*DJ Goodpack Target Cut To S$2.07 From S$2.50 By Maybank-Kim Eng
 
 
 

Daily Review, 28 August 2012 Page 1 of 3

SGX-ST Member, SGX-DT (CNCM)

Daily Review

28 August 2012

LIM & TAN SECURITIES PTE LTD

20 CECIL STREET

#09-00 EQUITY PLAZA

SINGAPORE 049705

TEL: 65330595 FAX: 65332368

www.limtan.com.sg

RCB Reg No. 197301030W

SUMMARY

• Trading volume in key markets has continued

to drop, especially in recent days as the Federal

Reserve’s annual economic symposium

draws close. Yesterday’s was the lowest since

2008! (The annual event is scheduled for this

Friday Aug 31 in Jackson Hole, Wyoming, and

about 2 weeks before the next 2-day FOMC

meeting. Indications from economists in the US

suggest that Bernanke is unlikely to announce

the much anticipated QE3 on Friday. (Please

note the calendar of key events is a regular

feature of our Daily Review.)

• It is interesting to note that the joint

bookrunners for ASCENDAS

HOSPITALITY’s IPO (Nomura, Stanchart,

HSBC) bought only 13.109 mln units from the

open market, representing only 18% of the

maximum under the over-allotment , ie the

balance of 60.294 mln units “came from” the

vendors. We expect the Australian-centric

hospitality reit to continue to slide. Note trading

volume totaled 127.435 mln units and price

ranged largely from 86 cents to 88 cents during

the period July 27 - Aug 24. (It touched 89.5 cents

briefly on debut.)

Daily Review, 28 August 2012 Page 2 of 3

SGX-ST Member, SGX-DT (CNCM)

RAFFLES EDUCATION

S$0.37-RAFFLES.SI

• Raffles Ed is proposing to undertake a

renounce-able non-underwritten rights issue (1

for 5) of up to 170,893,872 rights shares at an

issue price of 14 cents (62% discount to its last

traded price) to raise $23.745mln in net

proceeds.

• Based on the last traded price of 37 cents, the

ex-right price is 33.17 cents.

• 60% of the proceeds will be used to repay loans,

20% for investment in education institutions and

the rest for working capital.

• While the latest fund raising exercise is

necessary for the company given its weak financial

position with the latest cash position of $42mln

(down from $65mln last year) versus short term

debts of $168mln and long term debts of

$47.5mln and weak current ratio of 0.78x, we

believe the latest exercise would be detrimental

to its share price in the short term (despite

already depressed) as

− it is non-underwritten; and

− the big 62% discount could suggest existing

investors over-subscribing to the heavily

discounted rights share and potentially selling

their existing holdings to pick up the rights

shares, thereby causing short term selling

pressure.

• Raffles Ed is only trading at 1/2 cent above its all

time low of 36.5 cents and looks likely to break

below this level with the latest announcement.

• We maintain our Sell/Avoid recommendation.

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Results Review 28 August 2012

Singapore

Co. Reg No: 198700034E

MICA (P) : 099/03/2012

China Minzhong

First Dividend Payout Since IPO?

Results better than expected. Minzhong announced its FY6/12 results

on 27 Aug, which is better than expected. Full year revenue came in at

RMB2.6b, up 33.2% yoy while net profit grew by 19.9% yoy to

RMB679.6m. We maintain our positive view on the company and BUY

recommendation with target price of SGD1.16.

Domestic cultivation business drove the growth. Minzhong’s FY12

results reaffirmed our view that Minzhong would gradually achieve a

more balanced business model as its domestic cultivation business

grew faster than its export business. For FY12, domestic cultivation

revenue increased by 64.5% vs 19.1% growth in export business.

Gross profit of domestic business also registered higher growth of

50.7% yoy vs only 2.5% for export business.

Account receivables should not be a big issue. A sharp increase in

account receivables was a concern before the results. However, the

situation is better than expected. Although account receivables

remained high at RMB967m in FY12, Minzhong actually has managed

to collect around RMB220m since end FY12 and we do not think there

is any material default risk associated with the remaining receivables.

Expecting higher yield even without adding more farmland. Yield

per mu increased significantly in FY12, mainly because the farmland

that Minzhong acquired two years ago is approaching optimum yield.

Thus, we expect higher production volume going forward even without

adding more farmland.

Positive free cash flow and dividends this year? We expect higher

operating cash flow and less Capex in FY13, thus the first positive free

cash flow in three years. We cannot rule out the possibility that

Minzhong will pay dividends or buy back shares in FY13. Although we

have not put in any dividends payments or share buyback forecast as

our base case, we believe such actions will boost the valuation if they

eventuate. We maintain our BUY call with unchanged target price of

SGD1.16 pegged to 4.35x FY13 PE.

China Minzhong – Summary Earnings Table

FYE June (CNY m) FY2011 FY2012 FY2013F FY2014F FY2015F

Revenue 1929.2 2568.8 2870.4 3229.5 3597.0

EBITDA 769.6 904.0 1116.6 1301.3 1472.9

Recurring Net Profit 566.7 681.6 750.5 887.0 1050.8

Recurring Basic EPS (fen) 101.7 121.9 133.9 158.0 187.1

EPS Growth (%) 51.7 19.9 9.8 18.0 18.4

PER (x) 3.52 2.93 2.67 2.26 1.91

EV/EBITDA (x) 2.80 2.81 2.09 1.29 0.61

P/BV (x) 0.69 0.68 0.55 0.38 0.32

Net Cash (CNY m) -164.7 -550.0 -340.0 319.7 1101.4

ROE (%) 21.8 21.0 18.9 18.6 18.3

ROA (%) 16.7 14.9 14.7 15.0 15.1

Consensus Net Profit (CNY m) n.a n.a 704.2 756.8 760.0

Source: Company, Maybank KE estimates

Buy(unchanged)

Share price: SGD0.715

Target price: SGD1.16 (unchanged)

WEI Bin

[email protected]

(65) 6432 1455

Stock Information

Description: A leading integrated vegetable processor in

China, whose key products are fresh vegetable produce and

more than 100 types of processed vegetables.

Ticker: MINZ SP

Shares Issued (m): 557.44

Market Cap (USD m): 318.5

3-mth Avg Daily Turnover (USD m): 4.0

ST Index: 3,044.49

Free float (%): 60.8

Major Shareholders: %

Government of Singapore Investment

Corporation 16.9

OCA II Holdings 10.3

Lin Guo Rong (CEO) 6.3

Key Indicators

ROE – annualised (%) 21.0

Net gearing (%): 15.0

NTA/shr (CNY): 5.27

Interest cover (x): 28.6

Historical Chart

Performance:

52-week High/Low SGD1.285/SGD0.53

1-mth 3-mth 6-mth 1-yr YTD

Absolute (%) 26.5 22.2 -32.9 -39.1 -12.3

Relative (%) 24.6 11.3 -35.1 -45.1 -23.8

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MINZ SP Equity