UBS cuts rating on Australia's United Malt to neutral on demand risks

United Malt

18/01/2023 02:52

** Analysts at UBS downgrade rating on commercial maltster
United Malt Group  UMG.AX  to "neutral" from "buy"
    ** Downgrade comes more than two months after UBS rated it
buy on a sustaining beer demand outlook and easing supply-side
headwinds
    ** Brokerage downgrades rating considering near-term risks
around balance sheet, beer demand, and risks to execution of
transformation efficiency program
    ** Adds "feedback suggests independent U.S. craft beer
sector has slowed in recent months, including share loss to
other beverages"
    ** Says solid Canada barley crop supply and declining barley
prices, freight rates and energy costs minimise 1Q23 earnings
risk
    ** Believes UMG has "opportunity to deliver more than A$200
mln ($139.88 mln) EBITDA in FY24E, but consensus expectations
sit below this, given uncertainties around unwinding of
COVID-related uncertainties"
    ** Brokerage expects net earnings of A$30 mln and A$61 mln
in FY23 and FY24, respectively, significantly higher than A$12
mln logged in FY22
    ** Last week, Jefferies cut its earnings estimate for UMG on
tough macro conditions and downgraded rating to "hold" from
"buy"
    ** UMG up 5.5% this year, as of last close, nearly in line
with a 5% increase in the ASX 200 benchmark index  .AXJO  
($1 = 1.4298 Australian dollars)
 (Reporting by Sameer Manekar in Bengaluru)
 ((Sameer.Manekar@thomsonreuters.com; Twitter: https://twitter.com/sameer_manekar))