Stock Name: BERNAS
Company Name: PADIBERAS NASIONAL BHD
Padiberas Nasional Bhd
(Oct 17, RM3.23)
Maintain buy at RM3.22 with target price of RM3.90: Bernas has secured 800,000 tonnes of rice over the next 12 months via a memorandum of understanding (MoU) signed with the Vietnamese government. This consignment is more than enough to alleviate any supply disruptions due to the flooding in Thailand. Bernas should have no problems supplying rice at a reasonable price in the next'' six to 12 months. We maintain our 'buy' call and target price of RM3.90 based on 8.1 times 2011 price-earnings ratio.
This order is uncharacteristically large for a single supplier. In 2010 Bernas imported 932,000 tonnes of rice from six different countries. This showcases the high level of inventory in the world ' Vietnam and India have both had record harvests and have the highest inventory levels ever. Although we expect Thailand's rice exports will be severely impacted next year, the other rice exporting countries will be able to offset the shortage and serve the world's demand for rice.
Bernas' business strategy is more than able to manage the current global rice crisis with: (i) sufficient rice stockpile to last five to six months; (ii) secured and locked in prices for rice imports up till March 2012 for direct consumption and to replenish its depleted stockpiles; and (iii) supply transparency with the Vietnamese rice MoU.
Despite the negative outlook portrayed by the media, Bernas is thriving and is in no crisis whatsoever.
Bernas' chief problem of cheap rice smuggled from Thailand into Malaysia has been resolved naturally, as the floods render ground transport impossible. Furthermore, we expect the Thai government to stress restocking its national stockpile first and implement its policy of buying paddy from farmers direct at a fixed price. We believe there is no longer any financial incentive for Thai smugglers to market their product in Malaysia.
Bernas is due to release its 3QFY11 results in mid-November. We expect continued strong performance with net profit growth of +40% year-on-year to RM81 million. The drivers are volume growth of 3% y-o-y with stable average selling price and input cost. We believe there is potential upside to our earnings forecast as we have not imputed the benefit of no smuggling of Thai rice into Malaysia. ' Maybank IB Research, Oct 17
This article appeared in The Edge Financial Daily, Ocotber 18, 2011.
Company Name: PADIBERAS NASIONAL BHD
| Research House: MAYBANK | Price Call: BUY | Target Price: 3.90 |
Padiberas Nasional Bhd
(Oct 17, RM3.23)
Maintain buy at RM3.22 with target price of RM3.90: Bernas has secured 800,000 tonnes of rice over the next 12 months via a memorandum of understanding (MoU) signed with the Vietnamese government. This consignment is more than enough to alleviate any supply disruptions due to the flooding in Thailand. Bernas should have no problems supplying rice at a reasonable price in the next'' six to 12 months. We maintain our 'buy' call and target price of RM3.90 based on 8.1 times 2011 price-earnings ratio.
This order is uncharacteristically large for a single supplier. In 2010 Bernas imported 932,000 tonnes of rice from six different countries. This showcases the high level of inventory in the world ' Vietnam and India have both had record harvests and have the highest inventory levels ever. Although we expect Thailand's rice exports will be severely impacted next year, the other rice exporting countries will be able to offset the shortage and serve the world's demand for rice.
Bernas' business strategy is more than able to manage the current global rice crisis with: (i) sufficient rice stockpile to last five to six months; (ii) secured and locked in prices for rice imports up till March 2012 for direct consumption and to replenish its depleted stockpiles; and (iii) supply transparency with the Vietnamese rice MoU.
Despite the negative outlook portrayed by the media, Bernas is thriving and is in no crisis whatsoever.
Bernas' chief problem of cheap rice smuggled from Thailand into Malaysia has been resolved naturally, as the floods render ground transport impossible. Furthermore, we expect the Thai government to stress restocking its national stockpile first and implement its policy of buying paddy from farmers direct at a fixed price. We believe there is no longer any financial incentive for Thai smugglers to market their product in Malaysia.
Bernas is due to release its 3QFY11 results in mid-November. We expect continued strong performance with net profit growth of +40% year-on-year to RM81 million. The drivers are volume growth of 3% y-o-y with stable average selling price and input cost. We believe there is potential upside to our earnings forecast as we have not imputed the benefit of no smuggling of Thai rice into Malaysia. ' Maybank IB Research, Oct 17
This article appeared in The Edge Financial Daily, Ocotber 18, 2011.
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