Operations: Engages in growing, processing, and selling canned and fresh pineapples, pineapple concentrate, tropical mixed fruit, and tomato-based products.
Brands: Del Monte and S&W
Ticker: DELM SP
Shares Issued (m): 1,296.6
Market Cap (USD m): 612.1
3-mth Avg Daily Turnover (USD m): 0.6
ST Index: 3,147.00
Free float (%): 33
Major Shareholder: Nutri-Asia (67%)
Key Indicators
Metric
Value
ROE (%)
9.9
Net gearing (%)
65
BVPS/shr (USD)
0.20
Interest cover (x)
8.7
Share Price and Target
Share Price: SGD0.60 (PHP22.80)
Target Price: SGD1.00 (PHP35.20)
Buy Rating: Unchanged
Deal Overview
Deal: Acquisition of Del Monte Foods (DMF) consumer business for USD1.675 billion
Deal Status: Expected to close by 1Q14
Transaction Funding: Two-stage financing
Stage 1: Debt financing and equity raise
Syndicated Loan: USD970m (from USD930m)
Equity Financing: USD110m
Bridging Loan: USD165m (to be repaid via rights issue)
Stage 2: Rights issue and conversion of bank loan into preference shares
Share Price Impact: Sharp correction of 25% in 2 months due to equity-raising overhang
Earnings Accretion: Transaction is still earnings accretive
Dividend Payout: May slide to a minimum of 33% (from 75% historically)
Earnings Forecast and Consolidation
Metric
FY13E
FY14E
FY15E
Revenue (USD m)
521.6
572.4
624.7
Recurring EBITDA
70.9
82.4
100.6
Recurring Net Profit
34.0
42.6
56.1
Recurring EPS (USD cents)
2.6
3.3
4.3
DPS (USD cents)
1.5
1.3
3.2
P/E (x)
17.8
14.3
10.8
EV/EBITDA (x)
10.3
7.6
6.1
Div Yield (%)
3.2
2.8
6.9
P/BV (x)
2.3
2.3
2.2
ROE (%)
9.9
8.4
19.9
ROA (%)
5.0
4.1
9.6
Scenario Analysis (FY15E)
Scenario
Revenue (USD m)
EBITDA (USD m)
Net Income (USD m)
EPS (USD cents)
Bear Case
1,830.0
178.0
50.9
4.9
Base Case
1,830.0
237.9
87.9
6.2
Bull Case
2,104.5
273.6
109.6
7.3
Share Price Assumptions
Metric
Value (SGD)
Value (USD)
Current share price
0.595
735.0
Market Cap (SGD m)
933.4
-
Market Cap (USD m)
735.0
-
Immediate post-transaction P/E (x)
9.6
-
Immediate post-transaction EV/EBITDA (x)
9.7
-
Gearing Analysis
Metric
FY14E (USD m)
Post Transaction (USD m)
Net Debt
147.3
1,792.3
Equity
267.4
377.4
Net Debt/Equity (x)
4.7
3.3
Interest Cover (x)
3.9
5.1
Net Debt/EBITDA (x)
6.9
6.9
EBITDA/Interest Expense (x)
3.2
4.1
Peer Comparison
Company
Ticker
Rating
Share Price (lcl curr)
Target Price (lcl curr)
Market Cap (USD m)
P/E 2013E
P/E 2014E
P/E 2015E
EV/EBITDA 2013E
P/BV 2013E
ROE 2013E
Div Yield 2014E
SUPER GROUP
SUPER SP
Buy
3.78
4.55
1,658
23.8
20.5
18.3
16.8
4.7
18
19
YEO HIAP SENG
YHS SP
Hold
2.44
2.55
1,102
24.4
43.6
34.9
16.7
1.8
8
4
DEL MONTE PACIFIC
DELM SP
Buy
0.59
1.25
602
17.7
14.5
10.6
10.8
2.4
13
16
PETRA FOODS
PETRA SP
NR
3.10
NA
1,490
28.0
21.0
17.6
14.2
4.6
19
19
NIPPON INDOSARI
ROTI IJ
NR
990.00
NA
409
30.0
22.4
17.3
17.9
4.9
16
17
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Global F&B Comparison
Company
Ticker
P/E 2013E
P/E 2014E
P/E 2015E
EV/EBITDA 2013E
P/BV 2013E
ROE 2013E
Div Yield 2014E
DEL MONTE FRESH
FDP US
16.3
13.3
12.4
9.1
NA
NA
NA
DOLE FOOD
DOLE US
NA
NA
NA
NA
NA
NA
NA
CAMPBELL
CPB US
16.2
17.1
16.1
11.3
10.9
67
50
KELLOGG
K US
16.1
15.0
14.0
11.1
6.1
38
37
MONDELEZ
MDLZ US
22.3
20.3
18.2
14.5
1.8
8
9
TYSON FOODS
TSN US
15.0
12.0
11.5
6.7
2.0
13
14
HERSHEY
HSY US
26.1
23.5
21.7
14.7
16.6
64
56
CONAGRA FOODS
CAG US
14.5
13.1
11.8
9.8
2.4
17
17
Average (Global)
-
18.1
16.3
15.1
11.0
6.6
34.5
30.4
Average (Total)
-
22.9
20.3
16.5
14.1
4.8
21.0
22.2
Conclusion
Overall View: The deal is viewed positively and is expected to be transformative for the company.
Earnings Accretion: The transaction is still earnings accretive.
Price Target: The target price is lowered to SGD1.00 (12.5x FY15E post-deal EPS), a 20% discount to global peers due to higher gearing and execution risk.
Share Price Outlook: The share price is likely to be more constructive after the successful conclusion of the transaction.
