A sold off big cap at a good valuation.
Thailand's largest chicken exporter, Charoen Pokphand (CPF) predicted last week a better second half thanks to a recovery in chicken prices and consumer demand after the bird flu outbreak.
The CPF stock price is probably now over-sold (along with many SET stocks) and after avoiding CPF for many months here, in my view, it now deserves accumulation again -at a current low stock price of 3.68 (Closing price at the end of April). Here is just a short update on why I am warming back-up to CPF.
"Our outlook in the second quarter and the second half will be quite good," Chief Executive Adirek Sripratak told reporters after a shareholders meeting. I think the worst is past and earnings momentum going forward is promising again.
CPF is due to report first-quarter earnings next month, before May 15.
Khun Adirek said supply shortages as a result of the outbreak and higher feed prices have pushed-up the selling price of chicken. CPF, which last month cut its 2004 sales growth forecast to five percent from 20 percent due to the impact of bird flu, stated it would post weak earnings for the first quarter. I think it will be the bottom quarter with improvement on the way moving forward. If China re-values it currency upwards as I expect in time not too distant, CPF should be a good beneficary of this.
Khun Adirek expects CPF to resume export of fresh frozen chickens to the European Union, the second-biggest buyer of Thai poultry, in the fourth quarter. "The confidence in domestic chicken consumption has improved to about 60-70 percent of normal level," he claimed. This makes sense to us as most all places/restaurants in Thailand sell chicken again.
Japan, the largest market for Thai chicken, started to accept some cooked products in March -from plants like CPF which met domestic quality standards.
Earlier this year, the Thai poultry industry had been hit by ban on imports of its chickens following the bird flu outbreak. EU has banned only the import of fresh frozen chicken and I have no information when this ban will be lifted.
Thailand, is the world's fourth-largest chicken exporter and has slaughtered 30 million birds in a bid to eradicate the highly contagious virus, which spread across the region earlier this year.
Khun Adirek said CPF was looking into overseas investments, including a shrimp farm in Madagascar and chicken farms in Russia, Ukraine and Romania. CPF planed to invest 5.4 billion baht ($137 million) this year, mostly for shrimp farms and its new plant at Nakorn Ratchasima, northeast of Bangkok, where it plans to start production in June.
I think the worst is over for CPF and now am warming up to this selection. I remain long term positive on TUF and TIPCO which are my two other choices in this sector. CPF pays a quarterly dividend and trades actively on the SET bourse. On Friday April 30 it traded 4.5 million shares.
CPF also has ADS listed on the New York Stock exchange in the US.
Always Diversify Your Stock Portfolio.
Paul A. Renaud.
