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Japfa (JAP SP)
2022: Results Below Expectations; Uncertainties Remain
Japfa’s 2022 core net PATMI of US$34.6m (-73.9% yoy) was below expectations, forming 45% of our full-year forecast. 4Q22 core PATMI fell by 81% qoq to US$1.9m as high feed costs affected Indonesia poultry, while Vietnam operations still face weaknesses as ASF continues to plague the livestock industry. Japfa continues to see near-term challenges for both segments. We cut our 2023 earnings by 71%. Our SOTP-based target price is reduced by 35% to S$0.23. Maintain HOLD.
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Commodities – China
Weekly: China’s Modest Growth Target Dampening Basic Materials’ Demand Outlook
China has set 2023 real GDP growth target at around 5%, at the low end of market expectations. Absence of major stimulus for the embattled property sector and infrastructure investments are hurting market sentiment, in addition to the modest LGSB issuance quota of Rmb3.8t for 2023. Infrastructure investments will remain as the key pillar for basic materials’ demand in 2023. We are cautious on the sustainability of the demand recovery as the effects of pent-up demand gradually subside.
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Country Garden Services (6098 HK)
Issues Profit Alert For 2022 - Results Below Expectation Due To Impairment Of Goodwill
CGS’ core attributable net profit is expected to grow 5% yoy, beating our expectation.
Attributable net profit is expected to decline by 51% to 57% yoy, below our expectation.
Impairment of goodwill and other intangible assets arising from M&A companies is the
major reason behind the underperformance. We lower our 2022/23/24 forecast of attributable net profit by 61%/46%/43% respectively. Cashflow is less affected. Maintain BUY with a lower target price of Rmb19.84.
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Agribusiness
Palm oil stock preview for Feb 2023
■ Malaysia’s palm oil stock likely fell 2.8% mom to 2.2m tonnes at end-Feb 2023F as exports and local usage exceed production and imports.
■ CPO price has been rising in recent days due to concerns that recent heavy rainfalls in Johor could affect production for March and tighten supply.
■ Maintain CPO price forecast of RM3,800 per tonne for 2023F and Neutral sector rating.
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Jardine Matheson Holdings (US$50.82, up 4 cents) reported that underlying net profit of US$1,584 million for FY22 was US$71 million (5%) higher than the prior year. The increase was primarily driven by strong performances by Astra and other Southeast Asian businesses held by Jardine Cycle & Carriage (‘JC&C’), coming largely in line with market expectations. The Board is recommending an increased final dividend of US$1.60 per share, which produces a full-year dividend of US$2.15 per share, up 8% from the prior year.
JMH is optimistic that the reopening of borders, as well as opportunities in Southeast Asia, will drive the Group’s cyclical recovery during 2023 despite softening commodity prices, and JMH remains confident in their strategy for sustainable, long-term profit growth. JMH’s market cap stands at S$14.7 bln and currently trades at 8.1x forward PE and 0.5x PB, with a dividend yield of 4.2%. Consensus target price stands at S$65.26, representing 28.4% upside from current share price.
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Adaro Minerals Indonesia
Planting a seed in the EV value chain
■ We like ADMR given its metcoal exposure and aluminium smelter investment; it is also participating in the government’s metal downstreaming initiative.
■ We see upside potential from ADMR’s investment in an aluminium smelter, which could form c.53% of ADMR’s revenue by FY25F.
■ We initiate coverage on ADMR with an Add rating and SOP-based endFY23F TP of Rp1,800, implying 12x FY24F P/E and 9x FY24F EV/EBITDA.
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