SINGAPORE (Mar 5): UOB KayHian is maintaining Japfa at “buy” despite the stock’s 8% share price correction over the past two days in response to the African Swine Fever (ASF) in Vietnam.
Management has estimated a maximum net profit impact of US$15 million ($20.3 million), or 12% of Japfa’s FY18F core net profit, if the disease destroys 10% of its swine fattening volume and 20% of its feed volume in Vietnam. Fortunately, none of Japfa’s farms have been impacted so far.
Also, an ASF outbreak could lead to a spike in swine prices and shut down backyard farms which make up around 65% of the industry, allowing Japfa to increase its market share. Meanwhile, Japfa has put in place preventive measures in its swine breeding farms such as additional showers, better logistics systems and more surveillance.