Japfa

Japfa: ($0.85) Trading debut for Indo meat and milk producer Japfa opened 5% above its IPO price of $0.80/share, after receiving good interest in its share offering, consisting 248m shares (231.2m international + 16.8m public) being 5x subscribed. Japfa produces milk, poultry, and beef in Indonesia, and has replicated the same industrial farming business model in Vietnam, Myanmar and India for poultry and in China for dairy. The group also sells fresh milk, UHT milk and cheese under the Greenfields brand to consumers in Indonesia, where it holds ~38% of market share as market leader, and also exports to Singapore, HK, and Philippines. Net profit last year was US$41.8m (-22% ), while revenue rose 16% to US$2.7b. Japfa intends to use the net proceeds of $187.3m to: i) Develop its China dairy business, where profit margins are the highest, by building a second five-farm hub in Inner Mongolia; ii) Investment in the animal protein business in target markets (including the swine business in Vietnam, poultry business outside Indonesia and beef business in China); and iii) Repayment or prepayment of borrowings, including the prepayment charges. At $0.85, JAPFA is valued at FY13 P/B of 1.3x and 35.2x P/E.