Pacific Andes Resources Development (PARD) delivered a disappointing set of 4Q results, dragged down by lower earnings from China Fishery Group (CFG). Net earnings plunged to HK$8.9m, down from HK$146.1m in 3Q12. As a result of this, dividend per share was slashed from 1.08 S cents (which traditionally accounted for about one-third of its earnings) to 0.3 S cent (14.5% of earnings). Outlook is muted, and management is exploring new growth areas. While the Supply Chain Management (SCM) operation is still relative stable, the fishing operation appears to be under pressure. Overall, in view of the weaker outlook, we have cut our estimates for FY13 from HK$839m to HK$638m. In addition, we have also dropped our DPS projection to be the same as this year’s payout at 0.3 S cent. Using the same valuation peg, but moving to blended FY13/14 earnings, we dropped our fair value estimate from 17.8 cents to 14.3 cents. Downgrade to HOLD.
Sharp drop in 4Q earnings
Pacific Andes Resources Development (PARD) delivered a sharply below expectations set of 4Q results. Net earnings plunged to HK$8.9m, down from HK$146.1m in 3Q12. This meant full year earnings of HK$627.7m, way below market expectations of HK$755.3m. Management explained the main reason for the sharp decline in earnings was largely due to lower-than-expected earnings from China Fishery Group (CFG), which was dragged down by several factors including lower activity in the North Atlantic as well as lower catch volume in the South Pacific Ocean. In addition, overall average selling price (ASP) also fell 3%. This led to a sharp decline in margins. For PARD, operating margin fell from 10.2% in 4Q11 and 12.5% in 3Q12 to 6.4% in 4Q12. Other margins fell in tandem.
CFG disappointed, massive cut in dividend payout
CFG disappointed and posted net earnings of US$78.1m for FY12 versus US$103.7m in the previous year. This also translated into lower dividend payout of 1.9 S cents for CFG shareholders versus 4.5 S cents previously. Similarly, PARD shareholders will also see a cut in dividend payout from 1.08 S cents (which traditionally accounted for about one-third of its earnings) to 0.3 S cent (14.5% of earnings).
Cut FV to 14.3 cents; downgrade to HOLD
The key challenge is the lower activity in the South Pacific, which is unlikely to pick up any time soon. In addition, there has also been a 70% cut in Total Allowable Catch (TAC) in Peru for the upcoming fishing season. While the Supply Chain Management (SCM) operation is still relative stable, the fishing operation appears to be under pressure to find new areas of growth. Overall, in view of the weaker outlook, we have cut our net earnings estimates for FY13 from HK$839m to HK$638m. In addition, we have also dropped our DPS projection to be the same as this year’s payout of 0.3 S cent. Using the same valuation peg, but moving to blended FY13/14 earnings, we dropped our fair value estimate from 17.8 cents to 14.3 cents. Downgrade to HOLD.
Pacific Andes Resources Development (PARD) delivered a sharply below expectations set of 4Q results. Net earnings plunged to HK$8.9m, down from HK$146.1m in 3Q12. This meant full year earnings of HK$627.7m, way below market expectations of HK$755.3m. Management explained the main reason for the sharp decline in earnings was largely due to lower-than-expected earnings from China Fishery Group (CFG), which was dragged down by several factors including lower activity in the North Atlantic as well as lower catch volume in the South Pacific Ocean. In addition, overall average selling price (ASP) also fell 3%. This led to a sharp decline in margins. For PARD, operating margin fell from 10.2% in 4Q11 and 12.5% in 3Q12 to 6.4% in 4Q12. Other margins fell in tandem.
CFG disappointed, massive cut in dividend payout
CFG disappointed and posted net earnings of US$78.1m for FY12 versus US$103.7m in the previous year. This also translated into lower dividend payout of 1.9 S cents for CFG shareholders versus 4.5 S cents previously. Similarly, PARD shareholders will also see a cut in dividend payout from 1.08 S cents (which traditionally accounted for about one-third of its earnings) to 0.3 S cent (14.5% of earnings).
Cut FV to 14.3 cents; downgrade to HOLD
The key challenge is the lower activity in the South Pacific, which is unlikely to pick up any time soon. In addition, there has also been a 70% cut in Total Allowable Catch (TAC) in Peru for the upcoming fishing season. While the Supply Chain Management (SCM) operation is still relative stable, the fishing operation appears to be under pressure to find new areas of growth. Overall, in view of the weaker outlook, we have cut our net earnings estimates for FY13 from HK$839m to HK$638m. In addition, we have also dropped our DPS projection to be the same as this year’s payout of 0.3 S cent. Using the same valuation peg, but moving to blended FY13/14 earnings, we dropped our fair value estimate from 17.8 cents to 14.3 cents. Downgrade to HOLD.
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