Thai Union Frozen Product

Thai Union Frozen Product Plc (TUF)  

 

- Bumble Bee deal unlikely 

TUF's Bumble Bee acquisition deal is currently under the anti-trust law investigation, and the packaged seafood industry is currently under the U.S. Department of Justice's (DOJ) investigation regarding prices and competition, likely to take two or three years; these two cases are not related. In case that TUF can successfully acquire Bumble bee, it may have to sell Chicken of the Seas, so we believe that the acquisition of Bumble Bee may be delayed or cancelled, so we exclude Bumble Bee from our earnings forecast in 2015-2016. TUF would be focusing on marketing and M&A deals in the Middle East and Asia that show potential growth, aiming to boost its long-term sales to US$8bn within 2020. 

- Bumble Bee excluded from FY2015-2016 earnings forecast 

We revise up TUF's earnings forecast by 0.2% in 2015 but slash our projection by 37.3% in 2016, reflecting changes in assumptions: excluding Bumble Bee's earnings and lowering assumptions on THB/US$ exchange rate and tuna and shrimp price. Under the new forecast, TUF's net profit is projected at B6.0bn In 2015, growing 17.0%yoy, mainly from subsidiaries acquired in 2014 (King Oscar, MerAlliance, and Orion) and businesses restructuring. FY2016 net profit growth forecast is slashed from 65.8%yoy to 3.7%yoy. 

- New fair value is B20 

We recommend holding for average dividend yield of 3.4%p.a. Under the new forecast, FY2015 fair value is revised down from B25.56 (7.34% WACC) to B20 (DCF, 7.34% WACC). P/E ratio is 14.7x and PBV is 1.9x at present. FY2016 expected P/E ratio and PBV have barely changed from 2015 because of possibly limited profit growth.