Indonesian Companies: Update Performance of Malindo Feedmill
The outlook for Malindo Feedmill, one of the largest animal feed producers in Indonesia, has become more upbeat after the arrival of fresh funds (IDR 537 billion) through the company's rights issue and on expectation of improving conditions in the nation's chicken breeding industry. Malindo Feedmill will use proceeds from the rights issue to repay US dollar-denominated debt to Bank Central Asia (BCA) and Bank CIMB Niaga. Based on a financial report, the company had a total debt of IDR 2.2 trillion (approx. USD $157 million) in the third quarter of 2015.
Debt repayment is a positive matter as it will lower Malindo Feedmill's debt ratio from approximately 197 percent in Q3-2015 to the range of 71-81 percent. This will have a positive effect on the valuation of the company. Furthermore, US dollar-denominated debt repayment makes Malindo Feedmill's debt ratio in line with debt ratios of other companies active in the same sector.
Indonesia's chicken breeding industry has started to recover, evidenced by the higher price of commercial day old chicks (DOC). The average DOC price rose from IDR 3,921 in October-November to IDR 5,500 in early December. This price rise was possible due to the government's request to 13 Indonesian livestock companies to destroy six million parent stocks, hence curtailing the supply of chicken meat. Moreover, the government limited imports of grand parent stocks to 665,000 chickens in 2015 after imports had grown considerably in recent years.
Stock Quote Malindo Feedmill - MAIN:
Other positive factors are Malindo Feedmill's decision to limit capital expenditure (this will speed up recovery of the company's profit figures). The limited rise of corn and soybean prices also has a good impact on the company's profit margin.
Regarding the long-term prospects, Malindo Feedmill has ample room for growth as Indonesia's chicken meat consumption is still relatively low at 12 kilogram per capita per year, well below the 38 kilogram per capita figure of Malaysia.
Future Projection Malindo Feedmill's Financial Highlights:
| 2013 | 2014 | 2015F | 2016F | 2017F | |
| Net Sales | 4,193.1 | 4,502.1 | 4,647.0 | 5,224.0 | 5,917.0 |
| EBITDA | 573.3 | 142.7 | 319.7 | 473.1 | 594.8 |
| Net Income (loss) |
241.2 | (84.6) | (36.6) | 120.1 | 206.1 |
| P/E Ratio (x) | 7.3 | - | - | 23.5 | 15.2 |
| P/BV (x) | 2.72 | 2.30 | 1.97 | 1.83 | 1.66 |
in billion IDR rupiah unless otherwise stated
Source: CIMB Securities