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Prosperity on the menu

Peace or war, boom or bust, people eat and drink, a fact reflected in the positive and quick returns for investors in 15 of the 22 companies in the Food and Beverage sector.

However, some stock analysts still prefer the performance of agribusiness companies to food and beverage firms.

The distinction between the two sectors is that food and beverages relate to production of ready-to-eat products and those sold directly to consumers, while agribusiness is bulk supplying of primary products such as frozen chicken and producing animal feed.

An analyst with SCB Securities said agribusiness generally received more attention from the market as demand for its products was more stable than for the food and beverage sector.

Earnings for the food and beverage sector were difficult to predict as they hinged on the economic outlook.

On the Shareholder Scorecard, Tropical Canning posted the highest one-year result at 133.9% against a 22-company sector average of 31.4%. On a three-year basis, S&P Syndicate led the field at 66.7% compared with a 13.4% sector return.

United Flour Mill and Malee Sampran, both at -32.9% over one year, trailed the field. On a three-year basis, Malee Sampran was last at -36.3%.

Businesses in the sector are still confident about their future as they sell necessities and the sector is of interest to both Thai and foreign investors.

Among the top performers is Thai Union Frozen Products, which registered a nine-month net profit of 978.9 million baht. The canned tuna exporter, the largest firm by far in the sector by market capitalisation, posted healthy one-year shareholder returns of 76.2%, and 11.5% over three years.

President Thiraphong Chansiri said TUF shares were in demand because of its good fundamentals, with annual revenue growth projected at 10%, reaching $1 billion by 2003.

He outlined three strategies in place to reach that goal: expanding product lines continuously and emphasising value-added products; expanding the market as much as possible; and developing new businesses continuously, especially in food-related activities.

Mr Thiraphong said TUF also was admired for paying good dividends and for its focus on good governance.

S&P Syndicate, a bakery and restaurant operator, reported a healthy nine-month net profit of 118.7 million baht. It has an A-grade for returns in the short, intermediate and long terms.

Vitoon Sila-on, the business development manager of S&P, said the bakery side in particular performed well, even in the recession. A 25% price reduction offered every Wednesday has widened the customer base to low-income consumers.

Among the lower-end performers is AgriPure Holding, formerly River Kwai International, which exports canned sweet corn and fresh vegetables. It posted one-year returns of -7.7% and three-year returns of 6.3%, both well below the sector average.

Managing director Roj Burusratanabhand said AgriPure had had debt restructuring problems as its former major shareholder, Nithi Venture Corp Plc, had made investments that created an unclear business policy. A new major shareholder, the Navis Group, has stabilised the company and renamed it AgriPure to reflect its business focus.

Mr Roj said the company had taken time to adjust and was now ready to grow as its products had won recognition among buyers, especially those of fresh organic vegetables in Europe.

Despite unfavourable returns in the past five years, venture capitalists were still interested in AgriPure and its market capitalisation had risen to 420 million baht as of mid-November, he said.

- Somporn Thapanachai