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Broker's take: DBS upgrades Japfa to 'buy' on strong Q4 results

DBS Group Research has upgraded agri-food firm Japfa to "buy" and raised its target price to S$0.84 from S$0.53 previously, on the back of strong fourth-quarter performance.

The research house believes that the mainboard-listed firm's operations are on the cusp of recovery and will be stable moving forward.

This comes after the firm was plagued by a broiler oversupply situation in Indonesia, and African swine fever in Vietnam during the first half of fiscal 2019.

As at 10.15am on Wednesday, Japfa shares were trading at 57 Singapore cents, down 0.5 cent or 0.9 per cent.

Looking ahead, DBS is expecting continued growth from Japfa's poultry operations in Indonesia due to feed volume growth and stable prices.

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The group should also benefit from higher pork prices in Vietnam, which would more than offset a fall in volume amid valid concerns of swine volume contraction from the African swine fever, said analysts Andy Sim and Alfie Yeo in a report on Wednesday. 

For the fourth quarter ended Dec 31, 2019, Japfa's core net profit without foreign exchange gains/losses before tax was US$72.1 million, almost triple the US$26.6 million a year ago.

Its revenue rose 15.7 per cent to US$1.05 billion, from US$909.3 million a year ago. The strong performance was due to improved livestock prices, according to Japfa's results released on Feb 29. 

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