Author Topic: MFL -- Matco Foods Pvt. Ltd.  (Read 16810 times)

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Offline MZ

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MFL -- Matco Foods Pvt. Ltd.
« Reply #-1 on: June 17, 2017, 01:03:11 PM »
All about Matco foods Pvt. Limited.

Matco Foods is an IFC-investee company with over 50 years of experience in the rice industry, and a global portfolio of more than 150 corporate customers. As the largest basmati rice exporter from Pakistan, its flagship brand “Falak Rice” is available in more than 45 countries worldwide. It also exports private label brands to over 60 countries in the world.
As a leading agribusiness in the region, Matco aims to serve the changing needs and preferences of global consumers and therefore holds Organic Certification from the United States Department of Agriculture (USDA) as well as the European Union (EU).

http://www.matcofoods.com

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MFL -- Matco Foods Pvt. Ltd.
« Reply #-1 on: June 17, 2017, 01:03:11 PM »

Offline MZ

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Offline MZ

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MFL -- Matco Foods Pvt. Ltd.
« Reply #1 on: January 17, 2018, 01:52:31 PM »

Matco Foods Limited (MATCO): Subscribe to IPO for slight upside
Wednesday, 17 January 2018

By: Ismail Iqbal Securities (Pvt.) Limited
Matco Foods Limited (MATCO), engaged in processing and export of rice, is scheduled to go for book building on January 23-24, 2018. Floor price of PKR 26 per share has been set, which gives it a trailing P/E multiple of 8.5x, which is lower than its peers operating in Food sector at an average P/E of 18.3x.However, there is no local listed company operating is rice industry. We like Matco because i) it’s undergoing expansion in it Rice Glucose/ Syrup and Rice Protein Plant, ii) except for one listed entity namely Habib ADM, it’s competitors are only small, family owned business giving it supplier power, iii) it is the largest rice exporter operating in Pakistan and hence stands to gain from PKR devaluation, and iv) it has a diversified portfolio of products.
In addition to these factors, there are other factors too that can affect the valuation, such as i) the company intends to remain fully focused on international market of Rice Glucose/ Syrup and Rice Protein as it offers higher margins as compared to the domestic market, ii) the company will enjoy tax benefits if plant is commissioned before June 2019, iii) currently, majority of Glucose is extracted from corn, which is being replaced with Rice Glucose in Europe and US due to its least likeliness to cause allergy and iv) the company has already acquired the land and is in process of final negotiation with contractors.
Further, IFC’s shareholding post IPO will be around 15%, which it can’t dispose of for the period of one year from the date of IPO. One reason for concern is that Basmati Rice exports are heavily dependent on international prices, where the company may face direct competition from India given its low pricing. However, this remains less of an issue for the period of up to 2 years (2 rice production cycles) due to de-facto ban by European Union (EU) Commission (ban due to higher level of Tricylazole (fungicide) in Basmati rice), which is mainly found in Indian Basmati rice. Secondly, Rice processing and exports offer very low net margins of around 2% to 4%. Given the trailing multiple of MATCO at its floor price, the Food sector’s P/E and the company’s future earnings potential, we recommend investors to subscribe till a value of PKR 29. Please note that our recommendation is based on the FY19 earnings estimate given by the management, which we find to be reasonable; we have not created a financial model ourselves.
The management expects diversification towards Rice glucose to add value to its bottom line due to high margins as compared to its core business. Furthermore, Rice Glucose uses the by product (broken rice) of its core business as its raw material, which is currently being sold at very low margins due to its properties and very low demand.

Offline Farzooq

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MFL -- Matco Foods Pvt. Ltd.
« Reply #2 on: January 19, 2018, 04:37:10 PM »

In the first public listing of CY18, Matco Foods Limited (MATCO) will auction 29.1mn share to the
public. The issue will be made through book building and IPO process scheduled between Jan 29,
2018 - Jan 30, 2018. Company plans to raise PKR758mn for the expansion of its existing
production facility (25% of the post issued paid up capital) with a base price of issue set at
PKR26/sh. The company plans to utilize the IPO proceeds to expand its Rice Glucose / Syrup and
Rice Protein production capacity. Currently the country has a documented demand of ~60,000MT
with a supply standing at ~55,000MT. The new capacity is expected to come online in CY19
however may be delayed due to technical and regulatory reasons. The scrip will be offered at a
base PER multiple of 8.7x (calculated on the basis of base price and the CY18 estimated earnings)
which would be at a significant discount from the peer average.

