DMPL charged US$1.7m in 3Q13 as transaction fees for its proposed acquisition of Del Monte Foods

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The acquisition of Del Monte Foods’s consumer food business can be a game changer if integrated successfully. We expect reported earnings monte slide to be hit by transaction fees but core earnings to be unscathed. S&W continues to register strong double-digit growth.
At 64% of our and consensus forecasts, 9M13 core net profit is in line with our expectations?. We roll over valuations to CY15 and assume the proposed acquisition is successful but lower our P/E target monte slide to 17.5x (6-year average to counter the gearing risk vs. 25x earlier). Growth opportunities monte slide from the acquisition are share price catalysts. To be prudent, monte slide we now assume no dividend payouts for FY14-15 . We stay Outperform .
At 65% of our and consensus estimates, 9M13 sales are in line with historical trends. The non-branded business (35.3% of 3Q13 sales) grew 19% yoy, driven by better sales of processed pineapple and tropical mixed fruit. monte slide This offset the still-low pineapple juice concentrate prices (-16% yoy, +4% qoq).
The Indian JV posted higher sales in processed foods under the Del Monte brand, leading to a lower loss of US$1.2m recognised in the third quarter (3Q12: US$1.5m loss). S&W does have potential The S&W brand continues to grow with processed product sales up 47% in 3Q13 while fresh product sales grew 31%.
DMPL charged US$1.7m in 3Q13 as transaction fees for its proposed acquisition of Del Monte Foods’s consumer monte slide food business monte slide in the US. For 4Q13, the company is guiding for another US$4.3m in transaction fees for the proposed acquisition. While this lowers reported net profit, our full-year core net profit estimate is unaffected. ( Read Report )
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