วันจันทร์ที่ 25 พฤษภาคม พ.ศ. 2552

Phillip Stock Investment Guide Recommends Buy TUF

Thai Union Frozen Products – TUF - BUY

Target price : Bt26
Recommendation : BUY
Closing Price (28 April 09) : Bt21

1Q09 net profit expected to be 10% higher than in the same year-ago quarter at Bt635m
- We estimate TUF's 1Q09 net profit to be about Bt635m, up 10% YoY on the back of strong sales and effective expense controls.

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- We maintain a BUY recommendation on TUF with a price target of Bt26/share.

1Q09 net profit expected to be 10% higher than in the same year-ago quarter at Bt635m
Despite a recession in the US, tuna sales volume is expected to rise 16% in 1Q09 but average selling prices are forecast to drop 11% YoY. Overall, tuna sales are predicted to grow 2% on the year. Shrimp sales are likely to be flat. Shrimp exports to the US market dropped as a result of sagging sales to food outlets and restaurants in the face of deteriorating economic conditions, while shipments of shrimp to Japan are predicted to rise 30% YoY on import tariff cuts. Sales of sardine, a new product are projected to jump by 33%. Sales of pet food are estimated to grow 19% and canned seafood sales should increase 15%. Domestic sales are expected to rise 13%, but shrimp feed sales are forecast to dip 4% YoY. On this basis, we are looking for a rise of 4% YoY in 1Q09 sales in dollar terms to US$500m. During the quarter, the baht fell 10% to the US dollar. Thanks to the currency's weakness, sales in baht terms are therefore predicted to rise 15% YoY to Bt17,665m. Though gross margins may not be as good as previously expected as a result of price discounts to clients in a slowing economic environment, the margin figure should however improve both YoY and QoQ on the back of the baht's weakness. Effective expense controls would push SG&A expenses lower to 8% of sales from 8.66%. Interest expenses are expected to be up 12% YoY but down 25% QoQ. TUF is also anticipated to take in a FX gain of Bt115m in this quarter. All in all, we estimate TUF's 1Q09 net profit to come in at about Bt635m, up 10% YoY and 107% QoQ.

BUY recommendation
We remain bullish on TUF's earnings prospects. The outlook is likely to remain positive. TUF, Thailand's top canned tuna exporter is also expected to be less hit by economic slowdown, in our view. We maintain a BUY recommendation on TUF with a price target of Bt26/share, equivalent to a P/E of 9x.

By Phillip Securities (Thailand) Plc. on Apr 29, 2009

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