Data loading...

VIET SEAFOOD

Analyst Bullish On Thai Union & Tuna: BUY

The Thai analyst Bualuang Securities published today its investment thesis on Thai Union Frozen Products Plc (TUF): “We are now more bullish on TUF’s 4Q11-FY12 earnings outlook, following the 4Q11 preview meeting. The firm guided for stronger GM than we earlier modeled. As such, we have upped our FY12 profit forecast 6% to Bt5.45bn to reflect expanded expectations for FY12 sales growth and fatter GM, led by synergy-building with MWB. Hence, our PER-based YE12 target price rises 7% to Bt85. Despite the tuna price uptrend in FY12, we expect TUF to post better YoY margins, based on its track record of being able to increase sales prices and its scope for marketing and promotional cost savings during periods of tuna supply shortfalls. Our BUY rating stands.”
“Record tuna price in Jan: The mean skipjack tuna price for last month set a new record of USD 2,030/ton, up by 34% YoY and 1% MoM. We expect an average FY12 tuna price of USD 2,200/ton, up 25% YoY and another new record. The price uptrend is driven by prevailing lower tuna catches, unfavorable weather and stricter fishing regulations and enforcement. During periods when the tuna price may retreat—high-catch season—we doubt that it would fall below USD 1,500/ton, as supply appears to be broadly tightening. As long as the firm can pass on higher tuna and shrimp costs to clients, margin can be sustained”.
Robust 4Q11 profit expected: We now estimate a Bt1.1bn net profit for 4Q11, up by 212% YoY (but down 30% QoQ on seasonality and year-end expense items)—significantly more bullish than our previous forecast of Bt858m. Stripping out Bt100m in FX gains, core earnings would have jumped 346% YoY (but dropped 30% QoQ). The YoY profit jump is attributable to a fatter GM, driven by sales price rises of 15-20% and sales volume increases of 3-5%.
FY12 sales growth target of 20%: Management guides that FY12 sales will expand 20% YoY. GM should be in the 16.5-17.5% range, comparable to FY11. But TUF indicated at the meeting that the guided GM of 16.5-17.5% for FY12 doesn’t include synergistic gains from MWB estimated at about €10m. With those gains factored in, GM would probably exceed 18%.
Outlook
Record tuna price in Jan: The mean skipjack tuna price for last month set a new record of USD 2,030/ ton, up by 34% YoY and 1% MoM. The FY11 average tuna price was USD 1,766/ton, up 37% YoY. It climbed from USD 1,500/ton in Jan 2011 to USD 2,000/ton in Dec 2011. During the course of the year, the tuna price retreated three times—in March, July and October 2011—by 7-10% on each occasion; but the broad trend was upward and price volatility was relatively modest. We expect an average FY12 tuna price of USD 2,200/ton, up 25% YoY and a new record. The price uptrend is driven by prevailing lower tuna catches, unfavorable weather and stricter fishing regulations and enforcement in some jurisdictions. A number of Pacific Ocean fishing grounds will be closed for 1-3 months in order to preserve fish stocks. Management guides that during periods when the tuna price may retreat—high-catch season—it is unlikely to fall below USD 1,500/ton, as supply appears to be broadly tightening.
/