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Asian Citrus

Asian Citrus

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Published by bacteriaaa
Kim Eng
Kim Eng

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Published by: bacteriaaa on Jan 30, 2013
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12/02/2013

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SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS
Hong Kong
Company Update
 
23 January 2013
Asian Citrus 
A Better 2HFY6/13 In Sight
 
Profit alert.
AC expects its 1HFY6/13 sales and core net profit to dropYoY, though the magnitude of the decline was not mentioned. The profitalert did not come as a surprise to us, as it had already announcedweak winter crop trading updates owing to unfavorable weather andnegative impact brought by its replanting program. In all, sales of winteroranges were 15% short of our projections, implying 8%/5% downsiderisk to our original total orange sales/total sales projections for FY6/13F.
1HFY6/13 preview.
We forecast a 1HFY6/13 core net profit decline of24% YoY as a result of an 11% YoY revenue drop. We project a 2.6pptYoY GPM contraction for the same period given the ASP pressure atboth its orange plantation and processed fruit units. We believe thatOPEX ratios will inevitably increase YoY amid weak sales. Note that theASP of processed fruit concentrates plummeted in 2HFY6/12 as aresult of destocking by its Thai and Philippines peers, which led to atough base in 1HFY6/13. On a separate note, we expect headline netprofit to drop more rapidly than the core net profit given the much lowerfair value gains on biological assets to be booked in 1HFY6/13.
Better outlook in 2HFY6/13 though.
Despite a weak 1HFY6/13, wereckon there are several positive catalysts for the stock, including: i)prices of tropical juice concentrates have stabilised, rebounding slightlysince Nov 2012; ii) the new BPG production plant is expected tocommence operations after Chinese New Year, which should boost itsprocessing capacity by 67%; iii) improving domestic consumption couldsee negotiated ASPs of its summer oranges rise; iv) 2HFY6/13 wouldhave a more favourable comparison base for its processed fruit unit.
Risk-reward profile attractive, maintain BUY.
We trim our FY6/13-15F core earnings estimates (ex-FV gains on biological assets) by11%/7%/6% on more conservative ASP and GPM assumptions. Withthe stock trading at 4.8X FY6/14F PER, we believe key negatives arefully priced in. Also, given its strong balance sheet and consistentpayout record, we believe a projected yield of 6-7% for FY6/13-14offers good downside protection, while the improving 2HFY6/13Foutlook should serve as a near-term share price catalyst. Maintain BUY.Our new TP of HKD4.55 is based on a core FY6/14F PER of 6.3X (-1S.D. from its historical average) vs. 8X previously.
Asian Citrus Summary Earnings Table
Source: Company data, Maybank KE 
FYE Jun (CNYm) 2012A2013F 2014F2015F
Revenue 1,776 2,039 2,511 3,044EBITDA 902 958 1,102 1,197Recurring Net Profit 629 619 753 844Recurring Basic EPS (CNY) 0.520.51 0.610.67Recurring EPS growth (%) (6.40)(1.49) 19.289.87DPS (CNY) 0.18 0.18 0.21 0.23Adjusted PER 5.665.74 4.824.38EV/EBITDA (x) 2.091.83 1.361.00Div Yield (%) 6.186.09 7.277.99P/BV(x) 0.440.41 0.390.37Net Gearing (%) N/AN/A N/AN/ACore ROE (%) 8.017.35 8.358.71Core ROA (%) 7.917.25 8.238.58Consensus Net Profit (CNYm) -639 8311,066
 
BUY
(Unchanged)
 
Share price: HKD3.50Target price: HKD4.55
(from HKD6.27)
 
Jacqueline KO,
CFA
  jacquelineko@kimeng.com.hk(852) 2268 0633
Stock Information
Description:
 Asian Citrus is the largest oranges plantationowner in China. It accounts for 3.3% of total oranges outputin China in 2010.
 
Ticker: 73 HKShares Issued (m): 1,008.0Market Cap (USDm): 426.53-mth Avg Daily Turnover (USDm): 2.2HSI: 23,659Free Float (%): 53.12
Major Shareholders: %
Chairman Tong Wang Chow 19.26Xu Xuefeng 9.67Wellington 5.99Value Partners 5.96Chaoda 6.0
Key Indicators
 
ROE annualised (%) 7.4Net cash (HKDm): 3,096NTA/shr (HKD): 8.78Interest cover (x): N/A
Historical Chart
Performance:
 52-week High/Low HKD3.94/HKD1.981-mth 3-mth 6-mth 1-yr YTD Absolute (%) 4.4 11.5 48.6 41.0 1.2Relative (%) (0.7) 2.4 28.2 23.4 (3.2)
 
0.01.02.03.04.05.06.07.08.09.0Jan 12Mar 12May 12Jul 12Sep 12Nov 12Jan 13PRICEPRICE REL. TO HANG SENG INDEX
Source: Bloomberg 
 
