Halcyon Agri

Halcyon Agri: Credit Suisse re-instate coverage of Halcyon Agri with an OUTPERFORM rating and a target price of $1.20 (previously Neutral, $0.80). The house believe there is over 40% share price upside driven by significant capacity growth and supported by increasing demand in the global tyre market. Following the acquisition of Anson Company from Lee Rubber for a consideration of $450m, Halcyon's licensed capacity will increase by 408,000mT to reach 748,000 mT, making it one of the largest producers of Technically Specified Rubber (TSR) globally. With the use of Halcyon's sales and marketing to support Anson's operations, see scope for Anson's margin to increase from US$161/mT in 2013 to US$320/mT in 2016E, in line with Halcyon's margin. Overall, expect the volume growth and acquisition synergies to drive an increase in net profit from US$9m in 2013 to US$50m in 2016. Halcyon currently trades at a 2015 P/E of 9.2x and 2016E P/E of 5.8x, a discount to global tyre manufacturers and commodity traders. $1.20 target price is based on a 2016E P/E of 8.0x, in line with its peers.