An exceptional gain of $1,177.6mn was also recorded from the realisation of fair value adjustment reserve upon the reclassification of Vinamilk, boosting the FY17 PATMI to $1,283.1mn.
We are cautiously optimistic on the trading environment in Malaysia, Singapore and Thailand. Singapore and Thailand’s Food and Beverages markets have showed signs of improvement. On the other hand, margin pressure in Malaysia should ease slightly, on the back of a more favourable sugar price. The contract with the Malaysian government which fixed the sugar prices at RM2,800/tonne (higher than the market price) will end in Dec-17. Moving forward, the Group will source is sugar needs at a more favourable market price at about RM2,300-RM2,400/tonne.
The Group will continue to reinvest its earnings into brand building efforts in New Markets, namely Myanmar, Vietnam and Indonesia, adding new avenues for growth.
Upgraded to “Accumulate” with higher sum-of-parts derived TP of S$2.83 (previously S$2.52)
We trimmed FY17e revenue by 6% on as we expect subdued demand in Malaysia to extend into FY18e. The upcoming general election in Malaysia which could further weigh against consumer sentiment and Ringgit’s strength.
Nonetheless, we adjusted FY18e earnings upward by c.59%, on the back of (a) continuous support from Dairies; (b) benefits from restructuring initiatives to realize; and (c) higher profit sharing from Vinamilk with full 12 months contribution in FY18e. Vinamilk to continue to drive over 40% of the Group’s EBIT moving forward.