The Kitchen of the World - Charoen Pokphand Foods (CPF)

With a vision to be the “Kitchen of the World”, Charoen Pokphand Foods is Thailand’s largest agribusiness firm, in a country where 66% of their GDP comes from exports and 12% of their exports are agricultural products. CPF is a publicly traded subsidiary of the Charoen Pokphand Group. CPF is also looking for investment opportunities in the USA and Europe to achieve geographic diversification when there are readily available distressed assets and the beginning of an economic recovery. With CPF shares currently trading at THB28.75 on the Bangkok SET stock exchange and a 52-week range of THB 28 to THB 42, now looks a good time to buy as there are fears of bird flu affecting the business. However with a one year return of 20% and strong company fundamentals, this is a good investment in a world-class agribusiness.

CPF was established in 1923 and now has operations in 24 countries worldwide. These are significant world operations, with the CPF UK business boasting a £120 million turnover last year. Through its parent company, CP, it has connections with telecommunications, retail and distribution services, petrochemical, automotives, real estate and electronic procurement. CPF’s annual revenues in 2012 were around US$4.5 billion with international sales representing half of their revenues. They count the UK’s Tesco and USA’s Costco as among their biggest buyers. They are currently the world’s largest integrated producer of shrimps and the world’s second largest producer of poultry. They have intense investment plans for the next few years to reach an ambitious target of THB700 billion (roughly US$24 billion) by 2016. CPF have earmarked THB75 billion over the next four years for investment projects, with around THB35 billion being used to expand its international feed, farm and food interests. In April 2013, CPF announced plans to construct its first integrated food-processing complex focused on producing ready meals, sausages, ham and bacon, soup, sauces and pre-mixed ingredients as well as an R&D center to develop new products. The integrated food processing complex will ensure efficient production costs and a supply of raw materials throughout the processing line using world-class manufacturing technology and an automated processing line that significantly reduces the number of workers needed from 400 to 20 per plant. The lower number of workers handling the processing ensures high food safety without contamination by any disease. The roughly six multiple sales growth will be driven by the company’s three strategies – an expansion of the existing livestock and farm sector, an increase in value-added products and potential acquisitions in Europe and the USA.

CPF - Kitchen of the World?

For a more detailed view, CPF has two core business lines: livestock business line and the aquatic business line. The aquatic business line mainly focuses on shrimp and fish. CPF have caught onto the rising trend in developed countries of healthy food by promoting “Probiotic Farming” which avoids the use of drugs and chemicals. The livestock business line focuses in three areas on different types of products: feed, farm and food. Feed focuses on producing livestock feed in the forms of concentrate, powder and pellets for broilers, layers, pigs and duck. Here CPF is a leader and pioneer worldwide in its manufacture and distributes feed products to more than 600 sales outlets throughout the country as well as selling directly to many large animal farms in Thailand. A fully computerised production process ensures a high and consistent quality of produce. Farm focuses on animal breeding, animal farming and basic meat processing. Here CPF is a worldwide leader in R&D of natural animal breeding. The Company produces parent stock broiler chicks, parent stock layer chicks, parent stock swine, broiler chicks, layer chicks, layers and piglets for distribution to animal farms and domestic sales representatives. Grandparent stock used in livestock breeding are imported from abroad to breed parent stock which are then raised on the Company’s farms. CPF utilize good farm management practices and the evaporative cooling system, an advanced technology to raise livestock which has been an effective method in preventing disease and ensuring high quality products. Food includes semi-cooked meat, fully-cooked meat and ready-to eat producers. These products are distributed to wholesalers and retailers, fast food restaurants and supermarkets. They also have excellent distribution channels in Thailand as they own, through CP All, all the 7-11 convenience stores in the country where CP-branded food products are easily evident. CPF export these products all over the world but mainly to the European Union, Japan and other Asian countries, importantly using the CPF brand. CPF has shown that they are a company that can truly compete globally by meeting global standards for their fresh products and for cooked food products.

Popular Produce?

This is a chance to invest in a world-class company deriving from an emerging market with geographic diversification. CPF invests in world-class technology and upholds high health and safety standards as well as re-invests a large amount of retained earnings into investment projects. Buying into CPF also allows exposure to one of the fastest-growing stock exchanges in the world right now, Bangkok’s SET as well as a non-cyclical food industry. Buy now while the price is around THB28.75 and hold for the long-term as the stock price soars, both as CPF truly becomes the “Kitchen of the World” and as the Thai Baht continues its rise against the Major Currencies – USD, EUR, CHF, and JPY.