http://www.bipldirect.com/downloads/research/MS16-01-2018.pdf
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Offline MZ

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MFL -- Matco Foods Pvt. Ltd.
« Reply #3 on: January 23, 2018, 08:26:59 PM »
Elixir Insight

Matco Foods Limited

Promising Story but International Rice Prices Remain the Key Risk

·         Matco Foods Limited intends to issue 29.1mn shares at a floor price of PKR 26/share, with Book Building scheduled to be held on 23rd - 24th January, 2018. Proceeds will be utilized in financing Rice Glucose/Protein diversification plant.

·         Company intends to increase its rice glucose and protein capacity from 10,000 MT to 30,000 MT and from 1,000 MT to 3,000 MT owning to increasing focus towards rice glucose (restriction to use Corn glucose), 5 year Tax holiday, expected PKR devaluation, expected ban on Indian exports due to increasing levels of Tricyclazole and cheap valuations support investment thesis.

·         At floor price, the issue reflects trailing (FY17) PE of 11.3x and FY18F PE (management guidance) of 8.7x (vs. Food sector average trailing PE multiple of 18.8x).We recommend investors to subscribe the issue.

IPO Details: Matco Foods Limited intends to issue 29.1mn shares (representing 25% of its post IPO paid capital) at a Floor Price of PKR 26/share. The company intends to use IPO proceeds to finance its expansion of Rice Glucose/ Syrup from 10,000 MT to 30,000 MT per annum and of Rice protein from 1,000 MT to 3,000 MT per annum (increasing production capacity by 200% on both fronts). At floor price, the issue reflects trailing (FY17) PE of 11.3x and FY18F PE (management guidance) of 8.7x (vs. Food sector average trailing PE multiple of 18.8x).
§  Offer registration: January 18, 2018 to January 24, 2018

§  Book Building: January 23, 2018 and January 24, 2018

Company Overview: Matco Foods Limited is Pakistan’s leading rice processing and exporting company. Established in 1964 by Syed Sarfaraz Ali Ghori, the company embarked its footprint in 1990 as a Private Limited Company. Having presence in 65+ countries, with 150+ corporate clients and 5 processing plants; Matco has a rich history of 50 years in Food business. Initially,  Matco was engaged in supplying rice manufacturing plants and equipment’s to GoP but later on set up  Pakistan’s first fully automated, modern rice processing plant supplied by Satake Corporation of Japan. The company is also sole distributor of Dubai based snacks manufacturer “Signature”.
The company has recently expanded its operations into other rice products namely Rice Glucose and Rice Protein. Matco is also looking to expand its current business portfolio of salt, rice bran oil, spices and organic rice.
As per FY17 financials, company’s revenue mix consists of 65% exports and 35% domestic sales. At product level, rice constitutes around 77% of the total revenue mix whereas Other/By-products serve the rest of 23%.
Rice Glucose & Rice Protein- What is the real game plan?
Rice glucose is a liquid sweetener, obtained through starch hydrolysis using broken rice as a raw material. The current global demand for rice glucose stands at ~1 million MT out of which Pakistan’s share comprises of ~4%. As per IMARC Group’s Global Report, the global glucose consumption is expected to reach ~4 million by 2022. Recent encouragement from EU to use rice glucose instead of corn glucose due to potential health concerns including infertility, immune problems and accelerated ageing, together with increasing global demand, supports Matco’s diversification plan.
Rice protein is a concentrated fraction of the entire rice grain which is used in nutraceuticals, animal feed and dietary supplements. Globally, the current rice protein demand is 11.3 ktons which is expected to grow at a CAGR of 8.2% by 2025.
Matco’s Leverage
1.     Exports offering hedge against potential PKR depreciation
As per management guidance, Matco’s exports’ contribution to sales will rise from 65% to 73% in 5 years (FY17 vs. FY22). Management projections incorporate 4%pa depreciation in Pak Rupee; any depreciation over and above the long term average (of 4-5%) will have a positive impact on earnings.
2.     Tricyclazole - An opportunity for Matco
As per recent European Union (“EU”) Commission orders, basmati rice manufacturers have been asked to bring down the maximum residue limit level for Tricyclazole (fungicide) in Basmati rice to 0.01 mg per kg from 1mg per kg till December 31, 2017. Out of India’s 350,000 MT exports, 70% had Tricyclazole limit of 1mg per kg.
The recent ban if materializes will open an opportunity for Pakistan’s rice exporters to grab the market share of Indian rice exports.
3.     Relative Valuations: cheap when compared to peers
Since no direct competitor of Matco is available in the market, comparison with other listed food entities reflect a discount of ~40% on trailing PE (calculated at floor price).
Recommendation: Subscribe!
We recommend investors to subscribe to the issue within 10-15% of the floor price. While the stock appears attractive given 1) dearth of liquid food plays and 2) otherwise premium valuations in the segment, we do not advise an aggressive stance as the company’s financials are prone to be severely impacted by the volatility in global rice price. For instance, Matco’s entire profitability for FY16 was wiped out when global rice prices plummeted to USD600/ton.
 
