Yamada Green Resources Limited “the Company” is offering 30.08m Vendor Shares and 74.9m New Shares of which 2m will be via public and the rest via placement. The shares are priced at $0.22 each. The IPO will close on 6 Oct at12pm.
The Company is a major supplier of self-cultivated shitake mushrooms in Fujian Province PRC and operates one of the largest cultivation base there. Its products are broadly classified into mushrooms or processed food products.
Revenue grew from RMB 73m million in FY2007 to RMB 236.2m in FY2009 and net profit after tax grew from RMB10.4m to RM81.7m over the same period. The net margin improved from 14.2% to 34.6% during this period. The unaudited 3M 2010 revenue grew by another 63% and net profit grew by 85% respectively over the same period in FY2009.
Post IPO, the company intends to expand its cultivation base, expand its eucalyptus plantations and establish its own distribution and marketing network. There will be 406.6m shares post IPO, i rather they issue less shares and priced it higher. I guess the IPO managers are still of the view that investors believe "lower priced" China shares are 'better' as the down side risk is 'lesser'. I rather they be more confident in this regard.
Based on the post IPO no. of shares, the company is listing at a historical PER of 5.23x (assuming the service agreement is in place in FY2009 based on the post-IPO shares). The market cap will be $89.45m.
Assuming the net profit increased by more than 50% in FY2010, this means the net profit will be RMB 122.5m. This will translate into a EPS of approximately 6 Singapore cents. Based on the IPO price of 22c, it is priced at a prospective PER of 3.67x which is very 'cheaply' priced.
Sinograndness (another listed S-chip in button mushroom) is trading at around 6.2x PE. Assuming Yamada trades at 5-6x prospective, it will translate into a fair price of 30-36c. But a few push back factors will be the vendor share sale and huge float. It will likely be another hit and run story.