COMPANY NEWS & UPDATES
ING Group Limited ( ING )
Hold Valuation $ 3.60
Earnings Forecast
Yr to June |
2012A |
2021F |
2022F |
|
Sales Revenue
($ M )
|
2,555.3 2,630.8 |
2,748.2 |
|
Reported
Profit ($ M )
|
78.8 |
86.5 |
96.8 |
EPS ( c ) |
21.2 |
23.3 |
26.1 |
Div ( c ) |
14.0 |
16.0 |
18.0 |
P / E ( x ) |
16.2 |
13.9 |
12.4 |
Yield (%) |
4.1 |
4.9 |
5.6 |
Franking (%) |
100.0 |
100.0 |
100.0 |
|
EPS Growth
(%)
|
-22.1 |
10.0 |
11.9 |
* Profit & EPS adjusted for options , goodwill , notional earnings and nonrecurring items .
1 st Quarter Reward
We maintain our $ 3.60 valuation for shares in no-moat Inghams following a business update at the firm ' s annual general meeting . First quarter poultry volumes have increased 7.5 % compared with the last quarter of fiscal 2020--broadly back to pre- COVID-19 levels . Industry oversupply also appears to be abating , with Inghams ' inventory levels improving by around $ 16 million ( around 7 %) since June 30 , 2020 . While producers struggled to keep up with pantry-stocking and panic buying in March and April 2020 , this sales momentum was not maintained , and the poultry industry entered fiscal 2021 in oversupply . Pricing typically suffers in times of oversupply , and we expect pricing to recover over the coming months as surplus poultry gradually diminishes . While feed costs remain elevated , we continue to expect improvement in feed pricing toward the end of fiscal 2021 , providing some breathing room into fiscal 2022 .
We continue to forecast fully franked dividends of $ 16 cents per share in fiscal 2021 , representing a dividend yield of 4.5 % compared with our fair value estimate . Inghams has tweaked its dividend payout policy in light of the new accounting standard for leases , AASB 16 . Inghams now intends to pay out 60 % to 80 % of underlying net profit , post-AASB 16 ( from 60 % to 70 % of pre-AASB 16 profit ). The new policy is broadly in line with the prior policy , considering the negative impact AASB 16 has on near-term earnings . We expect dividends will be well-supported by Inghams ' relatively stable earnings . While capital expenditure requirements have been elevated in recent years ( given heavy investment into automation and operational efficiency ), peaking at $ 109 million during fiscal 2019 at 3 % of revenue , we expect growth capital expenditure to moderate from fiscal 2021 , and free cash flows to strengthen .
We expect poultry demand to remain robust over the long term . Chicken meat is a cheaper alternative to competing proteins , driven by favourable production dynamics . The chicken industry remains highly efficient in translating feed into live weight for production , with producers able to convert feed at a rate that is about 1.5 times more efficient than pork and 4 times more efficient than beef . We forecast lowsingle-digit growth in annual percapita chicken meat consumption to 53 kg by fiscal 2025 , before moderating as chicken consumption approaches saturation .
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