Key Risks
1.     Volatile International Rice Prices
International rice prices plummeted from a high of USD1,400/ton in 2014 to USD600/ton in 2015. After staying low for an elongated period of time, prices have now stabilized to ~USD1,100/ton. Management guidance is currently based on international prices of USD1,019/ton; any recurrence of price decline in international markets is likely to severely hamper future financial projections.
2.     Leverage
The current debt to equity stands at 1.4x.  Any deviation in profitability due to international rice prices, expected EU regulations, bilateral trade with USA etc. can lead to sustained high leverage.

Offline msypk

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MFL -- Matco Foods Pvt. Ltd.
« Reply #4 on: January 29, 2018, 07:59:59 PM »
Should we apply ?



Offline KI

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MFL -- Matco Foods Pvt. Ltd.
« Reply #5 on: January 31, 2018, 10:05:45 PM »
Should we apply ?




yes you should apply

Offline KI

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MFL -- Matco Foods Pvt. Ltd.
« Reply #6 on: January 31, 2018, 10:08:50 PM »
Cautiously Optimistic!
Event
? We expect improvement in company’s exports given (1) tighter fungicide EU policies and (2) probable improvement in bilateral trade with Iran and KSA amid lower Indian basmati production. We believe established brand with expanded outreach and vertical integration into efficient utilization of its by product would provide stability to its margins going forward. We recommend subscribing to the IPO upto the price of Rs32.9.
Impact
? About the issue: The present offer comprises of 29.143mn ordinary shares (25% of post-IPO paid-up), of which 21.86mn (75%) ordinary shares will be issued via book building (January 23 & 24) at a floor price of Rs26/sh. While the remaining 25% (7.286mn shares) will be issued to the general public through book building to be held on (January 29 & 30). The issue would generate Rs 758 mn at floor price and be utilized for (1) expansion of existing facilities (~Rs651mn) (2) meeting working capital requirement (~Rs107mn) and (3) in case if subscription is above the floor price that additional amount would be used to pay off ST-borrowing.
? Window in European market a key trigger: Tightening of EU fungicide rules in Jan-18 would lowers Indian exports (~160k tons) as they mostly fall foul of the rules. Emerging scenario would provide opportunity for Pakistani exporters to propel the quantum, presently ~115k tons. The impact of this would be more prominent in 1HFY19 as Indian rice inventory is already piled up. We don’t see diversion of cut in Indian EU share to other markets given reduced Indian production, down 8% to 5.65mn tons.
? Established brand provides partial immunity against cyclicality: MFL’s established brand “Falak” would allow it to fetch premium over other basmati products both domestically and globally that lowers price risk, in our view. Globally Basmati rice prices are determined by India, but Pakistani rice is sold above these prices due to low supply and higher quality. Currently, 40% of the MFL exports are to the Australian market.
? Changing product mix to stabilize margins: In order to fetch higher prices for its broken rice (by product) company has vertically integrated for its conversion to Rice glucose/protein. Demand of rice glucose/protein is growing due to its extensive use by pharmaceutical and confectionary industry. We expect this segment to provide incremental profitability of Rs0.4/1.5/2.4/sh in FY18/19/20.
? Thrust to come from improving bilateral trades with Iran and KSA: Probable improvement in relations with Iran would open up their basmati market to Pakistan, in our view. While ongoing Pakistan and KSA negotiations on enhancement of food exports would also bode well for the company. To highlight, Pakistan forms just 2% share of the Iranian and KSA imports that constitute 40% of the basmati market.
Key Catalysts & Risks
? Key catalysts: (1) Rice glucose/protein expansion, (2) opportunity to gain EU market, (3) Branded product to attract higher prices compared to local peers, (4) improving bilateral trade with Iran and KSA and (5) dollar hedge.
? Key risks: (1) Volatile rice prices and (2) client concentration.
Recommendation
? We advise investors to ‘Subscribe’ the issue up to Rs32.9/sh.

