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