Все комментарии из этого раздела на дату:

Искать в комментариях:

Например: Сити брок

Kernel: In search of a bottom (eng)

19.04.2014 | Источник: ICU
Тема: Обзоры по компаниям и отраслям, ICU, Инвестиционный Капитал Украина, Кернел

In search of a bottom

We are initiating coverage of Kernel, one of the high-ranked Ukrainian food producers. Once a growth leader and darling of investors, Kernel found itself in a difficult situation in recent years with profits dented by rising competition and weak grain prices. Shares that have significantly declined over the past year now offer a substantial upside to an estimated fair value of PLN48. However, the risk/reward profile still remains unfavorable given the escalation of Ukraine-Russia conflict combined with an uncertain outlook for fy 2015 and exuberant market expectations that weigh on the share price. Hence, we are Neutral on the stock and prefer to wait for a better entry point.

Some years ago, Kernel was a darling of investors who praised its break-neck growth and expansion strategy. During the years following its IPO in 2007, the company captured a quarter of the local oilseed crushing market, broke into the top five largest local grain exporters, and consolidated one of the largest land banks in Ukraine. Consequently, its EBITDA surged six-fold from US$46m in fy 2007 to US$301m in fy 2011 while its share price more than tripled.

Mounting challenges and strategic missteps derailed growth in recent years. In recent years, both the oilseed crushing and grain trading industries have seen increased competition that significantly squeezed profit margins. Furthermore, the high-cost venture into farming was misguided with results trailing well behind expectations. As a result, earnings began to slump and the share price fell into a downward spiral. As of now, the stock has lost over half of its value since Feb-13 when a clear downward trend was established.

Operations should soon stabilize but uncertainty over fy 2015 remains high. Kernel is set to deliver improved performance in 2H fy 2014 with the bulk of losses in farming behind and improved prospects in other divisions driven by the sharp hryvnia depreciation. Beyond that, we see modest recovery in FY2015 which, however, depends on a recovery in farming where the outlook remains vague due to uncertainty in selling prices and crop yields.

The Ukraine-Russia conflict is the major risk factor in the near term. The conflict has recently escalated into Eastern Ukraine and there are expectations that it will soon spread to Odessa and Kharkiv where Kernel has sizable operations. Fortunately, the conflict did not cause any disruption to Kernel's business thus far but it definitely hurts sentiment and dampens price appreciation.

We do not yet see an attractive risk/reward in the stock and look for a better entry point. In our view, current valuations are reasonably attractive with fair value in the range of PLN47-51, implying an upside of 63-77%. Nevertheless, the buy at the moment seems to be rather premature given i) the adverse geopolitical setting, ii) the vague outlook for fy 2015, and iii) exuberant market expectations. Hence, we would prefer to wait for a better entry point to play out the ultimate turnaround in operations.

 Скачать полный обзор »

Комментарии по теме