Del Monte

Del Monte: CIMB maintains ADD with TP $1.14. The house note that the key re-rating catalyst of earnings growth driven by the favourable changes in 2015 would lead to stronger earnings for Del Monte Pacific (DMPL) in FY15. The ambitious proposal to acquire Del Monte Foods (DMF) in the US, if successful, could result in a truly sweet (20)16 for the company. The house latest discussion with management revealed that DMPL has secured the debt portion of the US$1.675bn required for the proposed US acquisition. Thus, DMPL has the leeway to lower its new equity issuance to US$35.5m, instead of the initial US$150m proposed. However, the concerns about the dilution have shifted from the new share issuance to the possible rights issue (that maybe more dilutive) for the refinancing of the shareholder. However, the possible rights issue would at least allow for the participation of the existing shareholders. Transaction costs for the DMF acquisition have risen since our last update. The house now expect a US$6.3m charge in 4Q13 earnings. Given that 1Q is a seasonally slow quarter and the transaction cost has risen to US$20m (previous: US$16m), expect a headline loss in 1QFY14