Petra Foods maintains foothold amid intensifying competition

With a war chest of $315m, the label is staying in ASEAN cupboards.

Petra Foods is showing no signs of relinquishing its 53% dominant market share in Indonesia and might even increase its scope as its war chest is poised for M&A.

A report by OSK-DMG reveals that the company is rooted well where it is despite several multinationals craving to get a foothold in Indonesia’s confectionery market.

OSK-DMG adds that following the divestment of its upstream cocoa ingredients business, Petra is now an even purer play to rising consumption spending in ASEAN.

Exposure to two of the most important ASEAN growth markets. Petra Foods (Petra) has an estimated 53% market share in Indonesia, where its flagship brand SilverQueen is a household name, built up over half a century.

Petra’s various products and brands have been dominating the Indonesian retail scene, whereas in the Philippines, it is a top five player with a 10% market share, after buying Nestle’s chocolate business in 2006.

Here’s more from OSK-DMG:

The company is sitting on a net cash position of USD121.6m. We believe management is actively looking at possible acquisitions in similar spaces which are potentially earnings accretive. Organically, we also expect a greater push into new markets such as China and Vietnam, which could be another significant revenue contributor for the company.

A more stable IDR may provide earnings tailwind. Petra’s revenue is denominated in local currencies mainly the IDR, while 60% of its costs are USD-denominated. We believe a more stable IDR should provide some tailwinds to earnings growth, in the form of stronger gross margins and higher translated net profit. Our sensitivity analysis estimates a 6.8% increase in FY15F USD net profit for a 5% appreciation of the IDR.