China Fishery Group - Strong trawling offsets weak fishmeal

China Fishery Group CFG's 1Q09 net profit of US$43.7m (+8.2% yoy) was in line with expectations, forming 48% of our FY09 estimate and 39% of consensus. Trawling operations reported higher catch volumes and selling prices, with gross margins expanding to 42.3% from 38.3%. Fishmeal sales jumped 45% yoy on a 48% surge in sales volume. But low ASP and sparse anchovy catch volume resulted in a collapse in gross margins to 7% from 72.6%. Our core EPS estimates are intact. Our target price, however, rises to S$1.42, now based on 7.5x CY10 P/E, or a 20% discount to peers (from S$1.12, the peer average of 5.9x CY10 P/E). Ex-10% scrip dividend on 21 May, our target price will be adjusted to S$1.29. Maintain Outperform.

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