Trade and seafood

I got seafood on the mind, because I made crab cakes last night (so good - here’s the recipe. You gotta make the remoulade).

I have seafood on the mind also because of some news from Minh Phu, which has been such a disappointing stock. The trouble really started last year in September (we have talked about this before - it was due to US antidumping charges), and it just progressively got worse. We have seen a bit of an uptick starting in early April, but it is still down 24% yoy.

[There was a way to make money, although it would be hard - if you bought at the bottom and held it until now, you would be up 47%.]

So more bad news: The company announced in late June that it was lowering its guidance for the year (no real surprise there) from exports of 63,000 metric tons of shrimp to 57,000. Exports fall from $709m to $683m, also a 10% decline. Exports make up about 50% of all sales. The impact on the bottom line is more significant - net profit goes from VND1.37tr to just under VND1tr, or -27%.

The company also is delaying some expansion plans. Ultimately, the new guidance (if it is met) would mean about a 1% yoy decline in export values but still more than double net income (although last year was particularly bad). The stock is trading at about a 5.2x forward P/E based on this guidance, which might be attractively low compared to comps.

Source: Company data, chart by Vietecon.com

But it is hard to make the argument on valuation at this point: it has been cheap for a while! Looking at this year, I think it is safe to say that if it ever gets to below 4x forward P/E, think about buying it. But for it really to move up to above 10x where comps trade, the company needs to fix its problems with US Customs and get back to its much higher margins that it was previously able to post (2019 net margin was 2.6%, while 2017 was 7.2% - see chart).

Looking at the broader seafood market, Minh Phu is actually doing alright. Seafood exports from Vietnam have been weak so far, much worse than for the company . The main trade body said that June exports were down 10% to $626m. That is basically in line with the 9% decline in fishery products we have seen through May, according to Vietnamese customs. .

But fishery products are a sector suffering more than most. Overall, total exports were still up 1% through the end of May for the country as a whole. Imports were down 5% year-to-date. I just wonder how this will keep up. I keep expecting imports to start to rise, because Vietnam has opened and people are spending more (or I would assume they are). While exports should fall, in my view, because the rest of the world (especially the world’s largest consumer: the US) is suffering.

Anyway, I will be watching Minh Phu and overall exports, because both keep defying me like unruly teenagers.

Source: Vietnamese customs, chart by Vietecon.com

VietEcon

Trade and seafood

VietEcon