China Minzhong Food Corporation Limited

China Minzhong Food Corporation ("CFMC") launched its IPO by selling 119.602m new shares and 77.742m vendor share at $1.20 each. 9.867m shares will be available for the public while the rest will be through placement. The IPO will end on 13 April at 12 pm.

CFMC believed that it is the leading vegetable processor in China. It is also one of the few integrated vegetables processing companies with its own cultivation bases.  Its key products can be broadly classified into processed vegetables or fresh vegetables produce.

CFMC's revenue grew from RMB 445m in 2007 to RMB 1,058m in 2009. During this period, the net income grew from RMB 119m to RMB 288m. For the year ending 30 Sep 2009, the revenue was $224.6m and net profit was $61.2m. Based on the enlarged share cap, the EPS for FY2009 was $0.11. At the IPO price of $1.02, the company is listing at a historical PER of 9.3x. The IPO proceeds will be used mainlyto increase production and cultivation capacity. The NAV per share post IPO will be $0.65

The market cap based on the IPO price will be $645m and there will be over-allotment as well as stablisation action performed by JPM.

Pre-IPO investors came in at various prices, ranging from 18c to 72c. The more prominent ones are : Tetrad Ventures (aka GIC) at 28c, CMIA Funds (aka as the manager who was brought down by Ferro China) at 18c, OCBC Capital at 72c. Prudential Asset Managment is the public corner stone investor and has subscribed for 25m shares and Fidelity HK is also a cornerstone investor subscribing for 6.67m shares.

This is an interesting company as it is one of the first of this kind to be listed here.  If not for the fact that GIC is an investor, the company would probably have tried to list in HK.  It is listing at a fair PE mulitple of around 9.3x.  Assuming earnings went up by 25% in FY 2010 and a fair value range of 9x to 12x, the EPS will be $0.1375 and the Company's fair value will range from $1.24 to $1.65.

Given the fact that GIC has invested, it lends some 'credibilty to the operations and given the fact that this is one of the bigger IPO to be listed here, it will command a premium over its other China listed S Chip. With JPM acting as stablising manager, the selling pressure on the first week should be well absorbed and the IPO is worth 'a stag'.

However, the fact that many pre-ipo investors are PE funds, it is likely to face some selling pressure when the moratorium is over in 6 months time.