Mewah

Mewah: Poor set of 1Q12 results which were below estimates. Rev at US$996.2m, -10.7% yoy and -1.8% qoq, while net profit at US$8.3m, -51.2% yoy and -34.4% qoq. Operating Margins fell at 30.8% vs 36.6% yoy and 34% qoq. During the qtr, grp achieved sales vol of 898k MT, +4.9% higher than 1Q11, however, lower ASP resulted in rev declining, vs 4Q11, sales vol -2.3%. Global economic concerns, tough industry conditions particularly for Msian refiners, high inventory levels at origin countries and low inventories at destinations kept the operating margin under pressure for both Bulk and Consumer Pack segments. Going forward, grp remains cautious for the rest of 2012 but remains confident for its future prospects as mkt conditions improve. Grp is of opinion that current situation will consolidate the industry and benefit strong players in the long run. Meanwhile, aims to consolidate position by adding more refining capacity while diversifying manufacturing base to Indo, adding more products to portfolio and strengthening distribution network. We note that grp’s net gearing currently stands at a high 77%, which does raise some concerns. At current price grp trades at an annualized 15x FY12E P/E