Food & Beverage Sector

[winston]

DJ MARKET TALK:SGX China Food Plays Prone To Disease Fallout -DBS

0619 GMT [Dow Jones] Recent outbreak of blue-ear disease in China, which has killed more than 1,000 pigs since January, may lead to higher pork prices and impact several SGX-listed China companies if situation worsens, says DBS Vickers. According to China's Ministry of Agriculture, 1,056 out of 14,122 pigs raised in Shanxi Province have succumbed to disease.

Broker cites potential implications for Synear Food (Z75.SG), People's Food (P05.SG), China Fishery (B0Z.SG); "if the situation worsens and continues in China, we may see a rise in pork prices like during 2007." Notes pork prices account for about 15% of Synear's cost of sales. Says fallout may also hurt demand for fishmeal in China as about one-third of country's fishmeal take-up used as animal feed.

Adds, agriculture group Wilmar (F34.SG) may also be affected as past outbreak in 2007 reduced demand for soybean meal, which in turn hurt margins from crushing soybeans; "Wilmar is the only company potentially affected in the plantation sector."

Source: Dow Jones Newswire

[winston]

DJ MARKET TALK: RBS Advises Overweight China Consumer Staples

1229 [Dow Jones] RBS continues to Overweight China consumer staples, as valuations of Chinese food & beverage stocks "seem attractive," averaging 11.6X FY09, 9.5X FY10 P/E; possible announcement of stimulus measures for sector at March National People's Congress meeting could be short-term catalyst.

Top sector picks Yurun Food (1068.HK), China Agri (0606.HK), on "better earnings visibility and inexpensive valuations;" both rated Buy, target prices HK$13.97, HK$7.36 respectively.

Tips Mengniu Dairy (2319.HK), Tsingtao Brewery (0168.HK) to be relative underperformers. Yurun down 1.9% at HK$9.6, China Agri down 1.1% at HK$3.63; HSI off 2.9%

Source: Dow Jones Newswire

[winston]

DJ MARKET TALK: BNP Likes China Staples, Tingyi Top Pick

1052 [Dow Jones] STOCK CALL: BNP prefers China staples over discretionary stocks, citing resilient sales volume growth, possible margin expansion as weakening prices of soft commodities like pork, palm oil, sugar create margin buffers to absorb additional promotional expenses. Notes in economic crisis, both fundamentals, share prices of staples outperform discretionary.

Tingyi (0322.HK) remains top pick, also likes Hengan (1044.HK), Want Want (0151.HK), Mengniu (2319.HK); all rated Buys.

Stays cautious on China department store such as Parkson (3368.HK), New World Department (0825.HK), citing slowing same store sales growth, further operating margin erosion as aggressive promotion discounts hurt profitability

Source: Dow Jones Newswire

[winston]

China F&B

Not vested

DJ MARKET TALK: Buy Yurun,Shenguan Among China F&B Stocks-UOB

0926 [Dow Jones] China's F&B sector has underperformed the market since 4Q10 due to rising soft commodity prices, notes UOB KayHian.

It says the average share price has shed 10% while the H-share index has been +4.8% since 4Q10; "some F&B stocks have been oversold and it is time to selectively accumulate some," such as China Yurun (1068.HK) and Shenguan (0829.HK).

The house says margin squeeze from food inflation has been factored into weak share prices, while top-line growth remains strong and rising ASP is evident to partially offset margin pressure.

Yurun and Shenguan are both rated Buy by UOB; their target prices are HK$33.00 and HK$11.20, respectively. Yurun fell 0.4% to HK$27.20 Thursday, Shenguan was +2.4% at HK$10.96.


Source: Dow Jones Newswire

[winston]

So housebrands would probably be taking up more market share ...

Food Inflation Comes To America: General Mills, Kraft And Kellogg Hike Prices On Selected Food Products by Tyler Durden

After denying for months that surging food prices will eventually come to the consumer, hoping that instead food companies could absorb the margin drop, sellside research is finally capitulating to the reality of what is really happening in the retail store.

In a note discussing General Mills, Goldman Sachs says the company raised prices on snack bars some 7% last week. Goldman further clarifies that "this reportedly followed a comparable increase taken by K on its snack bars in mid-December.

In addition, KFT has reportedly announced a 6% increase on select Planters branded nut products. We expect more price increases to be announced by the food companies in the coming weeks." Maybe, but the Chairman sure doesn't. And the Chairman is always 100% correct.

http://www.zerohedge.com/article/food-i ... food-produ?

[winston]

Not vested

Food & Beverage: Focus on Scale Advantage and Brand Value.

For upstream enterprises, scale advantage enhances anti-risk abilities and we recommend China Yurun Food Group and Asian Citrus Holdings.

For downstream enterprises, consumption upgrade highlights brand's importance and we recommend China Mengniu Dairy Company and Want Want China Holding.


Source: Phillips

[winston]

China F&B

Soft commodities prices have dropped since Sep 11.

According to our channel check and industry data, soft commodities prices in Sep 11 dropped slightly mom.

Wheat and sugar prices dropped 1.5% and 2.6% mom while soybean and rice prices remained steady mom.

Raw milk prices increased only 0.7% mom to Rmb3.2/kg.

These may signal the CPI peaking in Sep 11.

Source: UOBKH

[winston]

Not vested

China Food & Beverage - On the ground: Supermarket channel checks on F&B by Emma Liu

Based on our supermarket channel checks in Beijing & Shanghai, a few key takeaways:

1) sales growth for the general food sector remains strong, driven by both volume and price increase;

2) the impact from the negative media news on Yurun’s (1068 HK, BUY) brand reputation is milder than what we expected;

3) the dairy sector is doing well and Mengniu (2319 HK, BUY) remains the top brand; and

4) Mengniu and Yili (600887 CH, NR) have been gaining market share from Want Want (151 HK, NEUTRAL) in the children’s milk segment.

We reiterate our BUY on Yurun and Mengniu, and remain NEUTRAL on Want Want.

Source: Nomura

[winston]

China F&B

not vested

DJ MARKET TALK: China F&B Names Should Outperform In 2012 - BOCI

1429 [Dow Jones] BOCI ups China F&B sector to Overweight from Neutral, as it believes the branded F&B sector should outperform in 2012.

BOCI says demand is more resilient and thanks to the lower input costs, earnings should grow faster than turnover;

It adds that the sector now trades in the lower half of the historical P/E range of 15X-35X.

With reference to the trend after the global financial crisis of 2008, BOCI expects sector earnings should rebound quickly ahead, thanks to the lower commodity prices.

The house continues to like growth stocks, among which China Foods (0506.HK) and Mengniu Dairy (2319.HK) have been the strongest performers with the highest earnings visibility;

Tingyi (0322.HK) may have the highest growth potential on the falling input costs;

Meanwhile, Tsingtao Brewery (0168.HK) should post the weakest earnings growth in 2012 and 2013.

Source: Dow Jones Newswire

[winston]

Sugar and aluminium prices rose by 45% and 17%, respectively, over the last year.

Source: Kim Eng