Mewah

Mewah: Poorer than expected earnings due to fall in CPO prices. 2Q Rev at $1.2b +51.5% yoy +11.8% qoq but net profit was at $6.0m -63.4% yoy -64.4% qoq due to fall in margins. With CPO prices trending lower during the quarter and expected to fall further in the future, sales volume grew at expense of margins as customers delayed purchases and negotiated for lower prices. Margins were likely impacted due to fall in CPO prices from RM3.8k per ton which co contracted to current RM3.1k per ton level.

Volumes for Bulk segment increased 1.8% yoy and Consumer segment was up 9.4% yoy. Co’s JV in West Africa also experienced slowed demand resulting in higher inventory cost and losses from falling prices.

A interim div of 0.35c per share was declared.

JP Morgan slashes TP from $1.30 to $0.60 and downgrades from Overweight to Neutral on limited upside to CPO price.

In separate news, co plans to invest in dairy products facilities in Selangor, Msia facilities are budgeted to cost RM146m (approx US$49 m) and will be funded from internal accruals and/or IPO proceeds and bank borrowings. The project is expected to be completed in FY 1H2013. Co is of view that palm oil being one of important raw materials for the production of dairy products will have production synergies with current palm oil business. The investment is also expected to have significant marketing and distribution synergies with current consumer pack segment