Agriculture - Food

Agriculture - Food

Foreign media accused the Thai fishery business of involving human
trafficking trade, which would affect the image of Thailand but only
slightly impact profit of the agri-food business. We recommend
gradually buying TUF when the price weakens.

- Foreign media attack Thai fishery business
A British media, The Guardian, reported that there was a human trafficking
in the Thai fishery industry and accused CPF of buying fishmeal from the
boats with a problem of labor abuse. As a result, Carrefour temporarily
stopped its order to CPF. However, CPF’s shrimp export to Carrefour makes
up only 0.03% of its total sales or only B130m, so the effect is insignificant.
Moreover, the media stated that the US was considering downgrading
Thailand on a human trafficking blacklist from tier two to tier three within
June 2014.
- Greater impact on image than profit
The aforementioned issue would have a negative impact on the image of
Thailand’s fishery industry as well as of big players like TUF and CPF, of
which the shrimp export comprises 7.1% and 1.5% of its total sales,
respectively. However, the effect would be limited for CPF and TUF because
no other customers have cancelled their orders so far (except Carrefour)
due to the companies’ good relationship with foreign customers and globally
accepted products.
- Prefer TUF to CPF
We maintain a net profit forecast for the sector, believing the news would
have a psychological impact on CPF and TUF’s share prices only in the short
term. We select TUF as a top pick because its overseas business has grown
remarkably and the company will not be impacted from a possible increase
in feed mill raw material price because its major raw material is tuna,
different from corn and soybean mill for a livestock business