day old chick (DOC) prices have been increasing since the beginning of April, currently at IDR6,650/bird for DOC and IDR20,000/kg for broiler. Recall about 7.5m-8.0m/week of DOC production were eliminated after the culling program in late 2015, as a results, both broiler and DOC prices are now 15-20% higher than the same period in 2015, this will be beneficial to the poultry companies operating margins in the coming 2Q16 results, live birds and DOC segment merely breakeven in 1Q16.

The bad:

- Due to a severe flood in Argentina, the third largest soybean exporter of the world, soybean meal price has skyrocketed from USD260/tonne to about USD410/tonne since the beginning of April. Soybean meal makes up for 20-25% of feed cost of goods sold, the impact on margin will be minimal in 2Q16 due to the poultry companies’ raw material holding period of 3 months. Assuming ASP to stay constant, these will impact feed gross margin by approximately 5-6% in 3Q16. However, current feed ASP of 6,200-6,300/kg is lower than listing price of 6,500/kg, and hence, we believe there will be a cost push increase of feed ASP in 3Q16 and ultimately lower the impact to about 2-3%.

- Rupiah has depreciated by 3% since middle of May due to stronger USD, stemming from a potential interest rate hike, this means that forex gain of Charoen Popkhand Indonesia ($CPIN) and Japfa Comfeed Indonesia ($JPFA) will likely be reversed in 2Q16, Malindo Feedmill ($MAIN) will not be impacted by this because of its 95% IDR debt structure.

Overall still positive:

- We remain upbeat towards the sector due to better supply and demand dynamics of poultry that drives an margin upcycle of longer than 1 year. For 2016, improvement is mainly on forex losses reversal and gross margin improvement due to higher average poultry prices while in 2017, we believe there will be volume growth, this in turn will utilize the excess DOC and live bird capacity in the market and improve DOC and live bird cost of goods sold.

- Historically speaking, poultry companies have been able to pass their feed costs pressure and maintain margin, this is highly dependent on poultry demand.

- Our top pick is Charoen Popkhand Indonesia.


Bull
P H
May 30,2016 11:06:19
Japfa Group to invest USD345mn to expand milk factories

Japfa  Group,  which  owns  listed  Japfa  Comfeed ($JPFA), plans  to invest USD 345mn through its subsidiary  PT.  Greenfields  Indonesia  to  build  five  farms  and  milk  processing  plants each,  planning  to  increase production  capacity  from  the  current  40m  liters  to  260m  liters over the  next decade. The products  are to be supplied domestically and internationally as well.
Bull
P H
Apr 29,2016 09:59:54
Japfa Comfeed Indonesia ($JPFA), 1Q16 net profit above RHB and consensus, at 40/48% respectively

Results at first glance:

¨ Strong due to better feed margins, profitable DOC segment, and forex gain.

¨ Big reversal if compared with 1Q15, net profit jumped 133% YoY . It’s down 51% QoQ because broiler segment suffered losses at this quarter, this is expected, 4Q15 net profit of IDR570bn is supernormal, and is already equal toFY16 full year consensus estimates.

¨ Operating profit of IDR396bn is in-line, 25% of my forecast, results beat expectation due mainly to forex gain of IDR128bn versus expected forex losses of IDR68bn. Using house call, I was assuming IDR/USD of 13,700, versus 1Q16’s average of about 13,200. Financing cost is also lower than expected, 21% of my estimate.
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P H
Apr 14,2016 09:34:16
1. Demand and supply determine prices of DOC and LB. We have cycles and its normal in poultry industry

2. Feed contributes significantly to our operating profit margin, feed's opm is 9-11% in 2013-2015. See the robustness and proportion of our feed segment. In 2016, we expect better operating profit, following culling and better economy.

3. Net debt/equity will be lowered in 2016 compared to 2015

4. Net profit Rp 524bn in 2015, if we add back unrealized forex loss to 2015 bottom line. Net profit should be around Rp1 tn - this is the similar level to net profit 2012 (where there was no forex loss in 2012). So Rp 1tn net profit is expected in the future should there be no unrealized forex loss. (

Regarding 3rd culling, we still wait for regulation issued by minister, possibly issued in near term.

-Oz company buying USD 60 million of 2 cattle station from Japfa indonesia biggest importer of cattle.

From : Japfa Comfeed ($JPFA)
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P H
Apr 05,2016 11:18:55
PT Japfa Comfeed (JPFA) is targeting a 10-15% growth in revenue this year vs last year’s IDR25.02t. Bambang Budi Hendarto, Vice President Director of JPFA, stated that the targeted revenue growth is based on the average growth that the company ahs achieved in 2010-2015.

$JPFA
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P H
Mar 02,2016 12:43:33
Japfa Comfeed ($JPFA) - A Strong Comeback

We think the stabilising IDR is a boon for Japfa’s prospects, as its earnings are highly sensitive to fluctuations in the value of the rupiah, as mentioned in our report: Agriculture- Poultry : Year Of Optimism. It recorded a bumper profit in 4Q15 on the back of the reversal of forex translation (a huge forex loss in 3Q15 to a large gain in 4Q15) and gross margin expansion. As RHB expects IDR to average 13,700/USD this year, we fine-tune our earnings estimates and upgrade the stock to BUY (from Neutral) with a higher TP of IDR1,150 (from IDR675, 39% upside).

¨ Stability of the IDR a boon; as RHB upgraded the estimated FY16 IDR/USD rate, the stock is now a BUY, with a higher DCF-derived TP of IDR1,150 implying 18x-15x FY16F-17F P/Es. We have our reservations though on Japfa Comfeed Indonesia’s (Japfa) prospects, as its earnings are volatile and sensitive to fluctuations in the value of the IDR, given its high USD exposure (70% of its COGS is in USD terms).

¨ A strong comeback in 4Q15. Japfa recorded IDR135bn in forex gains (vs 346bn losses in the previous quarter) while its quarterly gross margin expanded to 20.4% due to the stronger exchange rate and improvements in its feed and day-old chick (DOC) segments. We think its 4Q15 gross margin is not sustainable, as it is already competing head-to-head with Charoen Pokhand Indonesia (CPIN IJ, BUY, TP: IDR3,700) that is supported by market leader position and rather profitable processed food segment. Our revised FY16 estimate only assumes a gross margin of 13.6% as we are wary of the ongoing logistics issues of local corn suppliers affecting its feed segment.

4Q15 results were above expectations

¨ Key risks include the IDR depreciation, escalation of local corn supply issues, recurrence of DOC oversupply, the last 2m parent stock (PS), scheduled to be culled, is not done yet and potential fines levied on alleged price fixing.

Source: RHB Securities
Bull
Quotes delayed, except where indicated otherwise.
JPFA
1,340.00 35.00 (2.55%)
Japfa Comfeed Indonesia Tbk.
Last Update 02:54:11