hina Fishery Group (S$2.31) ? Initiating Coverage - Prize catch

Trawling operations form the core of its business, accounting for 65% of 1Q07 revenue. All supertrawlers are linked to vessel-operating agreements (VOA) and are highly profitable with net margins of above 30%. Long-term contracts also provide relatively secure earnings streams and visibility with the earliest expiry for the first three VOAs in 2024. Management is on the lookout for more VOAs, and has been aggressively expanding its fleet of purse seine fishing vessels and fishmeal operations through acquisitions. We believe acquisitions represent the most efficient way for it to leverage management?s extensive experience in industrial fishing and expand operations.

Net profit is expected to jump 122% yoy to US$106.5m in 2007, on full-year contributions from the company?s Peruvian fishmeal operations. Given its strong operating record, 20% share of fishing quotas in Russian waters and significant market position in the Peruvian fishmeal industry, we believe CFG should not be trading at discounts to its global peers, most of which are concentrated in single lines of business. Our target price of S$3.10 values the company in line with the industry average of 13x CY08 P/E, offering potential upside of 34%. Initiate with Outperform.

LOCATIONS

Pacific Ocean remained as the most significant fishing

ground, accounting for 95.6% of aggregate turnover.

Through the Group

Waters also accounted for 3.8% of total revenue.?s foray into Peru in FY2006, Peruvian

REVENUE BY MARKETS

PRC remained as the Group

and Korea gained significant share as sales of premium

products such as fish roe increased. With a larger fleet

and hence greater onboard processing capabilities, sales

of processed-at-sea frozen fish fillets to the European

market also increased.?s largest market, while Japan