The  disappointment  for  FY12  was  due  to  poor  results  from  the  China  Fishery Fleet operations (previously termed South Pacific operations) which recorded net losses of US$27m for FY12 (versus net profit of US$9m in FY11). Going forward we  expect  muted  share  price  performance  stemming  from  (1)  poor  earnings visibility from China Fishery Fleet (CF Fleet) segment and Peru fishmeal (due to a 68% cut in Nov 12 ' Jan 13 TAC), and (2) cut in dividend payout. We lower our FY13  earnings  by  46%  and  downgrade  our  call  to  NEUTRAL  (from  BUY previously) with a revised TP  of S$0.65 (from S$1.00 previously) based on 7.3x FY13  P/E,  a  33%  discount  to  its  five  year  average  forward  P/E.  A  dividend  of 1.9S'' per share has been declared.  

Earnings  visibility  could  be  poor  going  forward.  CF  Fleet  segment's  FY12 results  were weak due  to  lower processing business in  North Atlantic Ocean as suppliers we unable to deliver significant volumes for processing. Catch volumes in  the  South  Pacific  Ocean  came  in  lower  than  expected  as  well.  We  expect continued  uncertainty  in  earnings  visibility  for  this  segment  going  forward.  Peru fishmeal segment's outlook appears dampened as well with a 68% cut in Nov 12 '  Jan  13  TAC  to  810k  tonnes,  though  this  will  be  partially  offset  by  favourable fishmeal prices that have climbed 50% YTD to US$1,780/tonne.    

Cut in dividend payout could be here to stay. CFG does not have a dividend policy  but  has  historically  been  paying  out  a  third  of  its  earnings  as  a  guide.  Its FY12 payout has however been lowered to a 20% payout (1.9S'' for FY12) in a bid  to  conserve  cash.  We  think  this  payout  ratio  could  be  here  to  stay.  Our revised  FY13  dividend  yield  appears  much  less  attractive  at  2.7%  versus previous forecast of 8%.

Source: OSK