Halcyon Agri Corp

Halcyon Agri Corp (HACL): UOB Kay Hian has upgraded HACL to BUY with TP: $0.73 as share price has declined 19% since May. HACL is currently trading attractively at 7.9x 2016F PE vs peers’ average of 11.2x despite the group’s higher 2016F ROE of 20.5% (vs peers’ average of 9.6%).

HACL has secured a 3 year committed US$388m financing package and as of 1Q15, the group’s loans had an annualized average interest rate of 5.5%. However, post refinancing, the group will incur lower financing costs on the back up additional working capital loans, which charge a lower interest rate.

In addition, HACL has successfully upgraded to SGX Mainboard on 29 June 2015 which will reduce liquidity risk, extend HACL’s investor base and attract a higher level of interest from institutional funds.
Lastly, HACL’s reporting currencies as well as sales as in US$ while majority of group’s expenses are denominated in Indonesian rupiah, Malaysian ringgit, euro and Singapore dollar. HACL hedges 50-60% of its forex risk and is a net beneficiary of a rising US$. This gives HACL favorable tailwinds from the strengthening US$.