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
0.50
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12
MINZ SP Equity