January 27, 2004

 

 

Thailand Poultry Stocks Shares Tumble On Bird Flu

 

Poultry and food stocks in Thailand tumbled following the announcement of the first human bird flu casualty.

 

Charoen Pokphand Foods PCL dropped 5.38 percent after the poultry giant said its revenues would be hurt by the bans on Thai chicken.

 

CPF, a major operator in Southeast Asia, tried to soothe public fears on Monday with full-page newspaper advertisements insisting its products were safe.

 

Shares in another big Thai chicken exporter, GFPT (GFPT), were down 4.6% Monday at THB18.50, near a 27-month low.

 

Late last week, two of the country's biggest poultry markets, Japan and the European Union, imposed bans on Thai chicken products. Many other countries have taken similar action.

 

"Bans on Thai chicken products by our export markets will greatly affect GFPT...For Charoen Pokphand, it may lose about 50% in revenue," said Suttatip Peerasub, an analyst at Kim Eng Securities.

 

Many analysts said the two stocks had fallen well below fair value, assuming that the flu outbreak fades in coming weeks and that exports resume flowing. Before the outbreak, TISCO Securities had set a 12-month target price for Charoen Pokphand of THB4.34 and a target for GFPT of THB23.10.

 

"However, it isn't clear what the full ramifications of the bird flu outbreak will be. I would say investors should steer clear of the stocks for now," Suttatip said.

 

In a statement, GFPT said it expected the flu outbreak to hurt its earnings for around one to three months, depending "on the negotiations between the Thai government and importers". It said its income from direct and indirect exports accounted for only around 35% of total revenue; however, analysts said the bird flu would also dent domestic demand and depress prices for chicken.

 

In 2002, GFPT posted revenue of THB6.91 billion and a net profit of THB571 million.

 

Investor jitters over poultry- and feedstock-related stocks were evident elsewhere in the region. In Indonesia, where officials on Sunday confirmed an outbreak of bird flu among millions of chickens, shares in Charoen Pokphand Indonesia (CPIN.JK) had dropped 4.6% to IDR310 by midday Monday. Japan has also suspended imports of chicken meat from Indonesia.