Company Name: PETRA FOODS LIMITED
| Research House: CIMB | Price Call: BUY | Target Price: 3.77 |
CIMB Research and DBS Vickers upgraded their ratings and target prices for cocoa firm Petra Foods after it announced plans to divest its cocoa ingredients business.
CIMB Research upgraded Petra to ‘outperform’ from ‘underperform’ and raised its target price to $3.77 from $1.92, saying it views the company's move to focus on its branded consumer arm as a positive one.
By 10:34 a.m., Petra shares were up 1.5% at $3.36, having jumped 20.4% on Wednesday after it said Swiss chocolate maker Barry Callebaut was buying its cocoa business for US$950 million ($1.16 billion). Petra shares have surged 82% since the start of the year.
Although cocoa ingredients account for 35% of Petra Food's 2011 profits, the significance of the business is declining as grinding margins fall, CIMB said. Shareholders can look forward to a special dividend of up to $0.60, it added.
“Petra’s evolution into a pure consumer play could spark a rerating,” CIMB said, adding that its balance sheet will be strengthened from 1.7 times net debt to a net cash position.
DBS Vickers said Petra's branded consumer division has better margins and more stable growth, noting that the company is also an attractive acquisition target for global chocolate confectionary firms.
The brokerage upgraded Petra to 'buy' and raised its target price to $3.97 from $1.95.
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