Thai Equity - Bottom-up - Equities, Pi Securities PCL, Thailand

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Thai Equity - Bottom-up - Equities

Leading, full-service investment firm in Thailand

Pi Securities PCL, Thailand

Pi Securities is a well known securities company with 40 years experience in the industry, serving more than 60,000 clients. We offer one - stop service providing full range of financial products and services including extensive Brokerage, Proprietary Trading (Equities and Bonds), Advisory Services, Structured Products.

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Note: Effective on 1 March 2022, Country Group Securities PCL changed its name to Pi Securities

Equity Bottom-Up

Thai Foods Group Public Company Limited / Equity Bottom-Up

<ul>
<li>Maintain HOLD rating, with TP of Bt5.30 (up 15% from previous TP), based on 22.8PE’22E which is Asia ex-Japan consumer staple. Recent product prices leap in-line with feed cost hike</li>
<li>Expect 4Q21 earnings at B120m (-72%YoY, +126%QoQ), the QoQ surge is due to the absence of Covid-related expense, together with sales growth and margin expansion, backed by food prices rally </li>
<li>Solid 2022 outlook remains intact, since the product prices are expected to maintain at sky-high levels until 1H22, due to supply shortages caused by the widespread of Porcine Reproductive </li>
</ul>


Maintain HOLD rating, with TP of Bt5.30 (up 15% from previous TP), based on 22.8PE’22E which is Asia ex-Japan consumer staple. Recent product prices leap in-line with feed cost hike
Expect 4Q21 earnings at B120m (-72%YoY, +126%QoQ), the QoQ surge is due to the absence of Covid-related expense, together with sales growth and margin expansion, backed by food prices rally 
Solid 2022 outlook remains intact, since the product prices are expected to maintain at sky-high levels until 1H22, due to supply shortages caused by the widespread of Porcine Reproductive 


TFG: Expect Earnings Upturn from 4Q21 Onwards

<ul>
<li>We expect 4Q21 net profit to rebound QoQ, backed by improve demand volume, together with higher product prices, in line with rising feed cost and resuming economic activities.</li>
<li>Earnings should grow QoQ, upon better volume in all business units after lockdown easing, and absence of COVID-19 expenses.</li>
<li>Expect revenue to rise YoY and QoQ, supported by improve demand volume, allowing product prices to outpace feeds costs hike.</li>
</ul>


We expect 4Q21 net profit to rebound QoQ, backed by improve demand volume, together with higher product prices, in line with rising feed cost and resuming economic activities.
Earnings should grow QoQ, upon better volume in all business units after lockdown easing, and absence of COVID-19 expenses.
Expect revenue to rise YoY and QoQ, supported by improve demand volume, allowing product prices to outpace feeds costs hike.


IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<p><a href="https://www.smartkarma.com/entities/cp-pokphand-co-ltd" target="_blank" data-smartkarma-citation="entities:10135:1" rel="noopener">Cp Pokphand (43 HK)</a> (CPP) is a leading agri-food conglomerate in China and Vietnam. After market close on Thursday, it announced a privatisation offer by way of a scheme of arrangement from <a href="https://www.smartkarma.com/entities/charoen-pokphand-foods-public-company-limited" target="_blank" data-smartkarma-citation="entities:16131:1" rel="noopener">CP FOODS (CPF TB)</a>, the largest shareholder (49.74% of the outstanding shares). The offeror will offer HK$1.15 in cash for each scheme share. The bid represents a premium of 19.79% over the closing price of HK$0.96 per share on the last trading date (24 September prior to the trading halt). </p><p>For good measure, CPP also released a statement outlining a profit warning. CPP noted that the net profit would decline -75% YoY in 8M21, which marks a deterioration to the net profit decline of -50% YoY in 1H21. The profit warning was attributed mainly to a poor performance in China caused by lower poultry and swine prices. CPP notes that poultry and swine prices in China and swine prices in Vietnam will have fallen further in September. </p><div class="content-highlight"><p>The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. As disinterested scheme shareholders represent 5,958.8 million shares or 24.75% of shares outstanding, the 10% blocking stake is 595.9 million shares or 2.48% of shares outstanding. No shareholder holds a blocking stake. Overall, we think the offer price is attractive and that the privatisation bid will be successful. </p></div>

Cp Pokphand (43 HK) (CPP) is a leading agri-food conglomerate in China and Vietnam. After market close on Thursday, it announced a privatisation offer by way of a scheme of arrangement from CP FOODS (CPF TB), the largest shareholder (49.74% of the outstanding shares). The offeror will offer HK$1.15 in cash for each scheme share. The bid represents a premium of 19.79% over the closing price of HK$0.96 per share on the last trading date (24 September prior to the trading halt). For good measure, CPP also released a statement outlining a profit warning. CPP noted that the net profit would decline -75% YoY in 8M21, which marks a deterioration to the net profit decline of -50% YoY in 1H21. The profit warning was attributed mainly to a poor performance in China caused by lower poultry and swine prices. CPP notes that poultry and swine prices in China and swine prices in Vietnam will have fallen further in September. The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. As disinterested scheme shareholders represent 5,958.8 million shares or 24.75% of shares outstanding, the 10% blocking stake is 595.9 million shares or 2.48% of shares outstanding. No shareholder holds a blocking stake. Overall, we think the offer price is attractive and that the privatisation bid will be successful. 

