R&B Food Supply Public Company Limited (SET: RBF) recently announced a new establishment company in India, joined in a joint investment with Thailand’s leading manufacturer and exporter of frozen and canned seafood, Thai Union Group Public Company Limited (SET: TU), and Srinivasa Cystine Private Limited (SCPL), leading aquaculture and marine food processor in India.
Srinivasa Cystine Private Limited (SCPL) is an associate of Avanti Group, which distributes high quality food ingredients in the Indian market.
In this joint venture, RBF will hold 51% of the shareholding, while SCPL will hold 30% and TU will hold 19%.
The joint investment is in order to distribute high quality food ingredients such as flavoring and coating, and over time, will potentially explore the setup of its own manufacturing facility in India.
However, the share price of RBF and TU does not move in the positive direction as they should have been.
The share price of RBF closed at Bt19.10 per share on Monday, decreased Bt0.50 or 2.55%.
TU recorded a drop of Bt0.20 or 0.95% to close the day at Bt20.90 per share.
Still, CGS-CIMB Securities (Thailand) (CGS-CIMB) has a positive view on the JV, stating that given the size of the investment, it should have a more positive impact on RBF than TU. India has been among RBF’s export markets and the agreement should allow RBF to further tap into a sizeable market of 1.4 billion population with a 9% GDP growth forecast in 2022, which is higher than the average of global growth of 4.4% by IMF.
CGS-CIMB pointed out that India’s food processing market was valued at US$263 billion in 2022 and is expected to grow at a 15% CAGR to US$535 billion by 2025. Moreover, India is the 14th largest food exporter in the world with a 2% share in global food product exports while Thailand is ranked at 13th.
By utilizing TU and SCPL’s strong networks in India, CGS-CIMB expected RBF to secure its customer base in seafood processing and aquatic feed market.
Meanwhile, TU currently owns a 10% stake in RBF, 24% in Avanti Feed and 40% in Avanti Frozen, which are under Avanti Group. Avanti Feed is a leading shrimp feed producer in India, while Avanti Frozen is one of India’s largest shrimp processors.
TU and SCPL can also utilize RBF’s expertise in manufacturing food ingredients to produce new innovative products tailored to Indian customers.
In addition, CGS-CIMB sees the agreement should have more positive impact on RBF than TU, but with the current expensive valuation, the securities company maintained its Hold rating on RBF at the target price of Bt23.00 per share. CGS-CIMB added that TU has a sustainable growth outlook and potential valuation uplift from its pet food business spin-off in 2022.
