Mewah at 2-mth low after Q3 net profit fall

Stock Name: Mewah
Company Name: MEWAH INTERNATIONAL INC.

Research House: Nomura

Price Call: HOLD

Target Price: 0.45

Shares of Mewah International Inc dropped to the lowest in two months after the palm oil firm reported a 82% fall in third-quarter net profit to $1.2 million from a year earlier.

Mewah shares fell as much as 4.6% to $0.415, the lowest since Sept. 11. The stock has fallen nearly 11% so far this year, lagging the 25% gain in the FT ST Mid Cap Index.

“The primary reason for the erosion in profits was Mewah’s emphasis on trying to maintain its margins, even at the cost of volumes, and this resulted in net income being barely positive due to fixed costs,” Nomura said in a report.

Nomura, which has a ‘neutral’ rating and $0.45 target price on the stock, said the outlook for Mewah’s fourth quarter appears weak due to the volatile crude palm oil prices. It added that a downward revision in its and consensus estimates is “inevitable”.

DBS downgrades Mewah to 'fully valued'

Stock Name: Mewah
Company Name: MEWAH INTERNATIONAL INC.

Research House: DBS Vickers

Price Call: SELL

Target Price: 0.38

DBS Vickers downgraded palm oil refiner Mewah International to ‘fully valued’ from ’hold’ and cut its target price to $0.38 from $0.46, citing weak earnings outlook.

By 12:19 p.m., Mewah shares were up 1.2% at $0.425 and have fallen 8.6% so far this year, compared to the FT ST Consumer Goods Index’s 15.6% drop.

Mewah International said its net profit for April-June rose 3.8% to $6.3 million from a year ago, helped partly by a fall in cost of sales, although its revenue dropped 18.8%.

DBS cut its 2012-2014 earnings forecast for Mewah by 10-19% on expectations that slow demand for consumer pack will persist and on slower-than-expected take up of its new capacity for speciality fats business.

Malaysian refineries are expected to remain uncompetitive against their Indonesian peers unless crude palm oil prices fall to around 2,100 ringgit/metric tonne, an unlikely scenario, DBS said.

Mewah International rated 'reduce' by Nomura

Stock Name: Mewah
Company Name: MEWAH INTERNATIONAL INC.

Research House: Nomura

Price Call: SELL

Target Price: 0.50

Nomura Research in a Nov 11 research report says: "Mewah's 3QFY11 performance continued to be weak, with net income of US$6.5 million down 69% y-o-y. The numbers missed our (and Street estimates), with 9MFY11 forming just 50% of our full-year estimate (and 51% of Street).

"The 3Q numbers were only marginally up sequentially (compared to 2Q's US$6 million), suggesting that there is no recovery in the operating environment yet. Mewah has rallied 38% in the last month - which now seems unjustified to us given the continued weak results and possible downside risks to our and Street numbers.

"Valuations at ~8.5x FY12F P/E might look inexpensive, but are misleading given that a downward revision to estimates is increasingly possible, in our view. Unchanged target price of 50 cents. MAINTAIN REDUCE."

Mewah International rated 'underperform' by CIMB

Stock Name: Mewah
Company Name: MEWAH INTERNATIONAL INC.

Research House: CIMB

Price Call: SELL

Target Price: 0.36

CIMB in an Aug 15 research report says: "2Q11 earnings sank 63% y-o-y and 64% q-o-q to US$6.0 million, taking 1H net profit to US$23.1 million, which, at 21% of our and consensus full-year forecasts, was way below expectations.

"The main culprits were (1) severe margin erosion for all segments as the operating environment deteriorated in tandem with the weakening of crude palm oil price, and (2) lacklustre volumes due to soft demand.

"Slashing our volume and margin assumptions, we chop FY2011-2013 EPS by 63-67%. This reduces our target price from $1.29 (11.5x CY12 P/E) to 36 cents (10.2x CY12 P/E), still based on a 20% discount to peers. DOWNGRADE TO UNDERPERFORM."

Mewah International rated 'buy' by DBS

Stock Name: Mewah
Company Name: MEWAH INTERNATIONAL INC.

Research House: DBS Vickers

Price Call: BUY

Target Price: 1.23

DBS Vickers Securities in a June 3 research report says: "We caught up with Mewah and sales volumes in 2Q11 to-date have recovered consistent with trends indicated at the 1Q11 results briefing. African and Middle Eastern customers are buying for their current requirements as well as restocking.

"The Sabah refinery project is going well and is tracking ahead of schedule. We are maintaining our earnings forecast as the recovery in sales volumes, improvement in margins in 2Q11 and timing of specialty fats capacity are within expectations.

"Since the commissioning of the Sabah refinery is still 12 months away, we prefer to remain conservative and not to revise our Sabah refinery projections. Target price of $1.23. The stock is attractively priced at FY2011 PE of 11.1x with three-year earnings CAGR of 15%. MAINTAIN BUY."

