Halcyon Agri

Halcyon Agri: UOB Kay Hian has an unrated note on the counter. House note that early momentum points to a positive 2013 outlook. For 2013, Halcyon has already received committed orders for the delivery of 42,730mt with customers’ option to increase by 12,701mt. This compares to a total delivery of 67,046mt in 2012. It has completed the addition of 10,500mt new capacity (+11%), positioning it for another year of growth. Halcyon generated FCF of US$7m in 2012 and this boosted its cash balance by 42% yoy to hit US$12m. House see the potential for M&As in the upstream segment, which would enhance Halcyon’s position in the natural rubber supply chain, expand its earnings potential and capture better margins. Halcyon touts a robust risk management model that allows it to reference its raw material prices to market movements. In a typical cycle, Halcyon purchases the amount of raw materials needed one month in advance at a cost that is pegged to the current market rubber price. The US$/Rp rate is also fixed simultaneously. At month-end, Halcyon locks in the selling price and prepares for delivery. This approach allows it to consistently secure its target gross material profit of at least US$350/mt and to effectively manage its forex exposure.