Headquartered in Chongqing, China Xiangtai Food Co., Ltd, is a food company primarily engaged in pork processing. The Company's operations span key sections of the pork processing value chain, including slaughtering, packing, distribution, and wholesale of a variety of fresh pork meat and parts. Primarily focused on pork products, PLIN also offers other fresh and processed
products, including beef, lamb and poultries.
China Xiangtai Food Co., Ltd. Enters into Definitive Agreement to Acquire Controlling Interest in Chongqing Ji Mao Cang Feed Co., Ltd.
Published: April 3, 2020 at 9:00 a.m. ET
CHONGQING, China, April 3, 2020 /PRNewswire via COMTEX/ -- CHONGQING, China, April 3, 2020 /PRNewswire/ -- China Xiangtai Food Co. Ltd. (NASDAQ: PLIN) ("Company" or "PLIN"), an emerging growth company primarily engaged in pork processing in China, today announced that the Company, through its subsidiary Chongqing Jinghuangtai Enterprise Management Consulting Co., Ltd., entered into a definitive agreement (the "Agreement") to acquire a 51% controlling interest in Chongqing Ji Mao Cang Feed Co., Ltd. ("JMC"). JMC is a private enterprise specializing in feed raw material sales and providing feed formula solutions, and the acquisition is expected to help the Company expand its market in Southwest China.
As previously announced, the Company entered into a non-binding Memorandum of Understanding (the "MOU") to acquire 51% controlling interest in JMC, one of the leading feed suppliers in southwest China. JMC has more than 200 customers in the farm industry and nearly 100 customers in the feed production industry. In 2019, JMC sold more than 200,000 tons of soybean meal, exceeding $70,000,000 USD (RMB 500 million) in sales. With the Company's revenue of $102,545,152 in its last fiscal year, PLIN expects this acquisition to increase its gross revenue by 70% on an annual basis.
Pursuant to the Agreement, subject to certain milestones to be achieved by JMC, the Company agreed to issue to JMC a total of 2,000,000 shares of the Company's ordinary share for consideration equal to $7,420,000 over the next two years.
Ms. Zeshu Dai, Chairwoman and CEO of China Xiangtai Food, commented, "We are thrilled to enter into a definitive agreement with JMC. Combining JMC's capability in feed raw material and formula solutions with PLIN's commercial strength as a leading provider of pork products will make a dramatic impact on our penetration and expansion into China's southwest market. Looking ahead, we will continue to implement the Company's growth strategy to create value for our shareholders."
Mr. Xiaohui Wu, the President and Director of China Xiangtai Food, added, "The acquisition of JMC will further enable the Company to respond to the growing demand for pork in China. We believe that our business and profitability will benefit from this expanded vertical integration of the industry supply chain and network. Further, this transaction will accelerate our already impressive growth in this vital market."
About Ji Mao Cang Feed Co., Ltd.
Founded in 2012, Chongqing Ji Mao Cang Feed Co., Ltd("JMC"). is a private enterprise specializing in feed raw material sales and feed formula solutions. JMC has entered strategic alliances with large grain and oil companies such as Sinograin, COFCO, Cargill, Good Ocean, and Louis Dreyfus, and has obtained general distributorship in Chongqing, Sichuan and other places. JMC has more than 200 customers in the farm industry and nearly 100 customers in the feed production industry. In 2019, JMC had sold more than 200,000 tons of soybean meal and reported a revenue of RMB 525 million and a profit of RMB 15 million.
Stated By Goldman Small Cap Research
Analyst Rob Goldman from Goldman Small Cap Research, released a complete research report on the company with a $6.70 target.
- Pork is a major food staple in China and PLIN is a leading provider. PLIN benefits from key industry trends toward more profitable frozen and processed pork and by-products and sales through supermarkets and restaurants instead of farmer’s markets.
- Our thesis, forecasts, and target price reflect what we believe to be a potentially highly favorable impact on the Company and shareholders should management pursue a roll up of competitors and complementary firms. While the core organic business model remains robust on its own, we believe a roll up could dramatically change the positioning and valuation.
- With an estimated 60M tons to be purchased this year from and through a fragmented list of players, PLIN has an opportunity to expand market share via new products, channels, markets, or by acquisition. PLIN has an advantage as a popular and respected in-country brand that offers domestic and foreign product and its unique status as a U.S.-listed public company.
- Our model assumes top-line, margin and valuation expansion in conjunction with M&A. We forecast sales will grow from $102M in FY19 to $202M in FY21, with EPS jumping from $0.21 to $0.67.
