GFPTG

GFPTG Plc

Investment thesis
GFPT remains one of top picks within Food space in anticipation of a YoY earnings turnaround in 1Q13 and a sustained QoQ recovery through to 3Q13 (on high export season, a turnaround at GFN and declines in raw material prices). The stock price implies a cheap FY13 PER of 12.9x.
Anticipate a YoY turnaround for 1Q13
We estimate a Bt160m net profit for 1Q13 against a Bt14m net loss for 1Q12 (and up 68% QoQ), led by a higher domestic chicken price, increased export sales price and volume, a shallower net loss at GFN and greater other income (a realized Bt50m FX gain). The QoQ profit rise is due to greater domestic chicken and export prices, a shallower net loss at GFN and a decline in the cost of soybean meal (SBM). Those positive factors should outweigh the effect of lower shrimp feed sales as a result of outbreaks of Early Mortality Syndrome (EMS) disease in shrimp. Shrimp feed sales, which account for 12% of total sales, are estimated to have dived 20-25% YoY.
Gross margin should post a YoY and QoQ improvement to 8.5% for 1Q13. SG&A was well-controlled, despite an estimated Bt20-30m chicken inventory loss for the quarter. The 1Q13 mean domestic chicken price was Bt40.7/kg, up by 17% YoY and 8% QoQ. The average corn price was Bt10.2/kg, down 1% YoY and QoQ. The mean SBM price was Bt18.2/kg, up 22% YoY but down 8% QoQ. GFPT’s average export price is estimated at US$4,200/tonne, up by 10% YoY and 4% QoQ, while its export volume is assumed at 1,850 tonnes/ month, up 79% YoY but down 6% QoQ. GFN will post a Bt10m net loss for 1Q13—shallower by 91% YoY and 85% QoQ.
QoQ earnings growth sustainable through 3Q13
We preliminarily estimate a Bt250-300m net profit for 2Q13, a YoY turnaround from a Bt16m net loss for 2Q12 and up 57-88% QoQ. We expect higher YoY domestic and export prices and operational break-even (or close to it) for GFN. The second-quarter is also high season for exports. We estimate a Bt45/kg mean domestic chicken price in 2Q13, up 21% YoY and 11% QoQ. GFPT’s export volume for the quarter should exceed 6,000 tonnes and its mean export price is estimated at US$4,400/tonne, up by 12% YoY and 5% QoQ. We assume that 2H13 earnings will be boosted by a clear turnaround at GFN and lower raw material prices.
GFN should start posting profits from 3Q13, underpinned by sustained strong domestic prices and a new cooked production line, which will add about 400 tonnes/month to throughput capacity (to 1,600-1,800 tonnes/month) during the quarter.