Local consumers power some firms

Restaurant chains do well while export-dependent firms such as tuna giant TUF navigate tricky world markets

Brisk local consumption was a key factor driving the share prices of most listed companies in the food and beverages sector last year, in particular those of S&P Syndicate Plc and The Minor Food Group Plc (MFG).

But for sector giant Thai Union Frozen Products Plc (TUF), sales of its canned tuna continued to be driven by exports.

Among the 21 listed firms in the sector, The Thai Pineapple Plc, with market capitalisation of only 2% of the sector's total, or 883 million baht, produced the highest total shareholder return (TSR) of 150% last year.

Combined market capitalisation of all companies in the sector at the end of last year was 41.79 billion baht and the average TSR was 24.96% for investments of one year, 17.18% for three years, 16.93% for five years and -0.08% for 10-years.

Other front-runners were: Thai Wah Food Product Plc, which generated a one-year TSR of 129.79%, United Flour Mill Plc, at 84%, and The Minor Food Group Plc, at 80%.

TUF, the largest company in the sector in terms of market capitalisation, produced a one-year TSR of 9.83%, compared with 18.97% for three years and 27.33% over 10 years. Although its return slowed down last year, analysts still recommended the stock due to its outstanding performance.

At the other end of the scale, only three companies produced negative returns last year.

Kuang Pei San Food Products Plc, producer of Pompui, Pla Yim and Lap chopped canned sardines, provided a negative TSR of -18.12% last year, a marked improvement from -32.04% for investments of three years and -35.34% over five years.

Malee Sampran Plc, a manufacturer of canned pineapples and other tropical fruits and fruit juices, delivered a TSR of -7.22% for one year, -32.79% for three years, -27.78% for five years and -29.32% in 10 years.

As well, Tropical Canning (Thailand) Plc, an exporter of canned tuna, baby clams, shrimps, crabmeat, salmon and anchovies, delivered a one-year TSR of -2.7% and -8.26% for an investment of three years. Notably, its return was positive for investments of five years, at 2.58% but fell back into negative territory again for holdings of 10 years, at -11.18%

Generally, the food and beverage sector draws relatively less attention from investors due to its small market capitalisation, accounting for only 2.3% of total stock market capitalisation of 1.7 trillion baht at the end of last year.

Although the sector's one-year shareholder return averaged 24.96%, it lagged behind the SET's average of 40.50%. But its three-year TSR of 17.18% was well above the broad index's average of 3.1%.

An analyst at Kim Eng (Thailand) Securities said shares of two companies _ S&P and MFG _ were particularly attractive last year thanks largely to their aggressive expansion. S&P opened 30 more outlets of its flagship restaurant and a new cookie factory to serve more medium- and low-income consumers last year. As a result, its shares should perform well in the future in line with the economic recovery. As well, the company does not have long-term debts.

MFG, operator of fast-food chains The Pizza Company, Swensen's, Sizzler and Dairy Queen, was expected to raise its profit by 80% this year to nearly 200 million baht, the analyst said.

Both stocks were quite attractive for investors due to their high dividend potential.

As for TUF, an analyst at KGI Securities said that although investors had been advised by their brokers to avoid the stock last year, she still recommended her clients buy the shares, with a target price at 23 baht. TUF is currently trading around 18 baht.

KGI said TUF's well-regarded management should continue to operate the company effectively this year. Its net profit last year was 1.5 billion baht, up by 4.5% from the previous year. In fact, the growth could have reached nearly 35% last year, but foreign-exchange losses eroded the gains by about 300 million baht.

The analyst said the bulk of TUF's profit last year came from the sales of one of its US-based plants, Chicken of the Sea. At the same time, world prices of canned tuna made a modest recovery last year, averaging US$747 a tonne, compared with $731 in the previous year.

KGI forecast that TUF's net profit this year would be about 1.7 billion baht, up from 1.5 billion last year.

``TUF was dealt a big blow in late February, when the US detected chloramphenicol in its canned crabmeat. Although canned crabmeat accounted for only 2% of its exports, investors were worried that chemicals might also affect tuna, its core product, as it is from the same source, the sea,'' the KGI analyst said.

For a long-term investment, the analysts agreed that shares of the 2.55-billion-baht Thai Vegetable Oil Plc (TVO) were among the most attractive. Health concerns and a change in consumers' behaviour have helped push up the performances of vegetable oil producers. Previously, most Thais used fat-based oils for cooking, but today they have gradually switched to vegetable oil.

TVO also had a price advantage last year when the price of palm oil, its rival product, increased. Its 1.5-billion-baht plant in Nakhon Pathom will also be opened in the middle of this year, helping push its sales revenue up even further.

TVO delivered a one-year return of 7.33%, compared with 34.88% for investments of three years and 64.79% over five years.

_Woranuj Maneerungsee

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