Century Pacific eyes 10-15% annual growth
FOOD manufacturer Century Pacific Food Inc. (CNPF) is seen to grow business by 10-15 percent each year in the next five years, outpacing the country’s economic expansion.
Citing some key takeaways from a no-deal roadshow in Kuala Lumpur in December, a joint research by DBS Vickers and First Metro Securities noted that management was looking to grow revenues by 10-15 percent per annum in the next five years, excluding any major acquisitions.
Asked about such growth trajectory, CNPF president and chief executive officer Christopher Co said in a text message: “We don’t really give official guidance but we’re aiming to grow around that rate or approximately two times GDP (gross domestic product) growth in the next five years.”
“Lack of liquidity and low public float remain overhangs to the company’s share price. However, we stay positive on CNPF’s business outlook in the near to medium term,” the joint research said, noting that the company was on track to meet the P1.5 billion 2014 full-year net income guidance.
The research, authored by First Metro analyst Ghia Paula Yuson, projected a P1.719 billion net profit for CNPF for 2015.
The DBS Vickers-First Metro research said that barring any major spikes in raw material prices, CNPF was looking to maintain margins via cost efficiency measures such as establishment of tin can production facility, rationalization of modern trade distribution network.
The research noted that CNPF’s focus should still be on the lower income segments of the market in the Philippines, which still accounted for roughly 90 percent of the total population.
“While incomes are rising, the company sees more of increased usage and consumption of canned foods rather than trading out canned products. We see this as the trend going forward at least in the next three to five years,” the research said.
While CNPF was already a market leader in canned tuna and canned meat, the research noted that the company was still striving to be “one step ahead of its competition.” For instance, it noted efforts to grow the milk business, which contributed less than 10 percent to total revenues in full-year 2013.
In the last five years, the branded food business has been growing faster than tuna exports. This trend is seen supporting higher margins in the years ahead.
“Generally, CNPF’s branded food products are priced at a discount to competitors, which they can afford to offer without detrimentally hurting margins due to the scale of the business,” the research said.
But aside from price increases, the research said CNPF could also manage costs by modifying product formulations to minimize the impact of any increase in raw material costs.
The research also noted that CNPF also continued to be on the lookout for suitable merger and acquisition (M&A) to support growth going forward. “The group has quite a history of acquiring cheap, under- promoted brands which they in turn revamp and re- launch,” it said.
About 35 percent of CNPF’s initial public offering proceeds had been earmarked for potential acquisitions. The research noted that certain pockets of the canned food market, such as canned sardines, would be ripe for consolidation.
“CNPF is not limiting itself to domestic M&A. If an opportunity presents itself, they are also open to overseas acquisitions but the target has to be a well- run businesses vs one that needs to be turned around,” the research said.