 
23 January 2013 Page 2 of 9
 
Asian Citrus Holdings LimitedFigure 1: Our sales estimates
Rmb'000 FY6/11FY6/12FY6/13F FY6/14FFY6/15F
Orange sales 962,1271,057,3271,151,916 1,313,7421,458,343From BPG 417,393715,473883,802 1,194,0281,582,455Others 6,9033,3443,411 3,4793,549
Total
1,412,6211,776,1442,039,129 2,511,2503,044,347
Source: Company data, Maybank Kim Eng estimates 
Figure 2: Our volume and ASP projections for orange unit
Sales volume (tonne) & ASP (CNY/tonne)FY6/11FY6/12FY6/13F FY6/14FFY6/15F
Winter oranges 143,698171,607161,233 165,170158,947YoY changes (%) 25.4719.42(6.05) 2.44(3.77)Summer oranges(ex-Hunan) 73,19471,81487,821 103,408117,983YoY changes (%) 1.09(1.89)22.29 17.7514.09 Winter oranges ASP 3,7523,8523,891 3,9884,088YoY changes (%) 13.612.671.00 2.502.50Summer oranges ASP(ex-Hunan) 6,0615,8565,973 6,1526,337YoY changes (%) 9.88(3.38)2.00 3.003.00 Summer Orange volume (Hunan) N/AN/AN/A 3,76111,889Summer oranges ASP(Hunan) N/AN/AN/A 5,0005,125
Source: Company data, Maybank Kim Eng estimates 
Figure 3: Our volume and ASP projections for processed fruit unit
Sales volume (tonne) & ASP (CNY/tonne)FY6/11*FY6/12 FY6/13F FY6/14FFY6/15F
Pineapple juice concentrates 16,63624,34830,435 39,56649,853YoY changes (%) N/A46.3625.00 30.0026.00Other fruit juice concentrates 4,01710,01713,022 16,27820,347YoY changes (%) N/A149.3730.00 25.0025.00Other fruit purees 3,61617,47221,840 26,86333,042YoY changes (%) N/A383.1925.00 23.0023.00Frozen and dried fruits and vegetables 9,63418,17021,441 25,30029,854YoY changes (%) N/A88.6018.00 18.0018.00 Pineapple juice concentrates ASP 13,36211,15711,603 12,76413,785YoY changes (%) N/A(16.50)4.00 10.008.00Other fruit juice concentrates ASP 21,74316,19617,006 18,19719,470YoY changes (%) N/A(25.51)5.00 7.007.00Other fruit purees ASP 7,1307,1867,402 7,6247,852YoY changes (%) N/A0.783.00 3.003.00Frozen and dried fruits and vegetables 8,5106,5546,882 7,4328,027YoY changes (%) N/A(22.99)5.00 8.008.00
* Only 7 months of contribution Source: Company data, Maybank Kim Eng estimates 
Figure 4: Gross margin by segments
FY6/11FY6/12FY6/13F FY6/14FFY6/15F
Blended gross margin (%) 52.2944.6039.91 39.8537.86Oranges 60.3053.8049.17 49.3545.02- Hepu plantation 70.9064.3060.00 63.0064.00- Xinfeng plantation 40.2040.4041.00 43.0045.00- Hunan plantation N/AN/AN/A 33.0035.00Processed fruits(BPG) 34.0030.8028.00 29.0030.00
Source: Company data, Maybank Kim Eng estimates 
 
 
23 January 2013 Page 3 of 9
 
Asian Citrus Holdings LimitedFigure 5: Output forecast for Hepu-summer oranges(tonnes)
Jun-13Jun-14Jun-15Jun-16Jun-17Jun-18 Jun-19 Jun-20 Jun-21Jun-2201234
650 5,777 5,723 5,985 4,815 11,700 8,100
5
761 894 706 699 732 589 1,430 990
6
1,104 3,807 4,063 3,210 3,179 3,325 2,675 6,500 4,500
7
3,863 5,329 5,688 4,494 4,451 4,655 3,745 9,100
8
4,967 6,852 7,313 5,777 5,723 5,985 4,815
9
5,519 7,614 8,126 6,419 6,358 6,650
10
7,450 10,278 10,970 8,666 8,584
11
7,174 9,898 10,564 8,345 8,266
12
8,278 11,420 12,189 9,629
13
8,278 11,420 12,189
14
8,278 11,420
15
8,278
16
4,499
17
19,345 4,499
18
27,900 19,345 4,499
19
33,561 27,900 19,345 4,499
20
33,561 27,900 19,345 4,499
21
33,561 27,900 19,345 4,499
22
33,561 27,900 19,345 4,499
23
33,561 27,900 19,345 4,499
24
33,561 27,900 19,345 4,499
25
33,561 27,900 19,345 4,499
Total 
87,821 99,647 106,094 107,274 121,341 126,659 142,207 113,891 89,881 79,347
Source: Maybank Kim Eng estimates 
Figure 6: Output forecast for Xinfeng plantation (winter oranges only)(tonnes)
Age Jun-13Jun-14Jun-15Jun-16Jun-17Jun-18 Jun-19 Jun-20Jun-21Jun-226
28,000
7
29,200 29,200
8
30,000 30,400 30,800
9
34,000 34,000 34,000
10
41,195 42,000 42,000 42,000
11
44,000 44,000 44,000 44,000
12
48,000 48,000 48,000 48,000
13
56,000 56,000 56,000 56,000
14
57,200 57,200 57,200 57,200
15
58,000 58,000 58,000 58,000
16
58,800 58,800 58,800
17
60,000 60,000
18
60,000
19
60,000
20Total 
128,395 137,600 154,800 176,000 191,200 206,000 220,000 231,200 234,000 236,800
Source: Maybank Kim Eng estimates 
Figure 7: Output forecast for Hepu-winter oranges(tonnes)
Age Jun-13Jun-14Jun-15Jun-16Jun-17Jun-18 Jun-19 Jun-20Jun-21Jun-228
3,686 0 0
9
0 4,147 0
10
16,216 0 4,147
11
6,210 23,423 0
1213141516
3,491 0 0
17
1,419 0 0
18
1,818 0 0
1920Total
32,838 27,570 4,147
Source: Maybank Kim Eng estimates 
Output drop due to replantingprogram, no more output fromFY6/16F onwards

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