- Pork companies such as Hormel are near year highs as this category serves as a popular defensive group during these difficult economic and market conditions. Our $6.70 price target represents a 10x P/E versus the 26x Hormel multiple, and is a reasonable metric given top-line growth and margin expansion, in our roll up scenario. Even if management does not elect to pursue a roll up, we believe these shares can return to the $2.60 level (10x FY21E EPS) during the second half of 2020, a 66% gain from current prices.
According to Yahoo Finance, PLIN has a float of approximately 8.74Mn shares.
PLIN Potential Catalyst - New Business Collaboration Agreement
China Xiangtai Food Co., Ltd. Entered into Business Collaboration Agreement for up to RMB 35Mn to Expand Operation Scale and Diversify Distribution Channels
CHONGQING, China, Feb. 25, 2020 /PRNewswire/ -- China Xiangtai Food Co. Ltd. (NASDAQ: PLIN) (the "Company" or the "PLIN"), an emerging growth company primarily engaged in pork processing in China, today announced that the Company, through its primary operating subsidiary Chongqing Penglin Food Co., Ltd, entered into a business collaboration agreement (the "Agreement") with Chongqing Good Helper Commerce Co., Ltd. ("CGHC"), a financing company backed by the local government in Chongqing, China for a business collaboration for up to RMB 35Mn on the expansion of operation scale and diversification of distribution channels.
Pursuant to the Agreement, both parties agreed to collaborate on the purchasing, packaging, sales of pork, beef and lamb, as well as handle staffing, renting and managing additional facilities. CGHC has agreed to provide the Company with financing up of to RMB 35Mn with an annual interest rate of 10% in considerations of equal pro*fit and expense sharing.
Both parties are aware of the spread of 2019 [...] and are focused on being detailed orientated by providing continued transparency, integrity, and keeping its pork clean, price fair and stable, and timely delivery of quality fresh pork and other freshly processed meat products to supermarkets in Chongqing every day.
Ms. Zeshu Dai, Chairwoman and CEO of China Xiangtai Food, commented, "We appreciate CGHC's trust in PLIN, and are pleased to have reached this agreement. We need to increase our sale volume for premium quality product with diversified distribution channels to meet the strong domestic pork demand. This collaboration would offer us the opportunity to expand to new retail channels and access to considerable working capital for its business needs."
From the company website:
Incorporated in Cayman Island on January 23, 2018, China Xiangtai Food Co., Ltd. is primarily a pork processing company that has operations across key sections of the industry value chain, including slaughtering, packing, distribution, and wholesale of a variety of fresh pork meat and parts.
We purchase live hogs through distributors who purchase hogs from well-known big hog farms located in different cities in southern China. We use an automated standard modern production line to slaughter the hogs and pack the fresh pork and byproducts. We deliver the fresh pork to local distributors who then resell the fresh pork to smaller wholesalers and retail vendors. Main products from the processed series include shredded meat, sliced meat, meat stuffing, pickled meat, lamb and offal, sausage, bacon, steamed meat, breaded chicken and spicy meat.
We also purchase fresh pork, beef, lamb, chicken, duck, and rabbit meat from local farmers. We process fresh pork, beef, lamb, chicken, duck, and rabbit meat into processed products. We sell fresh pork and processed meat products to both wholesale and retail markets. Main products from the fresh series include fresh pork and byproducts, beef, lamb, chicken, duck and rabbit meat.
Maintaining the highest industry standards for food safety, product quality and sustainability is one of our core values. We have food circulation permit and national industrial production certificate. Our operations comply with international standards and we have obtained a series of certifications, such as ISO9001, ISO22000 and HACCP. We have strict quality control systems in each segment of our value chain, from production through sales and distribution.
We have more than 200 employees. In our slaughterhouse and processing facility, we have a standardized and automatic production line for hog slaughtering and meat packing. We also have meat processing rooms and standardized freezers to process and store processed meat product. Our slaughtering plant in Linshui Industrial Park, Sichuan Province covers an area of 27,000 square meters. Our processing factory in Fuling, Chongqing, covering an area of 8,000 square meters. We have 6 registered trademarks in PRC.
We are committed to provide consumers with high-quality, nutritious and tasty products through our portfolio of trusted and well-known brands and to driving consumption trends, while setting a high industry standard in product quality and food safety.
Conclusion: This NASDAQ low float stock profile is currently trading around the $1.85 level and has a staggering price target of $6.70. That alone is a 262% potential upside gain.