Investment firm touts Illovo as long-term buy
Cedar Capital Limited, a local investment and advisory firm, says Illovo Sugar (Malawi) plc counter is a long-term buy that offers good value for investors on the 16-counter Malawi Stock Exchange (MSE).
In its analysis of the company’s performance published on Friday, Cedar Capital Limited said the counter is attractive in terms of profitability, cash flows and dividends.
It said Illovo is also an acknowledged low-cost producer, thanks to irrigation facilities, good climatic conditions and high cane yields.
Reads the firm’s report in part: “This low-cost status will allow Illovo to remain competitive in the export markets even during soft commodity price periods.”
Cedar Capital said as export prices are expected to improve in 2022 amid a global shortage of sugar driven by supply chain disruptions and the food-versus-fuel debate playing out in Brazil, which is the world’s biggest exporter, Illovo can capitalise on this to grow its revenue.
“Management has the lee-way to control the volume that is sold into the regional, US and EU markets after the domestic market has been saturated,” said the firm.
It has since forecast profit after-tax and net sales for the year 2022 at K25.1 billion and K189.5 billion respectively.
Minority Shareholders Association of Malawi secretary general Frank Harawa said this was good news for investors who lost hope in the company due to its previous subdued performance.
In the year-ended August 31, 2021, Illovo posted a profit after-tax of K20.4 billion up from K2.7 billion in 2020, representing an increase of 650 percent.
Earlier, Illovo managing director Lekani Katandula said the results are in the context of the performance of the company in the last three years.
