Monday, April 23, 2012
China Fishery: DBSV UPGRADE to Buy from Hold and increase TP to $1.35 from $0.95. House now projecting a sustained earnings growth in FY12F, after a disappointing FY11, which saw results missing expectations. Believe market expectations are now at more realistic levels with downward earnings revision over, presenting outperformance opportunities. Expect earnings growth in 1Q12 to continue and project 2Q12 net profit to grow c.5-10% yoy to US$48-50m due to a stronger contribution from its fishmeal operations, as well as interest savings from an earlier refinancing of its senior notes. Add that counter is now trading at 6.5x/ 6.1x on FY12F/ 13F earnings, near -1 SD below its average of 9.8x. At current levels, this puts it at a hefty 44% discount to Carlyle Group’s entry price of $1.85 (in Jun 2010).