C.P. Pokphand’s Privatisation Bid from CPF

Head of Research, Krungthai XSpring

Waraporn Wiboonkanarak

Head of Research

A full service Thai brokerage

Krungthai XSpring

Krungthai XSpring is a full service broker. The company provides a wide range of investment services such as Securities Brokerage, Derivative Agent Business, Securities Borrowing and Lending, Securities Trading, Underwriting, Financial Advisory, Wealth Advisory, Private Fund Management and International Markets Securities Trading. 

In terms of credibility, Fitch Ratings has assigned Krunghtai XSpring a long-term rating of AA- and a national short-term rating of F1+ with stable outlook.

<div><div><div><p><strong>2Q21 core profit down YoY, QoQ; 2021E earnings revised down</strong><br>TFG’s 2Q21 core profit fell YoY and QoQ due to a narrower margin and an increase in the effective tax rate, leading us to revise down our 2021E core profit projection by 21%. Following the revision, we have a new target price of Bt4.90/share (14x PER). The 3Q21E earnings are expected to recover QoQ (but drop YoY due to the high base). There may also be upside from the possible recovery in swine prices following the potential upswing in economic activities after the COVID-19 situation improves. As the current share price implies upside of 10%, we maintain our Buy call.</p></div></div><div><div><p></p></div></div><div></div></div>

2Q21 core profit down YoY, QoQ; 2021E earnings revised down TFG’s 2Q21 core profit fell YoY and QoQ due to a narrower margin and an increase in the effective tax rate, leading us to revise down our 2021E core profit projection by 21%. Following the revision, we have a new target price of Bt4.90/share (14x PER). The 3Q21E earnings are expected to recover QoQ (but drop YoY due to the high base). There may also be upside from the possible recovery in swine prices following the potential upswing in economic activities after the COVID-19 situation improves. As the current share price implies upside of 10%, we maintain our Buy call.

Company Update Thaifoods Group Plc. (TFG)

<p><strong>We maintain BUY rating on TFG with a new 2021E target price at Bt6.10, from Bt5.95, derived from 14.9xPE’21E, which is +1SD of its 3-years trading average of forward PE. We attended analyst meeting yesterday and came up with key information as followed;</strong></p><div>• While the quarterly earnings should retreat from the peak in 3Q20, the ongoing performance should remain robust, given the favorable swine spread and continuously expansion in swine and feed business.</div><div></div><div>• In 2021E, TFG planned to grow its selling volume in broiler, swine, and feed business by 5%, 20%, and 10-15%, respectively. Meanwhile, broiler and feed selling price should maintain YoY, and, swine price should retreat by 9%YoY to about Bt68/kg, given the more balancing supply.</div><div></div><div>• The company expected to breakeven its chicken further business in 2021E, from the losses in prior years.</div><div></div><div>• It initiated Fresh Market, farm and food products distributor, in 2020. This unit could contribute Bt1.0bn revenue in 2021E, with net profit margin of 8-10%.</div><p></p><p><strong>We think if the stock price retreat on the concern of QoQ slowdown, it should be an investment opportunity.</strong></p>

We maintain BUY rating on TFG with a new 2021E target price at Bt6.10, from Bt5.95, derived from 14.9xPE’21E, which is +1SD of its 3-years trading average of forward PE. We attended analyst meeting yesterday and came up with key information as followed;• While the quarterly earnings should retreat from the peak in 3Q20, the ongoing performance should remain robust, given the favorable swine spread and continuously expansion in swine and feed business.• In 2021E, TFG planned to grow its selling volume in broiler, swine, and feed business by 5%, 20%, and 10-15%, respectively. Meanwhile, broiler and feed selling price should maintain YoY, and, swine price should retreat by 9%YoY to about Bt68/kg, given the more balancing supply.• The company expected to breakeven its chicken further business in 2021E, from the losses in prior years.• It initiated Fresh Market, farm and food products distributor, in 2020. This unit could contribute Bt1.0bn revenue in 2021E, with net profit margin of 8-10%.We think if the stock price retreat on the concern of QoQ slowdown, it should be an investment opportunity.

TFG: Solid Outlook, Though It Should Retreat from 3Q20 Peak

Thailand

Thaifoods Group Public Company Limited is the manufacturer and processor of poultry and swine products. The Company's business involves hatcheries, contract farming, raw chicken meat processing for export, and domestic distribution. Thaifoods Group operates in Southeast Asia.

Thai Foods Group Public Company Limited (TFG TB)

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Thai Foods Group Public Company Limited (TFG TB)

TFG: Expect Earnings Upturn from 4Q21 Onwards

Maintain HOLD rating, with TP of Bt5.30 (up 15% from previous TP), based on 22.8PE’22E which is Asia ex-Japan consumer staple. Recent product...

Pi Securities PCL, Thailand

TFG: Expect 4Q21 Earnings to Bottom Out

We expect 4Q21 net profit to rebound QoQ, backed by improve demand volume, together with higher product prices, in line with rising feed cost and...

Pi Securities PCL, Thailand

C.P. Pokphand’s Privatisation Bid from CPF

CPP announced a privatisation offer from CPF at HK$1.15 cash for each scheme share. Overall, we think the offer price is attractive and that the...

Arun George

Company Update Thaifoods Group Plc. (TFG)

TFG’s 2Q21 core profit fell YoY and QoQ due to a narrower margin and an increase in the effective tax rate, leading us to revise down our 2021E...

Krungthai XSpring

TFG: Solid Outlook, Though It Should Retreat from 3Q20 Peak

We maintain BUY rating on TFG with a new 2021E target price at Bt6.10, from Bt5.95, derived from 14.9xPE’21E, which is +1SD of its 3-years trading...

Pi Securities PCL, Thailand

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