Thai Union Frozen Product

Thai Union Frozen Product Plc

Renovation and innovation to be key drivers of overseas growth. TUF held an
investors’ meeting titled “Overseas Market Outlook”, bringing in lead management of
MWBrands (MWB), Chicken of the Sea International (COSI), Chicken of the Sea Frozen
Food (COSFF) and US Pet Nutrition LLC (USPN) to share insights and strategic overseas
plans. We are optimistic that the strategy to focus on reinventing core brands and
adding new products will drive business over the medium to long term. We believe the
worst is over and its business will move ahead with better core profit in 2014 with the
support of a better growth outlook for overseas divisions, plus gains from baht
depreciation in 4Q13 and early 2014. We thus BUY with TP at Bt70 on industry average
PER of 16x 2014.
Meeting highlights:
MWB has two avenues of growth. The first is geographic expansion, driven by
two business units that will be set up by end-2013 to cover North European,
Middle East and North Africa markets. It expects high single-digit growth in
mature markets and double-digit growth in emerging markets. Its second
avenue is innovation. It will introduce new lines and new products, such as
“Steam Pots” in the UK, which is an instant snack targeted at female workers. It
expects fish prices to continue to rise and is working to offer value-added
products that are of higher quality and of the type that consumers will be
willing to pay more for. MWB is working to becoming the leader in sustainability
in the seafood business.
COSI says 2013 has been a successful year, with volume growth at 500K cases
YoY, net sales up US$30mn and market share up 4% YoY. Moving into 2014, it will
triple its marketing expenses with campaigns to celebrate its 100th anniversary
and to rebrand and leverage its heritage core brand - Chicken of the Sea. It will
also explore more innovative products. Its latest product, “Pink Salmon”,
offering three different types of flavored salmon, is said to be the first of its kind
in the salmon category in US. COSI will invest heavily to grow its salmon business
category and focus on its partnership with Walmart to launch its new products
in 2014. Looking into 2015 and beyond, COSI expects 10-15% of the top and
bottom lines of its US portfolio to come from innovative products.
As the largest US importer of shrimps, COSFF expects to continue growing
strongly following its strong volume growth over the last six years of 57%.
Although it expects average prices of shrimp to continue to rise, it still expects
this business division to outperform competitors, supported by supply chain
integration with TUF.
USPN will stay focused on cost reduction and stabilization in 2014. It will launch a
new “Chub” product line that will provide additional revenue growth next year. It
expects revenue to triple by 2017 from US$46mn in 2013F.