Mewah International rated 'buy' by DBS

Stock Name: Mewah
Company Name: MEWAH INTERNATIONAL INC.
Research House: DBS Vickers

DBS Vickers Securities in a May 12 research report says: "Mewah reported 1Q11 net profit of US$17.0 million (-.3% y-o-y, -52.8% q-o-q), which was below our expectations of US$22 million. 1Q11 volumes are seasonally the lowest due to palm oil harvesting pattern and absence of significant festivities.

"1Q11 profit was dragged by lower sales volume (-10.8% y-o-y, -13.8% q-o-q) especially from Africa and Middle East where volumes shrank due to political instability during the quarter. Balance sheet remains strong with debt to equity ratio standing at 0.74x, representing a slight increase from 4Q11 at 0.64x due to higher commodity prices.

"We expect 2Q11 volumes to recover, as the political situation in Africa and the Middle East normalizes. Target price of $1.23, which offers c.26% upside from current levels. MAINTAIN BUY."

JPMorgan starts Mewah at overweight, target $1.30

Stock Name: Mewah
Company Name: MEWAH INTERNATIONAL INC.
Research House: JP Morgan Chase

JPMorgan has initiated coverage of Singapore palm oil refiner Mewah International (MEWI.SI) at overweight with a target price of $1.30.

JPMorgan said it expects Mewah’s capacity increase and margin expansion to drive earnings to grow at an annual average of 16% over 2011-2013.

Mewah’s new specialty fats production lines will be dedicated to the production of higher margin cocoa butter substitutes, and it also has plans to produce cocoa butter equivalents, the brokerage said.

“With recent political instability in Ivory Coast, the world’s largest cocoa producer, and historical under investment in cocoa planting threatening global cocoa supply outlook, we see strong potential for cocoa butter substitutes and equivalents picking up the supply shortfall,” JPMorgan said.

It also said it expects Mewah’s economies of scale to imrpove as its refining capacity increases 19% by the second half of next year.

At 9:52 a.m., shares of Mewah were 1% higher at $1.00 but have fallen 4.8 percent since the start of the year.

 

Mewah International rated 'buy' by DBS

Stock Name: Mewah
Company Name: MEWAH INTERNATIONAL INC.
Research House: DBS Vickers

DBS Vickers Securities in an Apr 1 research report says: "A CPO price moderation seen in 2H11and CY12 from supply recovery should benefit downstream processors, as selling prices generally lag lower feedstock costs. We see Mewah as a cheaper alternative to Wilmar and IOI Corp.

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Standard Chartered initiates Mewah at Outperform

Stock Name: Mewah
Company Name: MEWAH INTERNATIONAL INC.
Research House: StanChart

Standard Chartered initiates Mewah (MV4.SG) at Outperform with a $1.10 price target. It says the decline in Mewah’s share price from January 18’s $1.20 high is “misplaced and overdone.”

The house notes, Mewah is not a palm oil price play and estimates asset-less earnings exposure to the Middle East of around 10%. “We capture this Middle East exposure by applying a 10% discount to our theoretical valuation.” 

StanChart notes, Mewah is the second-largest palm refiner in Malaysia and the largest branded edible oil consumer pack entity in West Africa; “African exposure is a unique positive.” 

It adds, planned capacity expansion, particularly of value-added products, should support solid volume and value growth, and the house forecasts six-year earnings CAGR approaching 10%: “importantly, this is volume and value, rather than palm oil price-driven growth.” 

Shares are +4.4% at $0.960. 

Daiwa starts Mewah International at Outperform

Stock Name: Mewah
Company Name: MEWAH INTERNATIONAL INC.
Research House: Daiwa

Daiwa initiates Mewah International (MV4.SG) at Outperform with a $1.15 target price. The house notes the Malaysia-based palm-refiner’s operating policy to hedge its price risk, such that its refining ’spread’ (bulk division EBITDA/tonne) should not be affected directly by changing commodity prices: “we expect this spread to remain generally steady over the 2009-2013 period, at around US$27/tonne. Accordingly, we see production capacity as the key to Mewah’s earnings prospects.” 
It notes, Mewah has announced plans to expand refining capacity by 26.3% by end-2012 (vs end-2010), with about 85% of this expansion and associated working-capital needs already financed by its November IPO. “Thus, we think investors that buy now can be confident about the company’s 2011-2013 net-profit growth prospects.” 

Daiwa adds, its forecast 2010-2014 adjusted net-profit CAGR of 6.9% means that Mewah should not trade at a 2011E P/E premium to the market; “hence, we see a target P/E of 13.6X on our 2011 EPS forecast as fair.” 

Shares are up 1.0% at $1.01. 

Mewah International +1.9%; 4Q above view - CIMB

Stock Name: Mewah
Company Name: MEWAH INTERNATIONAL INC.
Research House: CIMB

Mewah International (MV4.SG) is +1.9% at S$1.05 after posting 4Q net profit of US$36.1 million, +38.9% on year, on revenue of US$1.06 billion, +16.0% on year.

