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Analysts savour seafood shares

Update: February, 06/2012 - 09:59

Analysts' Picks

by Bich Ngoc

HA NOI — A lot of securities analysts have recently given a vote of confidence to shares of seafood processors, saying they were less affected during the global economic slowdown. Fisheries also enjoyed easier access to credit, and the weak domestic currency against the US dollar was a benefit to the export-focused industry.

Over the past month, seafood stocks have bucked prevailing market trends, posting sustainable gains. Most stocks rose sharply, ranging around VND20,000-30,000 (US$1-1.40) per share.

Twenty-six seafood firms are listed on the nation's two stock exchanges, and the Hai Viet Corp and Da Nang Sea Product Import-Export Co are traded on the unlisted public company market (UPCoM). Remarkably, 12 listed seafood companies were rated among the 500 largest private enterprises in a November report, with Minh Phu (MPC) and Hung Vuong (HVG) in the top 50.

Recent earnings reports from many of these companies have marked highlights in revenue and profit growth over the past year. Cuu Long Fish (ACL), Anvifish (AVF), Ngo Quyen Processing Export (NGC) and Hung Vuong posted growth between 90-227 per cent. Notably, Nam Viet (ANV) enjoyed an astounding 1,228-per-cent increase in net profit.

Overall prospects for the sector this year are positive thanks to reviving demand in export markets like the US and Japan, An Binh Securities Co analysts said. Nevertheless, they warned that input costs and borrowing cost have continued to affect the sector, taking a bite out of the profits of half of the listed companies. Profits of Ca Mau Frozen Seafood (CMX) and Gentraco Feed (GFC) dropped 481 and 513 per cent, respectively, while Basaco (BAS) and Cadovimex (CAD), after two consecutive years of losses, were highly likely to delist this year.

Among the 12 leading seafood firms, Vinh Hoan continued to lead in tra exports, with aUS$135 million turnover in the first 11 months of last year. The company currently feeds fish on 200ha, meeting about 50 per cent of its demand. Ninety hectares meet Global Good Agricultural Practices standards. The company's net profit last year topped VND337 billion, up over 80 per cent over 2010.

The US is the target market for Vinh Hoan, and the company became the second one in the world in October to receive the Best Aquaculture Practice certificate from the US' Global Aquaculture Alliance. Vinh Hoan also has an opportunity to become the first Vietnamese seafood processor to be withdrawn from the ongoing US anti-dumping case, expected to finalise after the seventh period of review next month.

Vinh Hoan has also invested VND121 billion (around $6 million) into two subsidiaries operating in rice processing and trading.

A number of enterprises in the sector have also tempted investors with high dividends. After paying a 25-per-cent cash dividends last year, Cuu Long Fish recently announced it would pay an additional 20 per cent more – placing it alongside Ben Tre Aquaproduct Import and Export Co as the company with the highest dividend rate among seafood companies.

On the other hand, investors are concerned about Hung Vuong. Although sales have increased in recent years, the company's profits have been unstable. Overhead has increased four-fold to VND132 billion, mainly due to the company's provision for bad debts owed by foreign clients, and the debts have continued to increase. This has adverse impacts not only on profits but also on cash flow.

Late last year, the seafood processor was also the subject a rumour that Saigon Securities Inc (SSI) was planning a takeover. However, Hung Vuong chairman Duong Ngoc Minh increased his stake to 34.78 per cent – saying that he did so not for fear that SSI would acquire the company but because "it was part of the plan" he had every year.

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