| Chicken rice may be an affordable and popular dish in Singapore but there are places in neighbouring countries where this is not the case. From a low base in Indonesia, there is a huge projected 25% upside this year in its poultry consumption. That figure comes from Maybank Kim Eng's new reports which initiated coverage of the poultry sector and Japfa Comfeed with a positive view due to 1) low poultry consumption in Indonesia (see chart); and 2) the government’s continuous support to farmers to prevent losses.  In addition, chicken consumption will be boosted by the country's new program providing free meals targeted at 20 million students and pregnant women. The government is targeting to reach 80 million people (c. 29% of Indonesia’s population) by 2027. |
One company that's set to do really well is Jakarta-listed Japfa Comfeed Indonesia (JPFA). It's involved in everything -- not just poultry but also fish, beef, etc.
This means good things for its parent company, Japfa Ltd (JAP), which is listed on the Singapore Stock Exchange.
Japfa owns 55.4% of its subsidiary, which contributed US$75 million of its US$95 million core net profit in 9M2024.
Here's why Japfa Comfeed Indonesia is looking so promising, according to Maybank:
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• More people are eating chicken: Indonesia has a huge population, and as their economy grows, more people are choosing to eat chicken.
• The Indonesian government is helping out: They're putting in place policies to make the poultry industry more stable. This includes setting limits on how much chicken can be imported and encouraging farmers to reduce the number of chickens they raise to keep prices steady.
They've even set a standard price for corn, which is a big part of chicken feed, to protect profit margins for feed businesses. • JPFA is using technology to be more efficient: They've adopted modern, closed-house systems for their chicken farms, which means fewer chickens die and they save money. These systems help "reduce the mortality rate to less than 1% compared to traditional farms’ 10%".
• They're creating new and exciting food products: JPFA is coming up with innovative ready-to-eat meals to keep up with changing consumer tastes. These new products are expected to sell well, especially in supermarkets, which are becoming more and more popular in Indonesia.
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Maybank analysts Jocelyn Santoso and Jeffrosenberg Chenlim believe that all these factors will lead to JPFA making record profits in the coming years.
And, again, this is great news for Japfa Ltd.
The company already exceeded expectations in the first nine months of 2024, with a core net profit of US$90.5m, largely thanks to the strong performance of its Indonesian operations.
And, again, this is great news for Japfa Ltd.
The company already exceeded expectations in the first nine months of 2024, with a core net profit of US$90.5m, largely thanks to the strong performance of its Indonesian operations.
| CGS International recommends buying Japfa stock. Its target price is S$0.53, which is significantly higher than the current price. "We think the stock will continue to re-rate as the industry heads into a demand upcycle," said CGS analyst Tay Wee Kuang. |
