ABN Amro Dumps KH Foods

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By Greg Peel

KH Foods (KHF) started 2005 trading around the $8.00 mark. Having stoically maintained a Hold rating since that March, ABN Amro has now downgraded the stock to Sell and announced it will cease coverage. KH Foods closed yesterday at $0.65.

The cessation follows updated guidance from the company that the FY06 loss, previously estimated at $19.2m, will now be $28.4m prior to IFRS adjustments.

ABN is disappointed that a new management team and a company restructuring has failed to stop the rot. Soul Pattinson (SOL), with a 53.5% interest, had agreed to provide short term support, but debts are high and margins continue to deteriorate.

While ABN suggests KHF may reach profitability in FY08, the analysts are washing their hands of what they deem a high risk stock. They depart with a $0.46 target price, but that’s the last we’ll hear from them.

ABN had been the only broker in the FN Arena database to cover KH Foods. We don’t expect anyone to pick up the loss anytime soon.

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