Thai Union Frozen Product
High season for food business BUY
Thai Union Frozen Product Plc (TUF)
- 3Q14 profit to make new high thanks to high season
We estimate 3Q14 net profit at B1.8bn, growing 20.6%qoq and 82.7%yoy.
Financial cost is projected to drop by 59.9%qoq thanks to reversal of
provision of advance interest payment of the convertible bonds. 3Q14
normalized profit is projected at B2.1bn, growing 6.1%qoq and 44.6%yoy
thanks to worldwide high season for food export. Tuna business is expected
to grow continuously. Shrimp business is projected to rebound after disease
problem subsided. Also, pet food business is likely to continue recovering;
U.S. Pet Nutrition has restructured its business, resulting in smaller loss.
Overall, 9M17 net profit is estimated at B4.3bn, growing 111.3%yoy and
making up 83% of FY2014 earnings forecast.
- Revise up FY2014-2015 earnings forecast after acquiring two companies
We revise up TUF's earnings forecast by 0.4% in 2014 and 7.5% in 2015 to
reflect the following contributions: 1) Conversion of the convertible bonds
would decrease TUF's interest expense by B120m/year. However, it would
be negated by dilution effect because TUF's shares have increased by 4%.
2) The acquisition of MerAlliance and King Oscar would increase TUF's net
profit by 6% from the previous FY2015 earnings forecast. Under the new
forecast, TUF's net profit is estimated at B5.2bn (rising 83.4%yoy) in 2014
and B6.6bn (growing 26.5%yoy) in 2015.
- BUY. Growth stock and global play in food sector
Under the new forecast, TUF's fair value (DCF, 7.34% WACC) is B80 in 2014
and B91 in 2015. The new FY2015 fair value implies 26% upside from the
current share price. Dividend yield can be expected at 4%p.a (paid
semi-annually).
