Core  Contract  Supply  division  remained  strong.  CFG's  Contact  Supply  division (formerly  termed  North  Pacific  division)  earnings  grew  7%  y-o-y  on  the  back  of  top  line growth stemming from higher sales volume. The ASP for Alaska Pollock had remained flat. Meanwhile  a  potential  MSC  certification  for  Russian  Pollock  Fishery  may  lead  to  higher Russian Pollock prices in the future.

Cut  in  Peru  TAC  offset  by  higher  fishmeal  prices.  A  22%  fall  in  CFG's  1QFY13 Peruvian Fishmeal sales volume was due to the Peruvian government's cutting of TAC by 68% for the Nov 12 to Jan 13 fishing season. This was offset by ASP of fishmeal and fish oil increasing by 25% and 61% y-o-y respectively. Going forward we believe that fishmeal prices will stay high (currently c.USD2,000/MT) should Peru TAC remain reduced.

CF Fleet visibility remains cloudy. CF Fleet's net losses widened more than threefold y-o-y in 1QFY13 to USD9.9m on the back of a 91% fall in revenue. This was due to limited catch  as  well  as  low  volumes  from  suppliers  to  support  the  division's  processing  activity. The  CF  Fleet  will  again  be  deployed  to  South  Pacific  Ocean  as  well  as  to  Namibia  to harvest  Horse  Mackerel.  We  remain  cautious  on  our  expectations  given  the  past challenges faced by this segment.

Valuations  fair  at  7.9x  FY13  P/E.  We  believe  valuations  appear  fair  with  CFG  currently trading at 7.9x FY13 P/E. Our TP is based on a FY13 P/E of 7.3x, which is a 33% discount to  its  five  year  average  forward  P/E.  We  think  positive  catalysts  could  come  from  better
than  expected  catch  from  CF  Fleet  division.  Resilient  earnings  from  its  core  Contract Supply division will support share price at current levels in our opinion.

Source: OSK