Del Monte

Del Monte announced 3QFY14 results which were largely in line with estimates. Net profit came in at US$7.2m (-13% y/y, +17% q/q) while revenue was at US$127.0m (+9% y/y, +5.0% q/q). The lower y/y bottom-line was largely due to a one-off transaction fee of US$1.7m for the proposed acquisition of Del Monte Foods’ consumer food business in the US, barring which core earnings was up 7% y/y to US$8.9m. The branded business of DMPL in Asia, comprising of Del Monte in the Philippines and the Indian subcontinent as well as S&W in Asia and the Middle East, accounted for 65% of total sales in the quarter, and generated higher sales with a 4% growth, on back of increased volume production and consumption. The Group’s non branded business generated sales of US$44.8m (+19%), on improved sales of processed pineapple and tropical mixed fruit products, lifted operating profits for the division to US$1.9m (+16%), despite lower pineapple juice concentrate (PJC) prices of 16% y/y. Going forward, the group expects to improve base earnings in 2013 driven by both branded and non branded business with higher revenue from better volume and sales mix in the Philippines, S&W markets and export markets. Aims to pursue sales of higher margin value-added products and continue implementing operational efficiencies, procurement savings and active cost management. The latest result brings Del Monte’s 9MFY14 core earnings to US$20.7m (+11%), which translates to an annualized 34x FY14E P/E, versus recent M&A transactions in Asia which translates to a P/E of 30x. Latest broker ratings as follows: DBSV downgrade to Hold with TP $0.96