By Jenny Ruth
Friday 21st January 2011
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Sanford looks set to benefit from the recovery in global fish prices to near record highs, says Kar Yue Yeo, an analyst at First NZ Capital.
"Given the current fish prices, we see scope for 20% upside risk to our full-year 2011 earnings," Kar Yue says.
The value of New Zealand's seafood exports in the October to November period rose 18% compared with a year earlier in New Zealand dollar terms and was up 22% in US dollar terms while volumes rose just 2%, he says.
"Sanford offers a sustainable source of protein through the New Zealand fish quota management system which, coupled with improving fish prices, is yet to be recognised in the stock."
Kar Yue is forecasting Sanford's adjusted net earnings in the year ending September will be $32.4 million compared with $22.7 million the previous year, rising to $44.4 million in 2012 and $58.6 million in 2013.
He says his 2011 forecast is currently 6% above consensus earnings.
He has raised his 12 month target price for the stock to $5.70 from $5 previously (Kar Yue had been restricted from covering the stock during Sanford's $85 million acquisition of the Pacifica Seafoods mussel and oyster businesses because his firm was advising the company and is only now reinitiating coverage).
Rating: Outperform (raised from neutral).
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