Food firms outperformed the Thai stock market in 2001 as their cheap, essential products rode out the global economic slowdown and analysts said good dividends and growth in key markets made them attractive again this year, according to a Reuters story this week.
Fears over mad cow disease in Japan and bird flu in key competitor China mean demand for Thai chicken has never been stronger, with exports increasing by 30 per cent this year.
"Despite an economic downturn, a food producer can withstand the jolts as people need to eat," said Boontiam Larppoonpholdee, marketing manager at Kim Eng Securities.
"Mad cow disease fears and bird flu in China helped heighten the competitive advantages for Thai chickens."
Thailand's largest agricultural conglomerate, Charoen Pokphand Foods (CPF), has benefited most. Analysts expect CPF's 2001 net profit to grow eight per cent year-on-year to 3.7 billion baht (€95.9m).
"CPF's 2001 net profit was mainly boosted by chicken exports to Japan and the US," said Chavallanut Laopoonpat, an analyst at KGI Securities. CPF posted a net profit of 3.4 billion baht for 2000.
Asia's largest canned tuna exporter, Thai Union Frozen Products (TUF), is also flying high, with strong 2001 earnings expected on strong demand in the United States. ABN AMRO expected TUF to post a 2001 net profit of 1.81 billion baht, up from 1.51 billion baht the previous year.
TUF's earnings are seen growing this year on the back of increasing tuna prices and higher productivity following restructuring in its US "Chicken of the Sea" tuna factory.
ABN AMRO expected TUF's net profit to grow nine per cent in 2002 to 1.99 billion baht. TUF shares were trading at 20.2 baht on Tuesday morning, slightly under the brokerage's target price of 21 baht.
Fund managers said CPF and TUF were worth holding as dividend plays at a time when bank deposit rates were low as two per cent.
"They are good for investors who are concerned about their returns, especially risk-adverse players," said one local fund manager. "These stocks are worth holding, compared to putting your money in the bank," he said.