• 4Q08 results preview. 4Q08 results are likely to come in slightly below our estimate of US$19m, which is already 25% below consensus estimate of US$25.3m, given a sharp drop in fishmeal prices to close to US$800/tonne in 4Q08 and the company’s
advance purchase of bunker fuel at higher prices.
• Strong fish prices, stabilised fishmeal prices. Alaskan Pollock prices have firmed
by 19% yoy to US$1,600/tonne on substitution demand from more expensive fishes.
Meanwhile, fishmeal prices have recovered to the US$850/tonne level after dipping
close to US$800/tonne in 4Q08, with management guiding for prices of US$800-
850/tonne for FY09.
• Potential catalysts in 2H09. We believe soymeal prices should strengthen in 2H09
as the impact of lower supply from reduced plantings and lower fertiliser usage bites.
Firmer soymeal prices will likely lead to firmer fishmeal prices due to the substitution effect. Meanwhile, better-than-expected progress in the South Pacific operation offers upside to our forecasts.
• Maintain Outperform, target price of S$1.34 (5.9x CY10 P/E) and EPS estimates.
We are keeping our EPS estimates unchanged, although we note risks of weaker
pollock selling prices going forward. Current valuation of 2.6x CY10 P/E appears
attractive vs. the peer average of 7.8x.
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