Agri-food

Agri-food

- Continuous fund outflow makes THB 3-year weakest
THB has made the 3-years weakest, as a result of economic recovery of
developing countries, contrasting decelerating economy in Asia or
developing countries, causing foreign capital outflow in Thailand. THB is
currently B32/US$, weakened by 3.4% from end-2Q13, at the YTD
average of B30.16/US$, slightly higher than our projection at B30/US$.
This weakening is beneficial for agriculture-food sector. According to our
study, every B1 weakened rises FY2013 total net profit of this sector by
4.9%.
- 2H13 profit to recover, thanking to weakened baht and lower shrimp disease
Agriculture-food's 2H13 net profit is likely to rebound, as this is high
season for food export. Livestock (poultry, pork) and seafood (shrimp)
businesses shows blissful signal. Moreover, THB has been weakened
continuously, boosting profit in this sector. Effects on companies under
our coverage for every B1 weakened are as follow: 1) STA is the most
advantageous - 85% of income is in USD, 20% of cost is in foreign
currencies, and only 15% of debt is in USD. Thus, STA would gain 7.2%
additional net profit. 2) KSL is the second most advantageous - Though
68% income is in foreign currencies (mainly USD), only 5% of cost is in
foreign currencies, with little foreign debt. Because of futures contract
strategy in sugar deal, as well as fixed exchange rate in the contract, it
is not likely to gain much additional profit in FY2013. 3) CPF and TUF are
the third and the forth most advantageous - 65% and 90% of incomes
are in foreign currencies (mostly USD) , with 50% and 80% in foreign
currencies, as well as some foreign debt. Thus, benefits from weakened
baht are negated. They would earn 4.9% and 3.3% additional profit,
respectively. 4) GFPT is the least advantageous - 30% of income is in
foreign currencies (mainly USD), 20% of cost is in foreign currencies.
Thus, GFPT would gain 2.9% additional net profit, the lowest in this
sector.
- "NEUTRAL". "BUY" STA, CPF for best fx benefit
We reiterate "NEUTRAL" for agriculture-food sector. Top picks
are STA(FV@B20) and CPF([email protected]), as they gain most
advantage from weakened baht. Moreover, their 2H13 earnings
results are likely to be blissful. Though KSL([email protected]) is not
projected to gain much advantage due to the difference between
income and cost in foreign currency, KSL has hedged from
fx loss, so KSL is projected not to be benefited in FY2013.