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PR Newswire
20-09-2012, 11:00 AM
From DBS Vickers:
China Fishery Group: HOLD (Downgrade from BUY) S$0.77; Bloomberg: CFG SP
Fishing in volatile waters;
Price Target : 12-Month S$ 0.72 (Prev S$ 1.15)
By: Andy SIM CFA +65 6398 7969
Heightened regulatory risks in Russia could undermine confidence of
Alaskan Pollock supply
North Pacific accounts for 54% of revenue
Counter is cheap and operations in North Pacific are not disrupted
but it could do without attention by Russian authorities
Regulatory risks concerns could cap share price; downgrade to HOLD,
TP: S$0.72
Heighten regulatory risks to create overhang. We see heighten regulatory
risks for CFG’s North Pacific operations. The Russian Federal Antimonopoly
Service (FAS) has highlighted concerns of foreign companies establishing
control over Russian fishery companies. The FAS has added that it intends
to implement measures to establish “law and order”. A Russian news website
(Food Monitor) recently reported that 10 Russian fishing companies have
been investigated and FAS plans to initiate proceedings on the companies
for violating the monopoly law.
Alaskan Pollock accounts for 54% of revenue. Alaskan Pollock specie sales
from its supply contracts, via third party suppliers, are a main revenue
and profit generator for CFG. It accounts for c.54% and c.64% of the
group’s revenue and EBIT, respectively, in FY11. We understand from CFG
that its operations under its current supply agreements do not infringe on
Russian laws and are undisrupted currently. However, in the event that the
Russian fishing companies are penalised, we believe this could have an
impact on supply of fishes to CFG. We estimate that a 10% drop in fish
volumes/ sales could have a c.9.5% impact on FY13F earnings, all things
being equal.
Upside could be capped on regulatory concerns. Downgrade to HOLD, TP
lowered to S$0.72. Whilst the counter is trading at a low valuation of
c.5.6x and there are no certainties on any changes in regulations at this
juncture, we believe regulatory concerns could cap share price performance,
at least in the near term. As such, we downgrade our recommendation to
HOLD, from BUY, and lowered our TP to S$0.72, pegged to 5x FY12F/13F
earnings, at -1.5x std deviation below average.
China Fishery Group: HOLD (Downgrade from BUY) S$0.77; Bloomberg: CFG SP
Fishing in volatile waters;
Price Target : 12-Month S$ 0.72 (Prev S$ 1.15)
By: Andy SIM CFA +65 6398 7969
Heightened regulatory risks in Russia could undermine confidence of
Alaskan Pollock supply
North Pacific accounts for 54% of revenue
Counter is cheap and operations in North Pacific are not disrupted
but it could do without attention by Russian authorities
Regulatory risks concerns could cap share price; downgrade to HOLD,
TP: S$0.72
Heighten regulatory risks to create overhang. We see heighten regulatory
risks for CFG’s North Pacific operations. The Russian Federal Antimonopoly
Service (FAS) has highlighted concerns of foreign companies establishing
control over Russian fishery companies. The FAS has added that it intends
to implement measures to establish “law and order”. A Russian news website
(Food Monitor) recently reported that 10 Russian fishing companies have
been investigated and FAS plans to initiate proceedings on the companies
for violating the monopoly law.
Alaskan Pollock accounts for 54% of revenue. Alaskan Pollock specie sales
from its supply contracts, via third party suppliers, are a main revenue
and profit generator for CFG. It accounts for c.54% and c.64% of the
group’s revenue and EBIT, respectively, in FY11. We understand from CFG
that its operations under its current supply agreements do not infringe on
Russian laws and are undisrupted currently. However, in the event that the
Russian fishing companies are penalised, we believe this could have an
impact on supply of fishes to CFG. We estimate that a 10% drop in fish
volumes/ sales could have a c.9.5% impact on FY13F earnings, all things
being equal.
Upside could be capped on regulatory concerns. Downgrade to HOLD, TP
lowered to S$0.72. Whilst the counter is trading at a low valuation of
c.5.6x and there are no certainties on any changes in regulations at this
juncture, we believe regulatory concerns could cap share price performance,
at least in the near term. As such, we downgrade our recommendation to
HOLD, from BUY, and lowered our TP to S$0.72, pegged to 5x FY12F/13F
earnings, at -1.5x std deviation below average.