CIMB notes the “strong revenue growth” and says 4Q10 core net profit (which excludes placing and listing expenses) of +57% on year at US$40.8 million ($52.1 million) was above its expectations, forming 46% of its FY10 estimate and consensus. “12M10 core net profit of US$97.1 million represents 110% of our FY10 estimate and 109% of consensus. The divergence was mainly due to lower tax rate, and foreign exchange gains.” 

The house raises its FY11-12 EPS estimates by 1%-2% on higher consumer pack margin assumptions. 

Its target price stays at $1.41, based on 13X 2011 P/E, “roughly 10% discount to the plantation sector average...due to its slimmer margins than upstream plantations.” 

It cites potential catalysts as better-than-forecast earnings, higher refining margins and announcements of earnings-accretive acquisitions. The house has an Outperform rating on the stock.

The orderbook suggests a $1.06 near-term cap.

UOB KayHian starts Mewah at Buy; $1.28 target

Stock Name: Mewah
Company Name: MEWAH INTERNATIONAL INC.
Research House: UOB KayHian

UOB KayHian initiates Mewah International (MV4.SG) at Buy with a $1.28 target, based on 12X 2012F P/E, a 30% discount to Mewah’s purer upstream peers.

The house says the palm oil refiner is a “niche and efficient” downstream player that can achieve significant economies of scale with its strategically located and large-scale refineries; “for example, its West Port plant’s direct pumping facilities to/from the port give Mewah a cost advantage of at least US$5/ton.” 

The house says earnings could achieve 20% CAGR over 2010-13 from US$88 million ($112.6 million) to US$150 million, driven mainly by volume expansion and widening margins on increasing contribution from the higher-margin consumer pack division. 

With 10%-15% of total sales coming from Africa, the house notes Mewah is “a play on edible oil demand in Africa” where its consumer pack business and bulk segment are doing well. 

Cites catalysts as potential M&A to expand marketing and distribution capabilities in Africa, and upstream expansion to enhance margins. 

Shares are off 0.9% at $1.05. 

Mewah - CIMB starts Mewah at Outperform; $1.41 target

Stock Name: Mewah
Company Name: MEWAH INTERNATIONAL INC.
Research House: CIMB

CIMB initiates Mewah International (MV4.SG) at Outperform with a $1.41 target price. The house says Mewah is the second largest palm-oil refiner by capacity in Malaysia, the sixth largest globally and the owner of a stable of brands.



“We're bullish on its growth prospects from capacity and margin expansion, with earnings upside from acquisitions. Our target price of $1.41 is based on 13X CY12 P/E, a 10% discount to the plantation sector average to factor in its slimmer margins.” 

The house cites potential catalysts as better-than-forecast earnings, higher refining margins, and announcements of earnings-accretive acquisitions. 

It forecasts FY10-FY12 core EPS CAGR of 20%, supported by higher sales volumes and wider margins from economies of scale and expansion in downstream consumer pack products. 

It says the strong industry outlook, with palm oil the cheapest vegetable oil to produce and refine, is “contributing to its position as the biggest source of vegetable oils, at 37% of the world's vegetable-oil production.” 

Shares are up 1.8% at $1.14.

Mewah - BNP Paribas starts Mewah International at Buy

Stock Name: Mewah
Company Name: MEWAH INTERNATIONAL INC.
Research House: BNP Paribas

BNP Paribas starts Mewah International (MV4.SG) at Buy with a $1.33 target price. It says Mewah — Malaysia’s second-largest palm oil refiner and sixth-largest globally — has modern plants with state-of-the-art equipment, uses computerised process control and robotic system-storage facilities:

“All of which equates to operational efficiency.”" The house notes Mewah controls 14% of the Malaysian edible-oil market and is embarking on an expansion programme over 2010-13 that is expected to raise refining capacity 19% and quadruple its specialty fats output. 

It says one of Mewah’s key success factors is its management’s decision to integrate and modernise when most competitors were satisfied to remain pure refiners. The house benchmarks Mewah against Wilmar (F34.SG), rated Buy, Olam (O32.SG) not rated, and China Corn Oil (1006.HK) not rated, to derive a target blended mean P/E of 14X. Shares are off 0.9% at $1.09. 

Mewah - Mewah started at Buy by Nomura, $1.30 target

Stock Name: Mewah
Company Name: MEWAH INTERNATIONAL INC.
Research House: Nomura

Nomura starts Mewah International (MV4.SG) at Buy with a S$1.30 target price. Says the palm oil refiner’s large scale and risk management capability help it achieve stable margins.

Cites company’s strong distribution network in Africa’s downstream business as one of its key strengths, given that more than 40% of consumer pack earnings have come from the continent over the past 3 years.

Forecasts 17% earnings CAGR over the FY10-FY13 period, driven by volume and margin growth. House says Mewah should be able to take on as much as US$500 million ($658 million) in loans to fund expansion.

Adds, valuations are attractive as the stock trades at 10.2X FY11 P/E vs Wilmar’s (F34.SG) 16.4x, Ruchi Soya’s (500368.BY) 13.9x.

Shares +2.7% at S$0.995.