Delfi (formerly: Petra Foods)

[ksir]

Its good that they're engaging shareholders. But whether such Q&A prove to be useful depends on the amount of disclosure, or the quality of answers, from the company.

Apart from updates on its manufacturing and sales activities, the rest of the Q&A does not provide any information that hasn't already been mentioned in past annual reports. Most of the important questions are sidestepped and answered in a manner that is too general to be useful.

Here are some of my own answers.

Will the depreciation of IDR against USD impact results negatively? Will sales/profit be hit?

Yes. Revenue may fall. Margins may shrink. Profits may not be likely. And equity will be hit with currency translation losses.

FY20 is likely to be a repeat of FY15, when IDR depreciated sharply against USD. And when Delfi's sales fell due to weaker Indonesian consumer spending, as a result of lower earnings from its commodity exports. Still, the economy expanded by 4.9% in FY15. So if FY20's growth comes a lot lower as what most economists are predicting, then the hit to Delfi's sales will be worse than FY15.

Why is the share price falling?

The growth expected of the company -- as implied by its high valuation of 20-30 p/e -- since the divestment of its cocoa ingredients business in 2013, did not materialise. Much of the company's progress has been thwarted by IDR depreciation against USD. This meant higher COGS, which necessitated increasing prices periodically. Though price increases are unlikely to match (sharp) cost increases, since that may cause customers to be upset.

Chocolates are still a luxury/discretionary product for most Indonesians, and their disposable income is not rising fast enough to consume more of it.

In the long-term, the market for chocolates in Indonesia will still grow, but the runway for growth is probably longer than previously expected.

Generally agreed with most of your points.
But by and large, if we are investing in the company for long run. It wouldn't have mattered to look at a year or 2 results.
Rupiah depreciation & hit in consumer confidence are not new. They have been through that.

At price of $1, I wouldnt be interested to get in, but at $0.5? I will be glad to.

Their balance sheet is not stretched!
Likely can go through Covid without much damage.
Buying well known choc brands in Indo with earning yield of about 10% is rather interesting.

The question to ask is whether their brands still intact and can perform in long run? My gutfeel is yes! Silverqueen & TOP are rather well known and Indons grew up with sweet association with them!

The wildcard of growth is actually van houten! whose runway is wider!


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