Towards Financial Freedom
CHINA FISHERY - Hit by delay in Peru fishing season
Below our expectations. China Fishery's (CFG) 3QFY12 PATMI was down 44% YoY to US$21m (-56% QoQ), below our expectations mainly due to a one month delay in the start of the Peru fishing season. 3QFY12 PATMI accounted for 17% of our full year forecast. We maintain our FY12 earnings forecast with expectation of stronger contribution from (1) Peru fishmeal operations, and (2) China Fishery Fleet operations (formerly termed South Pacific Fleet operations) in 4QFY12. Maintain BUY with TP of S$1.00 based on 6x FY13 P/E, a 40% discount to its five year average forward P/E.
Expect more contribution from Peru in the coming quarter. 3QFY12 earnings were hit mainly due to a one month delay in the start of the first 2012 fishing season to May (compared to Apr in 2011). It is comforting to note that as of 31 Jul 12, 100% of allocated Peru fishmeal quota has been utilised, with the bulk of inventory expected to be sold in the coming quarter. Fishmeal prices have risen 37% YTD and this should provide further support to earnings.
Fairo Island processing a positive to China Fishery Fleet operations. Though China Fishery Fleet's (formerly known as South Pacific Fleet operations) performance has been disappointing YTD (9MFY12 PAT losses of US$26m), CFG will head to Fairo Islands for fish processing in 4QFY12. This was profitable for the group when executed in 2011 and is expected to contribute positively in FY12 as well.
Valuations attractive at 4.7x FY13 P/E. We think valuations still appear attractive with CFG currently trading at 4.7x FY13 P/E. Our TP is based on a FY13 P/E of 6x, which is a 40% discount to its five year average forward P/E of 10.3x, and 30% lower than peer average of 8.5x. We expect catalysts to come from earnings growth and key risk continues to stem from execution of the China Fishery Fleet operations which has not been performing up to expectations.
Source: OSK
Expect more contribution from Peru in the coming quarter. 3QFY12 earnings were hit mainly due to a one month delay in the start of the first 2012 fishing season to May (compared to Apr in 2011). It is comforting to note that as of 31 Jul 12, 100% of allocated Peru fishmeal quota has been utilised, with the bulk of inventory expected to be sold in the coming quarter. Fishmeal prices have risen 37% YTD and this should provide further support to earnings.
Fairo Island processing a positive to China Fishery Fleet operations. Though China Fishery Fleet's (formerly known as South Pacific Fleet operations) performance has been disappointing YTD (9MFY12 PAT losses of US$26m), CFG will head to Fairo Islands for fish processing in 4QFY12. This was profitable for the group when executed in 2011 and is expected to contribute positively in FY12 as well.
Valuations attractive at 4.7x FY13 P/E. We think valuations still appear attractive with CFG currently trading at 4.7x FY13 P/E. Our TP is based on a FY13 P/E of 6x, which is a 40% discount to its five year average forward P/E of 10.3x, and 30% lower than peer average of 8.5x. We expect catalysts to come from earnings growth and key risk continues to stem from execution of the China Fishery Fleet operations which has not been performing up to expectations.
Source: OSK
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