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Agriculture - Food

Greater impact on image than profit Neutral

Agriculture - Food

Foreign media accused the Thai fishery business of involving human

trafficking trade, which would affect the image of Thailand but only

slightly impact profit of the agri-food business. We recommend

gradually buying TUF when the price weakens.


- Foreign media attack Thai fishery business

A British media, The Guardian, reported that there was a human trafficking

in the Thai fishery industry and accused CPF of buying fishmeal from the

boats with a problem of labor abuse. As a result, Carrefour temporarily

stopped its order to CPF. However, CPF's shrimp export to Carrefour makes

up only 0.03% of its total sales or only B130m, so the effect is insignificant.

Moreover, the media stated that the US was considering downgrading

Thailand on a human trafficking blacklist from tier two to tier three within

June 2014.

- Greater impact on image than profit

The aforementioned issue would have a negative impact on the image of

Thailand's fishery industry as well as of big players like TUF and CPF, of

which the shrimp export comprises 7.1% and 1.5% of its total sales,

respectively. However, the effect would be limited for CPF and TUF because

no other customers have cancelled their orders so far (except Carrefour)

due to the companies' good relationship with foreign customers and globally

accepted products.

- Prefer TUF to CPF

We maintain a net profit forecast for the sector, believing the news would

have a psychological impact on CPF and TUF's share prices only in the short

term. We select TUF as a top pick because its overseas business has grown

remarkably and the company will not be impacted from a possible increase

in feed mill raw material price because its major raw material is tuna,

different from corn and soybean mill for a livestock business


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