Tuesday, October 25, 2011


Mewah: JPM cuts TP to $0.45 from $0.60, has Neutral rating.
Says the downward revision in Sep (by as much as 50%) of Indonesia export tax for refined palm products essentially makes Mewah’s products less competitive than its Indonesian counterparts in the export market. Estimates that ~60% of Mewah’s revenue is derived from exports. Notes with all of its existing facilities operated out of Msia, believes Mewah risks a structural de-rating if no countermeasures are proposed by the Msian govt as this could lead to a gradual decline in volume and margins for the company.

Notes CPO price has fallen ~25% YTD, and with Mewah’s profitability having a strong correlation to CPO price, believes 2H11 will remain challenging. Tips the company to report a still weak 3Q11, and the possibility of a quarterly loss cannot be discounted.
Trims FY11E/FY12E/FY13E earnings estimates by 43%/36%/28%, on the back of lower CPO price forecast, as well as lower volume and weaker OM/MT margin assumption on the back of increased competitiveness from Indonesian exports

Cautions that share price may overshoot to the downside should 3Q11 results significantly disappoint consensus, with longer term downside risks being no revision to the Indonesia/Malaysia palm oil tax structure, resulting in a structural de-rating to the Malaysian refining sector.

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