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What Makes Japfa So Attractive To Analysts?
Tradeable, Tradeable Ideas | 02 October 2014
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By: Raymond Leung
Articles (142) Profile
  1. Japfa is active in emerging markets where the purchasing power of residents are increasing at a rapid pace. This helps to increase demand for better quality foods.
  2. Japfa is a market leader in Indonesia and its brands enjoy strong popularity in the country.
  3. Growth potential of Japfa is high as can be seen in its EBITDA CAGR of 23 percent. Animal protein and dairy products are expected to be the main drivers of growth.

Recently listed, Japfa seems to have garnered some interest from analysts. Two of Singapore’s main research houses have initiated cover on the food producer and their coverage looks, forgive the pun, mouth-watering.

Analysts' Updates on Japfa

Japfa is a recently listed integrated dairy, animal protein, consumer food producer. The group is active in emerging markets such as Indonesia, China, India, Vietnam, and Myanmar.

Notably, the purchasing powers of people living in these countries are increasing at a rapid pace. Hence, demand for dairy, animal protein, and branded consumer foods are rising across the various countries that Japfa has a presence in.

To cater for this demand, Japfa is aggressively expanding its businesses across the various segments and countries with its primary focus on China and Indonesia.

Japfa is a market leader in Indonesia with 25 percent market share in Day Old Chicks (DOC), 22 percent in poultry feed, 25 percent in milk, and 31 percent in frozen food. Its consumer brands, Greenfields and So Good are enjoying strong popularity in the country.

Greenfields is a popular brand amongst Indonesians. Children seen here having their cup of Greenfields milk.

China has the largest output for Japfa’s dairy segment with an increasing demand volume for its milk. Its industrialized approach to dairy farming – which brings about superior safety and higher nutritional standards, allowed Japfa to command a significant price premium.

Growth potential of Japfa is high with its historic EBITDA (excluding biological asset gain/loss and FX gain/loss) CAGR of 23 percent for the past 3 years. It is projected that the CAGR will accelerate to 28 percent between 2013 and 2016. Animal protein and dairy are expected to be the main drivers of growth.

Sales for DOC Indonesia is expected to expand by 17 percent as consumption for chicken remains low when compared to neighboring countries’ per capita consumption. Plans for Japfa to expand its operations in Indonesia and double its dairy production in China are in place.

Analysts from DBS Vickers Research gave Japfa a “Buy” call with a long-term target price of $1.16. They cited Japfa’s huge growth potential and market leading position in Indonesia as top catalysts. Given the current price levels of Japfa, DBS Vickers feels the stock is undervalued.

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.

Japfa  0.470 -0.010 -2.08%   
Business: Co is an agri food company that produces multiple types of protein foods. It is headquarterd in Singapore and has operations in China, India, Myanmar and Vietnam.

Insight: Apr-19, 1Q19 revenue rose 7.8% lifted by broad-bas... Read More

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