Background:
Oriental
Food Industries Holdings Berhad (OFI) is mainly involved in manufacturing and marketing of
snack food and confectioneries (MMSC). Recall that MSCC division contributed
RM225m or 99.5% of the Company’s revenue in FY2014 (end March). Also, MMSC
division generated RM20m PBT or almost 100% of the Group’s PBT. Another
division is property development which contribution to earnings is much
smaller.
Some
of the Company’s brands include Fudo (cakes), Super Ring (corn based), Jacker
(crackers), Rota (potato chips) and Jacker
(chocolate wafer).
FY14 earnings jumped 25% to RM15.9m
Key
driver behind the earnings jump is the MMSC division which has registered 32%
jump in PBT to RM20.2m. The MMSC division sales have increased 9% to RM225m
while its PBT margin has improved to 8.9% (from 7.3%). PBT margin increase
should be caused by lower material cost such as corn, palm oil and sugar
prices.
Strong net cash of RM20.9m or 35 sen per share.
OFI
has RM27.6m cash, Long Term Debt RM3.9m and Short Term Debt of RM2.8m. This
means net cash of RM20.9m or RM0.35 per share. As the share price is RM3.00,
this means 12% of the share price is in cash.
Looking ahead to
better FY15 (Year End March)
Conservatively,
FY15 earnings should grow 10% to RM17.5m. Key earnings driver should be the
lower raw material prices. Globally, corn, palm oil and sugar prices have been
lower than last year due to higher supply.
Still cum 3.5 sen dividend with ex-date 29-Aug
This
makes its whole year dividend of 9.5 sen or dividend yield of 3.2% historically.
For FY15, the Company should be able to deliver better dividend of 10 sen
expected due to better earnings prospect.
OFI theoretically worth RM3.21
Based on 11x Fwd. PE to its food
business plus the RM20.9m net cash, the Company is worth RM3.21. The 11x Fwd.
PE is same to Small Cap Fwd PE. This means potential upside of 7%. Added with
the dividend of 10 sen expected or 3.3%, total return is 10.3%.
Items
|
Value
(RM m)
|
Food
business valued at 11x Fwd. PE
|
192.5
|
No of
shares
|
60
|
Value
Per Share (RM)
|
3.21
|
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