Champ Resto Indonesia (ENAK IJ), IOI Corporation (IOI MK), Delfi Limited (DELFI SP)

Champ Resto Indonesia (ENAK IJ), IOI Corporation (IOI MK), Delfi Limited (DELFI SP)

🍽 Champ Resto Indonesia (ENAK IJ)
Recommendation: BUY
Target Price: Rp1,300
Stop Loss: Not specified
Date of Recommendation: 6th September 2024
Broker: UOB Kay Hian

Investment Thesis: Champ Resto Indonesia – Expanding Growth and Strengthening Operations

Champ Resto Indonesia is positioned for significant growth in 2025, fueled by strong leadership and expansion plans. With an expected net profit growth of 38% year-on-year (yoy), the company is focused on expanding three of its key restaurant brands and improving operational efficiencies.

• Key Growth Drivers:
  a) Revenue Growth: The company is targeting a 10% yoy revenue growth for 2025, compared to 7% in 2024. This is supported by the expansion of its restaurant brands, Chopstix, BMK, and Platinum, which are expected to see increased outlets in 2025.
  b) New CEO’s Expertise: The appointment of Mr. Eric Leong as CEO, who brings over 15 years of experience in managing large-scale restaurants, is expected to accelerate growth and improve operational efficiencies.
  c) Brand Expansion: Champ Resto is focusing on expanding Chopstix, BMK, and Platinum, in addition to other successful brands like Gokana and Raacha, which have contributed significantly to its revenue.

Valuation and Financials:
The stock is trading at 30x FY24F PE, which is below its historical average. The company’s revenue is expected to grow from Rp1,614 billion in 2024 to Rp1,787 billion in 2025. EBITDA is projected to rise by 27.2% in 2024 and by 20.3% in 2025.

Share Price Catalysts:

• Strong outlet expansion and operational improvements.
• Better-than-expected earnings growth in 2025, driven by cost efficiencies and new store openings.

🌴 IOI Corporation (IOI MK)
Recommendation: HOLD
Target Price: RM3.60
Stop Loss: Not specified
Date of Recommendation: 6th September 2024
Broker: UOB Kay Hian

Investment Thesis: IOI Corporation – Stable Growth with Downstream Challenges

IOI Corporation continues to demonstrate stable growth in its plantation segment, benefiting from healthy fresh fruit bunch (FFB) output. However, its downstream operations face challenges due to margin compression.

• Plantation Growth: IOI expects FFB production to grow by 4.6% yoy in FY25, supported by higher productivity in Peninsular Malaysia and young tree output in Indonesia. The company has outperformed the industry in oil extraction rate (OER), achieving 21.77% for FY24.
• Downstream Margin Pressure: The downstream segment, particularly in oleochemicals and refining, faces intense competition from Indonesia. Margins are expected to improve slightly to 2% in FY25, but this remains below historical levels.

Valuation and Financials:
The stock is valued at 17x FY25F PE for the plantation division and 15x FY25F PE for the downstream operations. FY25 revenue is expected to reach RM10.62 billion, with net profit projected at RM1.32 billion.

Share Price Catalysts:

• Better-than-expected crude palm oil (CPO) prices.
• Improvements in downstream margins, driven by operational efficiencies.

🍫 Delfi Limited (DELFI SP)
Recommendation: HOLD
Target Price: S$0.83
Stop Loss: Not specified
Date of Recommendation: 6th September 2024
Broker: UOB Kay Hian

Investment Thesis: Delfi Limited – Navigating Currency Depreciation and High Cocoa Prices

Delfi Limited, a key player in the chocolate and confectionery market, faces headwinds from weaker regional currencies and high cocoa prices. Despite these challenges, the company is focused on stabilizing operations and maintaining market share.

• Revenue Impact: 1H24 revenue declined by 8% yoy, largely driven by weaker demand for its own brands and a termination of an agency brand in Indonesia. Gross profit margins also declined due to high cocoa prices.
• Cost Challenges: Currency depreciation and high input costs are expected to weigh on margins in the near term. Despite this, Delfi has maintained its interim dividend of 2.06 US cents per share.

Valuation and Financials:
The stock trades at 18.7x FY24F PE, with a target price of S$0.83. The company’s revenue for FY24 is projected at US$261 million, while net profit is expected to reach US$20 million.

Share Price Catalysts:

• Improvement in cocoa prices and stabilization of currency fluctuations.
• Stronger demand for own-brand products in key markets.Thank you