BUY S$1.78 Price Target : 12-Month S$ 2.72 (Prev S$ 2.89)
Netting higher profits
Story: CFG's 4Q/FY07 results came just a tad (4.3%) below our expectations
of US$92.4m. This was due to (i) some delays in shipment of fishmeal and
(ii) higher operating expenses than our forecast.
Point: Revenue surged 160% y-o-y to US$406m largely due to higher catch
volumes (from its 3rd and 4th Vessel Operating Agreements [VOAs]) and a
full year contribution from its fishmeal operations. Consequently, gross
profit was at US$141m, up 137% from FY06. However, operating expenses
increased by a much higher 228%, largely due to the addition of its
Peruvian fishmeal operations. As a result, net profit ended at US$88.5m, up
by almost 85% from US$48m last year.
Relevance: We have adjusted our forecasts in FY08F-09F down slightly by
about 6% to factor in higher operating expenses. Consequently, our TP is
revised down to S$2.72 (from S$2.89), still premised on 13x FY08F earnings.
Notwithstanding that, we still remain positive of the Group's prospects
over the longer term as we believe it is well poised to benefit from the
rising global demand for fish amid rising affluence and the growth of
aquaculture. On the fishmeal front, based on management's information and
industry reports, it seems that fishmeal prices have stabilised at around
US$900 – US$950/mt region. Catalysts for this counter would come if the
Group manages to re-negotiate its 4th VOA to a prepayment terms, higher
catch volumes and higher than expected fish and fishmeal prices. Maintain
BUY.
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