Proactive Investors - Run By Investors For Investors

City broker expects Genus to benefit from African swine fever ravaging southeast Asia

The AFS epidemic is keeping a lid on Genus’ near-term profits, but longer-term, Liberum expects pig prices and production to soar
Genus sells embryos, semen and breeding animals with “superior genetics” to farms

Cattle and pig breeder Genus PLC (LON:GNS) spurted higher on Tuesday after analysts at Liberum published a gushing ‘buy’ note.

The City broker, which moved its recommendation up to ‘buy’ from ‘hold’, thinks the African swine fever (ASF) epidemic, which is currently ravaging southeast Asia will prove to be a blessing in disguise over the long term.

READ: Genus upgraded to 'buy' by Peel Hunt

The highly contagious and incurable disease has swept through China – the world’s largest producer and consumer of pork – and surrounding countries over the past six months or so.

“While this is causing a short-term hit to PIC profits in China (£3mln in 1H19), it will cause Chinese and global pig prices to soar (the Chinese piglet price has jumped in the last few weeks).

“The vast scale of Chinese import demand will trigger substantial global hog production expansion for which Genus is in prime position to benefit.”

The analysts add that ASF will force Chinese authorities to clamp down on ‘back-yard farming’. When something similar happened in Russia, Genus’ market share rocketed from 8% to 38%.

“We nudge our 2021 EPS estimates up by 4%, noting that uncertainty over the ASF situation in China is keeping a lid on nearer term estimates.

“We believe the risk to these estimates lies on the upside. The estimate upgrades nudge our target price up 4% to 2,500p (from 2,400p), and we raise our recommendation to ‘buy’.”

Genus shares rose 3.3% to 2,259p in early afternoon trading in London.

View full GNS profile View Profile

Genus Timeline

February 16 2015

Related Articles

dna strand
May 08 2019
The latest update reveals the company significant clinical and commercial milestones in sight
February 22 2019
Broker Hybridan reckons Sareum is “arguably a bargain target for the relatively large group of biotech and pharma companies interested in TYK2 and the wider JAK inhibitor space”
researcher at microscope
May 24 2019
Its lead asset, RXC004, is part of a potentially breakthrough group of cancer drugs called Porcupine inhibitors

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use