JP Morgan - Mayora (MYOR) Small Cap search continues

This company has shown an impressive quarterly trend up to 4Q09. Over the last 8 quarters, turnover has grown by about 5% per quarter (turnover 42% higher in eight quarters). Gross profit margin has been expanding by 70 basis points per quarter. As a result, quarterly net income has multipled by 2.5x between 1Q08 and 4Q09. Profit run rate is now around Rp100bn per quarter, and the Street forecast of Rp390bn for the full year 2010 is looking conservative (implied P/E of 9.5x), given JPMorgan’s bullishness on IDR currency and further reductions in corporate tax rate. The management remains upbeat about surprising the Street further with 1Q10 profits, believing that growth opportunity for MYOR remains abundant. The company will be spending around US$40mn per year (10% of current market cap) on capex. Mayora’s total turnover has grown by 12x over the past 12 years, with no signs of market saturation. MYOR could be one of the best long term play on potentially rising purchasing power for the Indonesians, as the population drinks more instant coffees and eats more candies and biscuits.