MEWAH: Follow up. DBSV initiate on Mewah with Buy Call and $1.21 TP. Tip grp to be a beneficiary of a recovery in palm oil output in CY11F-12F; expect 3yr earnings CAGR of 15%. Cite grp’s aggressive expansion to raise refining capacity by 18% and quadruple specialty-fats capacity in two years….
Add that share is oversold and medium-term excess capacity fears are overblown. Believe re-rating catalysts for Mewah include:1) a recovery in CPO output boosting utilisation rates and refining margins (bigger price discount to soybean oil prompting a demand switch, 2) delivery of new capacity this year raising confidence in management’s ability to execute on its growth strategy…..
At current share price, valuations remain compelling, with grp trading at 11x FY11E P/E, representing 19% and 33% discounts to IOI and Wilmar FY11F P/E
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