Mewah

Mewah: interview with Reuters. Hurt by falling refining margins in Msia and a general weakness in palm oil prices amid plentiful supply in Msia and Indonesia, Mewah has been forced to reassess its growth strategy and look for new sources of revenue. Mewah will focus on lower-cost Indonesia to grow its palm oil business, while simultaneously expanding its consumer pack segment to include dairy products and rice. The consumer pack business currently incl edible oils, fats, bakery and confectionary oils, and fats in packaged form under the co's own and third party brands. Mewah's agri-business group traded about 45k mt of rice in 1Q12. This was the first foray into this segment and the co is encouraged by the initial response. Mewah is also investing ~US$50m in dairy facilities in Msia. Mewah said it is also on track to complete its Indonesian palm oil refinery by the end 2013. Weaker demand for palm oil in key export markets and the pressure on prices amid bumper production in Indonesia and Msia last year put Mewah's operating margins under pressure in 1Q12, slipping to US$34.2/ton, down from $42.6/ton yoy. Also, hurting Mewah's performance was Indonesia's new export duty structure. To boost domestic refining, Indonesia has changed its export duty structure to have lower duties on refined palm oil products than on crude palm oil. Spot refining margins in Malaysia, where the group presently has refineries, are almost non-existent while margins in Indonesia are ~US$80/ton higher. The stock trades at 10.8x P/E. The majority of Street still rates the stock negatively, with 6 Sells, 3 Holds and 1 Buy. Street TP ranges btwn $0.37 – 0.55.