1.
Apollo Food Holdings
Berhad (APOLLO) 1H15 EPS declined 39% to 13.16 sen as net profit slipped 39% YoY to
RM10.5m. The lower earnings is mainly caused by 3% decline in revenue to RM103.0m
and higher cost of materials (Cost of Sales +3% to RM76.0m). QoQ, net profit is
also down 16% to RM4.8m in 2Q15 again due to higher cost of materials. Note
that APOLLO financial year end is April.
2.
Net cash position remain resilient. APOLLO owns RM92.9m cash and no debt. This means
net cash of RM92.9m or RM1.16 per share. As the share price is RM4.35, this
means 27% of the share price is in cash.
3. Recovery only in FY16 with FY15 earnings
likely to drop YoY. Due to lower earnings seen so far in 1H15 which is down 39% YoY, FY15
EPS is expected to decline 30% YoY to 29.29 sen. The decline is likely to be
caused by slower demand from consumer as their spending power decline due to
higher cost of living after recent petrol price hike in 2H14. Outlook for FY16
should be better as demand return after consumer getting used to GST impact.
Hence, FY16 EPS is expected to grow 15% to 33.68 sen.
4.
Fair Value of RM4.53. Using 10x PE on FY16 EPS of 33.68
sen, the business for APOLLO is valued at RM3.37. However, adding to the cash
of RM1.16 per share the total value is RM4.53. This represents about 4% upside.
On the positive side, this stock provide good income as it deliver 25.0 sen in
FY14 representing dividend yield of 5.7%. However, weak consumer demand means negative
earnings growth in the next 1 year.
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