China MinZhong

China MinZhong: Kim Eng initiates coverage with Buy Call of $1.80 TP, based on 9x FYJun12 P/E. Note that China is emerging as an increasingly important vegetables supplier globally, & grp looks set to enjoy continued growth in its export sales for processed vegetables. Domestically, grp is benefiting from rise in demand for fresh quality vegetables on back of increased urbanisation, rising affluence & population growth….

As an integrated vegetable processor in China, Minzhong is able to plan its cultivation and processing schedules based on advance sales orders from its customers, ensuring strict product quality & tight cost control through maintenance of a reliable supply of raw materials….

Grp’s products are distributed in 25 countries around the world, giving rise to its diversified global customer base. Over the yrs, the grp has forged long-term relationships with many of its key clients such that repeat orders currently constitute the bulk of its total sales….

Minzhong is taking steps to bolster its product range by adding more higher-value vegetables, such as asparagus, king oyster mushroom and black fungus, to its portfolio. The cultivation of organic vegetables on a large-scale commercial basis may give its earnings a new lift. Going forward, grp plans to expand the size of its farmland in China by up to 90,000 mu (60m sqm), doubling the area of its existing cultivation land…

We note that Sino Grandness and Yamada are also key beneficaries of the increased interest and demand towards China’s agricultural commodities market. Sino Grandness currently trades at an undemanding 5.1x Forward PE, with Street having a unamnious Buy Call with TP ranging from $0.56-0.63....

Yamada similary trades at an undemanding 5.4x forward PE, with Buy Calls ranging btwn $0.38-$0.40, with counter appearing to have broken out of its resistance levels at $0.295. Next level resistance tipped at $0.355.

Yamada similary trades at an undemanding 5.4x forward PE, with Buy Calls ranging btwn $0.38-$0.40, with counter appearing to have broken out of its resistance levels at $0.295. Next level resistance tipped at $0.355.

We note that at current price, grp still trades at undemanding valuations of 5.2x FY11E PE, vs industry average of 14.7x.