JP Morgan Is Positive on ‘Thai Union’ with More Earnings Visibility from Red Lobster Divestment

The share price of Thai Union Group Public Company Limited (SET: TU) rose 4% at the opening bell on Wednesday, following the announcement of its intention to divest all shareholding in Red Lobster late yesterday.

Yesterday, Thai Union announced that it is seeking options to pursue an exit from the minority investment in Red Lobster Master Holdings, L.P. (Red Lobster), which operates Red Lobster restaurants in the U.S.

The exit will come with a one-time approximate THB 18.5 billion non-cash impairment charge in the fourth quarter of 2023.

Following the intention to exit Red Lobster, the company also announced a share repurchase program for up to 200 million shares, which is equivalent to 4.30% of its total paid-up capital.


The market reacted positively to the move, seeing it as a positive sign to end its suffering from consecutive losses in Red Lobster with this one-time impairment.

Some analysts commented after the meeting with the management that the company picks the right time to divest as its financial status is at its strongest. This cut will allow TU to be able to book profit from 2024 onward.


JP Morgan was positive on TU’s strategic intention to exit its entire stake in Red Lobster, saying that this will ease market concerns on persistent losses from the Sea Food chains and improve TU’s earnings visibility.

The impairment loss could lead to a covenant breach that may limit dividend payment in 2H23, according to JP Morgan. However, other analysts stated that this is still far from the breach.

In addition, JP Morgan raised its Jun-24 SOTP-based target price to THB17.00 from THB16.00 per share as the investment bank removed the valuation discount for Red Lobster. JP Morgan noted that the stock could re-rate in the near term, following the announced intention to divest.