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Recommendation
New : SELL
Previous : SELL
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Cash call
isn’t good for short-term investors
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GFPT's share price has risen
13% from a two-week low of Bt32.75, following its board of
directors' announcement last week to pay a Bt5/share
dividend (55% of its 2002 earnings) and double its share
capital from 67.2mn shares to 125.4mn shares through a 1:1
rights offering. The XD and XR date is on March 26, 2003.
The proceeds raised from the
cash call will certainly improve GFPT’s long-term
prospects since the company plans expand its chicken and
feedmill capacity, as well as diversify into manufacturing
other types of processed foods. This should help smooth out
GFPT's earnings, which are highly susceptible to
fluctuations in chicken prices.
However, investors should
still be prepared for a sharp decline in GFPT's earnings
this year, which will be worsened on a per share basis by
dilution from the rights issue. Even though we have revised
up our earnings forecasts in 2003 and 2004 by 4% and 8%,
respectively, we have downgraded GFPT’s fair value from
Bt32 to Bt30 due to the anticipated dilution. After XA, we
believe the share price would adjust down to about Bt21.0
and our target price to about Bt18.
Although the dividend yield
is attractive, the company is essentially paying out Bt5 in
dividends and then taking back Bt10 through the rights. The
company won't be able to match this dividend next year
unless there is a recovery in chicken prices. Until we see
clear signs of this, we are maintaining our SELL call on
GFPT shares.
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Original
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Revision |
Change |
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2002E |
2003E |
2004E |
2003E |
2004E |
2003E |
2004E |
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Sales |
6,914 |
6,452 |
6,958 |
6,582 |
7,444 |
2% |
7% |
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Gross
margins |
15.40% |
12.00% |
12.10% |
11.90% |
11.70% |
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Operating
margins |
8.40% |
5.20% |
5.90% |
5.10% |
5.50% |
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Total
debts |
1,292 |
1,313 |
1,388 |
889 |
982 |
-424 |
-406 |
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Interest
expenses |
53 |
88 |
95 |
74 |
65 |
-14 |
-29 |
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Net
profits |
571 |
283 |
339 |
294 |
368 |
4% |
8% |
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EPS |
9.1 |
4.5 |
5.4 |
2.4 |
3 |
-46% |
-44% |
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Table
1: GFPT’s earnings forecasts |
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Year
to Dec |
2001 |
2002 |
2003E |
2004E |
2005E |
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Sales
(Btmn) |
7,283 |
6,914 |
6,582 |
7,444 |
7,735 |
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Net
profits (Bt) |
734 |
571 |
294 |
368 |
401 |
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EPS (Bt) |
11.7 |
5.3 |
2.4 |
3.1 |
3.3 |
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Growth
(%) |
574% |
-24% |
-54% |
25% |
9% |
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Cash/shr(Bt) |
14.2 |
7.5 |
4.1 |
4.8 |
5 |
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PER (X) |
1.7 |
3.8 |
8.2 |
6.5 |
6 |
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BPS (Bt) |
24.5 |
22 |
24.3 |
27.9 |
30 |
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EV/EBITDA
(x) |
3 |
4.8 |
6 |
5.4 |
4.9 |
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Dividend
Yield (%) |
16.20% |
14.70% |
5.10% |
5.60% |
5.60% |
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Note:
EPS and multiples in 2003-2005 are based on
theoretical XA price |
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Analyst :
Pongpan (Ext. 1450)
Email :
pongpan@kimeng.co.th
If you have
any questions or suggestions please feel free to email our Research
Webmaster
Copyright © March 2000,
Kim Eng Securities (Thailand) PLC. All rights reserved.
Disclaimer
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