CHINA FISHERY, cimb maintain OUTPERFORM with target price $2.90
- Strong fundamentals. We believe that CFG¡¯s fundamentals remain
strong as
rising demand for fishery products coupled with limited supply of
CFG¡¯s key
catch species due to fishing quota systems should help to support fish
prices and ensure profitability. We do not expect fishmeal prices to
hit
previous lows of US$800/tonne despite softer soymeal prices as fishmeal
is
preferred to substitutes due to its higher protein content.
- Debt level remains manageable. Concerns regarding the company¡¯s debt
levels are overplayed as a chunk of the US$218m debt is in the form of
a
long-term bond, not due till 2013. We forecast a gearing of 0.8x with
comfortable interest coverage of 5.5x for FY08.
- Maintain FY08-10 EPS estimates. Our higher trawling ASP assumptions
are
offset by lower Chilean Jack Mackerel contribution forecasts,
conservative
fishmeal ASP assumptions from FY09 due to softer commodity prices, and
higher vessel operating cost expectations.
- Maintain Outperform and target price of S$2.90. Despite its strong
fundamentals, China Fishery trades at a historically low forward
valuation
of 4.3x, a steep discount to its peers, while prospective dividend
yield is
6.8%. Our target price remains S$2.90, still based on 14x CY09 P/E.
Maintain Outperform.