Petra

Petra / F&B: is currently under trading halt. The co has agreed to sell its cocoa ingredients unit to Zurich-based Barry Callebaut AG for US$950m, exiting the business that supplies Nestle and Mars. Petra Foods “will focus on strengthening and expanding its branded consumer business in the fast-growing regional economies” after the divestment. Barry Callebaut will gain control of seven factories in countries including Malaysia, Indonesia and France, as well as sales offices in the U.s., Singapore and Netherlands. Petra will enter into an agreement to buy cocoa ingredients from Barry Callebaut after the sale. The deal is subject to approval by shareholders and regulatory approvals. Lazard Asia Ltd. is the financial adviser to Petra. The cocoa ingredients business generated 75% of Petra’s sales and 51% of its EBITDA in the most recent fiscal year. This translates to valuation of 14.6x Price/EBITDA for the coca ingredients unit, compared to Petra group’s 10.7x Price/EBITDA at its last closing price of $2.75. This transaction opens up the prospect of Petra recording a potential gain on sale of assets, and special dividend. The news flow may have positive sentiment spillover on JB Foods, the other cocoa processor listed on SGX. This M&A deal further adds to the growing number of such deals within the F&B space in Singapore, other recent deals involving FNN, Thai Bev, Yeo Hiap Seng, Viz Brands. Expect momentum to remain strong in such consumer stocks / food processors. Besides Super Group, most of the other counters continue to be under researched. These include Food Empire, Khong Guan Flour Milling, Del Monte, etc, all of which have been charging toward new share price highs.