What’s new? We called TUF with regard to the outlook for 2Q12 net and core earnings. 2Q12 core profit will post healthy YoY growth with a solid GM. But the 2Q12 net profit will report a YoY dive, due to one-time financing charges.
2Q12 net profit tumble—one-off expenses ... We estimate an Bt850-900m net profit for 2Q12, down by 27-30% YoY and 40-42% QoQ, due to the recognition of Bt600-650m in one-time penalty expenses and other financing charges related to a debt prepayment from the proceeds of the rights offering (RO) in May 2012. However, the firm said that the negative impact on the 2Q12 income statement would be in the Bt450-500m range, due to the use of tax credits to mitigate the effect of the charges. The firm used Bt9.56bn from the RO proceeds to partially repay euro-denominated loans used to buy MWB.
We regard it as a non-cash accounting item. But solid 2Q12 core profit: Stripping out the one-off financing charges and FX gain, we estimate 2Q12 core earnings of Bt1.35bn, up by 15% YoY and 9% QoQ, and solid GM of 17-17.5%, due to TUF’s ability to pass through higher raw tuna costs to clients. We assume 8-10% YoY sales growth for the quarter, led by a weaker baht, greater tuna and shrimp sales volumes and solid MWB sales expansion.
Stable tuna price in June: The average price of West Pacific Ocean (WPO) skipjack tuna stood at USD 2,200/ton in June, a new record, up 0.1% MoM, 15% YoY, and 8% since Jan. The 1H12 mean price was USD 2,107/ton, up 26% YoY. The sustained high tuna price in June was expected. The more stable pricing environment will be positive for TUF’s 2Q12 GM and core earnings, given its ability to pass through higher raw tuna costs to clients. We estimate a mean tuna price of USD 2,200/ton for FY12, up 25% YoY.
Action: Our BUY rating stands, premised on solid FY12 core earnings growth, GM sustainability, scope for synergy-building with MWB and the possibility of new acquisitions in 2H12.
