Why MERISTEM placed a "hold" rating on Honeywell Flour Mills

Honeywell Flour Mills Plc posted a less than impressive quarterly result, towing the recent industry line as evident by recent releases in the sector. Contrary to the company’s usual double digit yearly and quarterly growth, the recently released result for the quarter showed 8.28% decline in revenue year-on year (YoY).

This represents the third quarter that revenue in recent years. Q1 2015 result showed a decline of 0.69% with NGN13.191bn revenue, Q2 showed 3.51% decline with revenue at NGN26.871bn and this Q3 result also declined by 8.28%(YoY) to peg revenue at NGN37.636. This mood was also reflected by the pressured profit after tax which declined by 52.24%. Also worthy of mention is the 11.03% surge in OPEX and foreign exchange loss of NGN0.903bn for the period.

The recent economic and industry circumstances has incited the need to review all assumptions and projections in our valuation, on the back of this, we reviewed our expected FY 2015 growth to -6.50% and thus our target price was revised downwards to NGN3.16 from the previous NGN4.58. This imply 5.33% potential upside to the current price. Hence, we change our recommendation to HOLD.