Offline MZ

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MFL -- Matco Foods Pvt. Ltd.
« Reply #7 on: February 06, 2018, 05:12:35 PM »

Offline Qur

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« Reply #8 on: February 06, 2018, 11:15:15 PM »
Matco kay 60% shares tu kisi neh liay hi nhe. Matlab k market me 26/sh se b sasta milay ga.

Offline SBM

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MFL -- Matco Foods Pvt. Ltd.
« Reply #9 on: February 07, 2018, 12:10:05 AM »
yes, it should floor a few times
I hate waking up.

Online Koolfire

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« Reply #10 on: February 09, 2018, 09:13:44 PM »
Credit of Shares of Matco Foods Limited Into CDS (General Public Portion)   

https://www.psx.com.pk/newsimage/109800-1.pdf
Failure Is Only a Temporary Change in Direction To Set You Straight For Your Next Success...Only Those Who Dare To Fail Greatly Can Ever Achieve Greatly...

Offline Sandhu

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MFL -- Matco Foods Pvt. Ltd.
« Reply #11 on: February 09, 2018, 09:31:03 PM »
Credit of Shares of Matco Foods Limited Into CDS (General Public Portion)   

https://www.psx.com.pk/newsimage/109800-1.pdf

Only 2.56mn out of 7.286mn (25%) shares  huhu

Offline shahmeer

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« Reply #12 on: February 09, 2018, 10:56:58 PM »
oh bahi jo public say bach gaya hai
wo book building valay investors ko
allot ho jaye ga.coz yeh bhe oversubscribed
hova tha .30 million aay ziada ke bids aaye then

Offline Sandhu

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« Reply #13 on: February 09, 2018, 11:52:50 PM »
oh bahi jo public say bach gaya hai
wo book building valay investors ko
allot ho jaye ga.coz yeh bhe oversubscribed
hova tha .30 million aay ziada ke bids aaye then
Janab mn public ki baat kr raha hon...
Chalain trading start hoti tu deikhty hn

Offline Ksexb

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« Reply #14 on: February 10, 2018, 02:28:27 PM »
they are selling rice to two leading Australian supermarkets namely coles and Woolworths which basically are only two best super markets where public go to.My only concern when I checked the back of the coles and Woolworths own rice,there is no mention of Pakistan,it always mention sourced from India and Bangaldesh.They sell their rice to third parties like coles and Woolworths and they can put their brand name of coles and woolworths.I am just wondering if all coles and Woolworths are their rice or it was old contract becase that is huge money if they providing all the rice.

Offline aatradekhi

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MFL -- Matco Foods Pvt. Ltd.
« Reply #15 on: February 12, 2018, 12:06:59 PM »

Offline Alpha

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MFL -- Matco Foods Pvt. Ltd.
« Reply #16 on: February 12, 2018, 05:44:06 PM »
sybol will be MFL

Offline Deep_Value

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« Reply #17 on: February 12, 2018, 07:10:23 PM »
sybol will be MFL

There will be psychological pressure of under subscription

Offline optimistic

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« Reply #18 on: February 12, 2018, 09:13:13 PM »
3 or 4 breakers kay bad entry banti ha for 2 upside caps.  :tongue:
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