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Thai Union Frozen Products

Analyst meeting

Thai Union Frozen Products Plc (TUF)

Investment thesis

TUF hosted an analyst meeting yesterday where it detailed offshore operations. We remain confident that COSI and MWB will deliver solid FY14 bottom-line growth and that USPN will turn around in 2H14. Our TRADING BUY rating stands.

New MENA markets—MWB's FY14 growth engine

MWB's net sales value (NSV) is projected to rise from €468m in FY08 to €633m in FY13, a 5% CAGR. France contributed the most to MWB's FY12 NSV (44%), followed by the UK (32%), Italy (8%), Ireland (3%) and the Netherlands (3%). We assume 5-7percent sales growth in FY14, led by new markets. MWB is launching four strategic initiatives: 1) expansion into the Middle East and North Africa (MENA), 2) product line expansions and further segmentation, 3) brand support and 4) stronger promotional execution in stores. It also plans to launch two new product lines in the UK and Italy.

We expect MWB's growth to be driven by sales in MENA markets, which we anticipate will rise in double digits on an annual basis. In contrast, we assume only single-digit sales expansion among developed markets.

New COSI product lines and marketing campaigns in FY14

COSI's has a three-pronged, three-year blueprint for growth: 1) product innovation with the launch of pink salmon and three new flavors of salmon pouches in FY14, 2) reduced spend on promotions and 3) branding support through the 100 Years of Good campaign. COSI has strong relationships with leading US retailers—Costco, Walmart, Trader Joe's, Delhaize, Publix—and will partner with Kraft to boost sales growth at Walmart in FY14. Management targets adding US$30m in net sales in FY13 and increasing its market share by another 4% this year.

We expect COSI's centennial marketing campaign, new product lines and new flavors to drive sales growth. Moreover, the easing of price competition will enable further margin improvement in FY14.

New management & product lines to turn around USPN in FY14

TUF's US Pet Food manufacturer, USPN, targets US$138m in sales in FY17, about three-fold its expected FY13 number, led by the launches of a new pet food product called Chubline, a sausage pet food, and a new line of wet pet food products in FY14. Chubline sales will comprise 50% of USPN's total FY17 sales, according to management. We expect the pet food maker to turn around in 2H14, supported by new products and a new management team.


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