Following Japfa’s distribution-in-specie of its dairy business AustAsia Group, CGS-CIMB on Tuesday (Jan 3) lowered its target on Japfa to S$0.42 from S$0.65.

The new target price was based on eight times FY2024 price-to-earnings ratio, against Japfa’s remaining animal protein businesses after the disposal.

The brokerage reiterated an “add” call on the counter, noting that the group’s current share price of S$0.315 implied a 16 per cent discount to its stake in Japfa Comfeed Indonesia – the group’s Indonesian agri-food arm, while disregarding the value of its animal protein and other business.

Post-distribution of AustAsia, CGS-CIMB also believes that shareholders could benefit over the long term if they opt to hold on to the AustAsia shares distributed as part of Japfa’s disposal exercise.

However, since AustAsia began trading on the Hong Kong stock exchange, the counter has not traded above its initial public offering price of HK$6.40. As at 2.35 pm on Wednesday, AustAsia was down 6.1 per cent to HK$5.73.

Analyst Tay Wee Kuang attributed this to poor market sentiment despite AustAsia’s growing milking capacity.

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He also noted that the African swine fever has been weighing on Japfa’s valuations, resulting in persistent losses in its animal protein and other business. The unpredictability of the swine fever is likely to drag on Japfa’s consolidated earnings, he said.

Shares in Japfa were trading up 6.4 per cent, or S$0.02, at S$0.335 as at 3.02 pm on Wednesday.