CLSA Raises First Pacific Target Price To HK$6.8

CLSA kept its Outperform rating on First Pacific (00142) and raised the stock's target price from HK$6.7 to HK$6.8, according to ETNet. The broker said Indofood Sukses Makmur (INDF) is trading near its lowest price-to-earnings and price-to-book ratios in 26 years. It added that a direct privatization at a 30% premium would be earnings- and value-accretive for First Pacific, but would require INDF to lift its dividend payout ratio after completion so First Pacific could maintain healthy cash interest coverage at the holding-company level. CLSA also said Metro Pacific's delisting prompted it to review a similar delisting assumption for INDF. It said such a move would remove the intermediate holding-company layer and the structural discount to net asset value, while INDF's strong balance sheet could turn it into net cash by 2027. Under a hypothetical deal in which First Pacific buys the 49.9% minority stake in INDF with additional holding-company debt at 6.0% annual interest, CLSA said the transaction would still be value- and earnings-accretive, though First Pacific's comparable holding-company interest coverage ratio in 2028 could fall from a forecast 5 times to 2 times.