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AsianCitrus

AsianCitrus

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Asian Citrus
Asian Citrus

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Published by: bacteriaaa on Mar 02, 2013
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12/31/2013

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SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS
Hong Kong
Company Update
 
27 February 2013
 Asian Citrus 
Look beyond the weak 1HFY6/13
 
Maintain BUY.
We keep our recommendation and forecasts intactfollowing AC’s weak, though largely in-line, interim results. Our TP of HKD4.55 is based on a core FY6/14F PER of 6.3X, equivalent to 1SDbelow its historical trading forward multiple. AC’s intention of maintaining its absolute dividends translates into a dividend yield of approximately 6%. Also, we anticipate that AC’s profits will recover, aswe believe both orange and juice concentrate prices will rebound in2HFY6/13, while costs should normalise without unfavourable weather.
Look beyond the weak 1HFY6/13.
1HFY6/13 core NP fell 23% YoYdue to a 15% drop in revenue. The weak results were attributable to adisappointing performance at both the orange plantation and processedfruit divisions. To recap, AC’s winter crop output fell 6% YoY onunfavourable weather and the negative impact of its replanting program.ASPs of processed fruit concentrate juices had plummeted in early2012 on destocking by Thai and Philippine peers, but have reboundedby 13% from their troughs in Aug 2012 are sustaining well as of now.
Upcoming catalysts.
We expect the summer crop output to increase22% YoY, and ASPs to rise 2% YoY. Meanwhile, with BPG’s new Baisefacility coming online by Apr 2013, we are of the view that AC’sprocessed fruit unit should see better economies of scale and will bemore able to capture market share over next three years once itsproduction bottleneck is resolved. That said, we estimate BPG’s saleswill more than double by end-FY6/15F from the last fiscal year, alongwith steadily rising gross margins on the back of its capacity expansion.
In search of new growth drivers.
We reckon AC’s graded “Royal Star”oranges have yet to possess bargaining power over its modern channelcustomers, as AC’s sales to this channel fell amid tough negotiations ina weak market. As such, AC is looking at diversifying into processingdifferent agricultural products as well as across more geographicalareas. Of note, it has been selling oranges to neighbouring Vietnamand is considering entering other ASEAN markets in future. We believeany earnings impact from this move would be minimal though.
 Asian Citrus –Summary Earnings Table
 
FYE Jun (CNYm) 2012A2013F 2014F2015
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 5.905.99 5.024.57EV/EBITDA (x) 2.292.02 1.531.16Div Yield (%) 5.925.84 6.977.66P/BV(x) 0.460.43 0.400.38Net Gearing (%) N/AN/A N/AN/ACore ROE (%) 8.017.35 8.358.71Core ROA (%) 7.917.25 8.238.58Consensus Net Profit (CNYm) -663 793867
Source: Company data, Maybank Kim Eng 
 
Buy
(unchanged)
 
Share price: HKD3.65 Target price: HKD4.55 
Jacqueline KO,
CFA
  jacquelineko@kimeng.com.h(852) 2268 0633
Stock Information
Description:
 Asian Citrus is the largest oranges plantationowner in China. It accounts for 3.3% of total oranges output in China in 2010 
 
Ticker: 73 HK Shares Issued (m): 1,227.7 Market Cap (USDm): 574.5 3-mth Avg Daily Turnover (USDm): 1.6 HSI: 22,520 Free Float (%): 53.12 
Major Shareholders: %
Chairman Tong Wang Chow 19.26  Xu Xuefeng 9.6Wellington 5.99Value Partners 5.96 Chaoda 6.0 
Key Indicators
 
ROE annualised (%) 7.4Net cash (HKDm): 3,096 NTA/shr (HKD): 8.78 Interest cover (x): N/A
Historical Chart
Performance:
 52-week High/Low HKD5.9/HKD3.211-mth 3-mth 6-mth 1-yr YTD Absolute (%) 4.9 0.3 4.3 (17.6) (0.8)Relative (%) 9.4 (2.7) (9.0) (22.8) (0.2)
0.1.2.3.4.5.6.7.8.9.10.0 Feb 12Apr 12Jun 12Aug 12Oct 12Dec 12Feb 13PRICEPRICE REL. TO HANG SENG INDE
Source: Bloomberg
 
 
27 February 2013 Page 2 of 9
 
 Asian Citrus Holdings Limited Figure 1: Our sales estimates
Rmb'000 FY6/11FY6/12FY6/13F FY6/14FFY6/15
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 FY6/14FFY6/15
Winter oranges 143,698171,607161,233 165,170158,947 YoY changes (%) 25.4719.42(6.05) 2.44(3.77)Summer oranges(ex-Hunan) 73,19471,81487,821 103,408117,983 YoY changes (%) 1.09(1.89)22.29 17.7514.09 Winter oranges ASP 3,7523,8523,891 3,9884,088 YoY changes (%) 13.612.671.00 2.502.50Summer oranges ASP(ex-Hunan) 6,0615,8565,973 6,1526,337 YoY 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 FY6/14FFY6/15
Pineapple juice concentrates 16,63624,34830,435 39,56649,853 YoY changes (%) N/A46.3625.00 30.0026.00Other fruit juice concentrates 4,01710,01713,022 16,27820,347 YoY changes (%) N/A149.3730.00 25.0025.00Other fruit purees 3,61617,47221,840 26,86333,042 YoY changes (%) N/A383.1925.00 23.0023.00Frozen and dried fruits and vegetables 9,63418,17021,441 25,30029,854 YoY changes (%) N/A88.6018.00 18.0018.00 Pineapple juice concentrates ASP 13,36211,15711,603 12,76413,785 YoY changes (%) N/A(16.50)4.00 10.008.00Other fruit juice concentrates ASP 21,74316,19617,006 18,19719,470 YoY changes (%) N/A(25.51)5.00 7.007.00Other fruit purees ASP 7,1307,1867,402 7,6247,852 YoY changes (%) N/A0.783.00 3.003.00Frozen and dried fruits and vegetables 8,5106,5546,882 7,4328,027 YoY changes (%) N/A(22.99)5.00 8.008.00
* Only 7 months of contributionSource: Company data, Maybank Kim Eng estimates
Figure 4: Gross margin by segments
FY6/11FY6/12FY6/13F FY6/14FFY6/15
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
 
 
27 February 2013 Page 3 of 9
 
 Asian Citrus Holdings Limited Figure 5: Output forecast for Hepu-summer oranges(tonnes)
Jun-13Jun-14Jun-15Jun-16Jun-17Jun-18 Jun-19 Jun-20 Jun-21Jun-2134
650 5,777 5,723 5,985 4,815 11,700 8,100
761 894 706 699 732 589 1,430 990
1,104 3,807 4,063 3,210 3,179 3,325 2,675 6,500 4,500
3,863 5,329 5,688 4,494 4,451 4,655 3,745 9,100
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-22 
28,000
29,200 29,200
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
20 Total  
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-22 
3,686 0 0
9
0 4,147 0
10 
16,216 0 4,147
11
6,210 23,423 0
12 131415 16 
3,491 0 0
17 
1,419 0 0
18 
1,818 0 0
1920 Total 
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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