Daily Review, 18 February 2013 Page 3 of 4
SGX-ST Member, SGX-DT (CNCM)
CHINA MINZHONG
S$1.02-CMIN.SI
Indonesia listed PT Indofood Sukses Makmur Tbk
(Indofood) which produce instant noodles, wheat
flour, baby food, food seasonings, coffee, cooking oil
and snacks is taking a 14.95% stake (representing
98mln new shares) in China Minzhong at 91.5 cents
each, representing a 10% discount to its last traded
price.
Indofood’s sales for 2012 is estimated to be around
US$5.12bln about 10x bigger than China Minzhong’s
US$512mln and is expected to help China Minzhong
penetrate into new markets and distribution channels,
especially into Indonesia which Minzhong currently
does not have a presence.
In a conference call this morning, management
disclosed that they will likely provide air-dried and
freeze dried vegetables to Indofood’s instant noodles
business segment which they had sold 15bln packets
last year. Another addressable market will be to
provide vegetables to Indofood’s baby food section.
S$70mln of the new proceeds will be used to finance
capex for the expansion of their industrialized farming
of King Oyster Mushrooms in China while the other
S$15.2mln will be used for working capital purposes.
After Indofood’s entry, GIC’s stake will be diluted
from 16.91% to 14.37% while Templeton’s stake will
be diluted from 13.05% to 11.09%.
Indofood’s 14.95% stake would make them Minzhong’s
single largest shareholder.
Without factoring in potential profit upside from the
new funds, the 14.95% dilution will see Minzhong’s
June 2013 PE increase from 3.6x to about 4.1x.
But management said at this mornings conference call
that over the next few months, they expect positive
earnings per share announcements to help offset this
dilution.
With the addition of Indofood as the largest
shareholder in Minzhong and one who is able to add
strategic business value and also provide market
confidence in this S-Chip, the 14.95% new share
dilution at a 10% discount is unlikely to be too much
of a concern.
We maintain BUY.