Japfa

Japfa: Coverage appears to be building up for Japfa, with the counter receiving its third initiation in a month. The latest initiation by a foreigner broker rates Japfa at Buy with TP of $0.95, which suggest a 30% upside to current share price, and with expectations that Japfa’s earnings will be buoyed by rising consumption of processed chicken and higher refrigerator penetration. As a background, JAPFA produces multiple protein foods, with an emphasis on milk, poultry and beef. It has complementary and growing businesses in swine and aquaculture. It is now the second-largest poultry producer in Indonesia and one of the top raw-milk producers in China, and has operations in India, Vietnam and Myanmar. Maybank-KE believes that JAPFA is a good proxy for rising demand for animal protein and raw milk in emerging Asia. But what impressed the house most during its company visit was JAPFA’s dairy farming in China. JAPFA trades at 20.9x trailing P/E, with consensus looking at 74.5/26.8% EPS growth in FY14/15 respectively. The street has 3 Buy ratings with a consensus TP of $1.12.