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Agribusiness Sector AGRI-FOOD

US blacklists Thailand over human trafficking, pressing TUF, CPF Rec : NEUTRAL

Agri-business Sector (AGRI-FOOD)

US downgraded Thailand to Tier 3 (lowest ranking) on the

Trafficking in Persons (TIP) report. This would affect the sector’s

labor cost in the future. TUF and CPF might be pressed for a short

term.


- US downgrades Thailand to Tier 3 on human trafficking report

The Department of State has blacklisted Thailand in the 2014 US State

Department report on trafficking. Thailand was downgraded to Tier 3

(lowest ranking), same as Syria, North Korea, Zimbabwe and the Central

African Republic.

- Negative factor to raise labor cost

Thailand had previously stayed on the Tier 2 (Watch List) for two

consecutive years on the Trafficking in Persons (TIP) report. No significant

progress had been made on anti-trafficking in Thailand in the recent year;

there was a political turmoil, and a new rightful government was not

obtained. We have been monitoring U.S. movement after the downgrade.

Initially, we anticipate that the downgrade would have a limited effect on

TUF and CPF. They have overseas production base, and their seafood

exports to US make up only 13.4% and 1% of their total sales volume,

respectively. Also, thanks to their world-standard products and good

relationship with customers, TUF and CPF’s orders from existing customer

base are not likely to decline. However, it would be harder for them to

expand their new customer base and promote their business growth. We

expect TUF and CPF’s labor cost to increase; labor cost currently makes up

8% and 12% of TUF and CPF’s total cost of selling, respectively.

- TUF, CPF share prices to drop for short term

We maintain agribusiness-food sector’s net profit forecast. The blacklist

would have a short-term psychological effect on CPF and TUF. For

TUF(FV@B76), we recommend buying when price weakens. For

CPF(FV@B28), we reiterate HOLD


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