TU starts to see active trade as investors punt on revenue growth and possible lower cost of tuna

TU starts to see active trade as investors punt on revenue growth and possible lower cost of tuna

Shares of Thai Union Group Plc (TU), the world’s leading maker of tuna, saw a surge in trade yesterday as investors bought the shares in hopes of the company’s quarterly earnings and expectations that weaker Thai Baht and rise in pet food would spur growth in its revenues.

Shares of TU yesterday hit a high of 17.70 Baht a share although it closed at 17.50 Baht/share or a rise of 0.30 Baht or 1.74% rise on active trade of 35.32 million shares, one of the highest volumes in a week.

Brokers have been recommending a ‘buy’ rating on the shares of TU with Kingsford Securities recommending ‘buy’ with a target price of 20.20 baht.

The brokers said that it expects Q3 2022 operations, the main support will come from the strong growth of the pet food business. While cost pressures from tuna prices are expected to ease from June 2022 onwards as tuna prices stood at US$ 1,425/ton in June, then in July it stood at US$ 1,600/ton compared to March when the tuna prices were at US$ 1,900/ton and in April it was at US$ 1,800/ton.

The lower tuna prices would boost gross profit margins from the previous quarter.

In terms of selling and general administrative expenses to revenue, it is expected to decrease as transportation expenses may become more stable.

The positive factor for overall net profit margin and normal operations would also see improvements. Although the overall profits are expected to be good there are some extraordinary items that may be seen during Q3 2022 that will still create some impact due to the adjustment of the fair value of preferred shares in Red Lobster, around 300 million Bath, to put pressure on it. But will be less impact than those seen during Q2 2022.

Another broker – Maybank Securities (Thailand), stated in the analysis that The Baht tends to depreciate continually against the dollar index that recently approaching 38 Baht/Dollar, a positive boost for exports.

Maybank says that this would have positive impact on TU’s profit outlook in second half of 2022 has improved.

They also see that the share price is stronger than the market driven by a promising profit in Q3 of 2022 and a weak Baht.