Purefoods Packs Value
April 17, 2017
We’ve been happily pushing PF since 2012, and over the years, its share price has gone above PHP300 per share, dropped to PHP114 per share and is now back to PHP300 per share. Through the years, it also paid quarterly cash dividends of PHP1.20 per share which went up to PHP1.50 per share. It notably paid a huge PHP48 per share cash dividend in 1Q14 which gave investors a 21% yield that time.
Now back to PHP300 per share, does PF still has upside or is it still a good stock investment? PF has a 94% correlation with Philippine GNI. Its three main businesses of agro-industrial, value-added products and feeds have almost 100% correlations with the Philippine services, industrial and agricultural sectors as well. PF’s overseas meat processing businesses likewise posted PHP1.35 bn in net income after years of losses.
Soya bean meal and wheat prices have remained low, and the peso’s recent strength bodes well for margins momentarily. Weighing down on PF is stiff competition in the flour and coffee mixes market and weak hog prices.
PF is dominant in the food market segments of hotdogs, poultry, feeds and flour. It is a strong second or third in the other segments of the food sector. PF also practices cost efficiency of using cheaper alternative raw materials, and more importantly has started increasing market penetration and distribution nationwide despite having a huge market share.
Currently, there aren’t a lot of Philippine food and beverage stocks with favorable prices and upsides. PF packs both value and huge upside. It grows along with the Philippines’ strong economic growth and its fast-food and convenience store customers’ nationwide expansion.
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