The current share prices of Fyffes and Greencore may be undervalued because of overly-pessimistic market concern about the impact of regulatory changes on future profits, according to a new analysis by Goodbody Stockbrokers.

The share price of both companies has been affected by plans to change the international regulatory regime, with EU proposals to reform the support for sugar producers hitting Greencore while Fyffes is affected by upcoming changes to the EU banana regime.

Current prices effectively assume that most of the profits from the regulatory systems "are assumed to fall very substantially, and permanently, from 2006."

Goodbody believes this is "overly cautious," according to the conclusions of a new report on the food sector.

However it cautions that "ongoing negotiations in the coming year will undoubtedly bring with it negative publicity which could undermine investor confidence further, until the situation is clarified."

For Fyffes, Goodbody's analysis suggests that at its current share price the market is assuming that profits will fall from 2006 by €25 million or more due to regulatory changes.

However Goodbody says that trading conditions for the company are good and that its 2004 results may beat forecasts, setting a price target of €1.90, compared to the €1.79 it was trading at yesterday.

Looking at Greencore, the broker says that under the current EU sugar reform proposals, profits would be all but eliminated in the company's sugar division.

However it says that some modification of the existing proposals and significant rationalisation within Irish Sugar will limit the impact.

The broker sets a price target of €3.55 for Greencore, compared to €2.90 yesterday.