by CIMB-GK (26 Aug)
We see increasing execution risks as the company expands into new and adjacent products, and new countries. Investing in upstream and downstream assets would also entail higher risks than operating an asset-light pure supply chain business.
The company needs capital to fund greater trade volumes, and acquistions and investments. The current yield of 13.7% for its debt implies a higher required rate of return on acquisitions/investments, and reduces its investment options available.
Management had delivered a 34% net profit compound annual growth rate (CAGR) in the past five years. We are cutting our FY2009-10 revenue estimates by 3% to 4%, and EPS estimates by 7% to 8% to account for increased volatility in commodity markets, which could lead to slimmer premiums and/or volumes.
Target price lowered to 16x CY2009 PER, at the low end of its historical trading band, from 27x CY09 PER.
-Research Report by CIMB-GK (26 Aug)
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