Event: the company announced on the evening of July 27 that the controlling shareholder Jiawo Group intends to accept the principal of US $62.5 million convertible bonds issued by Fresh, a controlling subsidiary of Cangyuan Investment, and the deferred interest payment (PIK) bonds corresponding to this part of the convertible bonds.
Reduce the asset-liability ratio and further optimize the financial structure
In March 2019, in order to complete the tender offer for Australis Seafoods, a leading Chilean salmon company, Jiawo Zhencheng, a wholly-owned subsidiary of the company, signed a "Joint Investment Agreement" with Cangyuan Investment, jointly funded the establishment of Fresh, and held 80.62% and 19.38% of Fresh, respectively. At the same time, in order to provide financial support and assistance for the acquisition of Australis, Cangyuan invested $125 million to subscribe for $125 million of convertible bonds issued by Fresh with a maturity of 60 months.
After the completion of this transfer, Jiawo Group and Cangyuan Investment respectively hold 50% of the convertible bonds issued by Fresh. The two sides agreed that after the completion of the transfer transaction, the Jiawo Group will convert the creditor's rights into the equity of Fresh, which fully reflects the long-term confidence and high recognition of the controlling shareholders for the future development of the company. The controlling shareholder will transfer part of the convertible bonds and will convert shares to reduce financial costs.
Control the license plate scarce resources and integrate the operation of the whole industry chain
Through the acquisition of Australis, a leading salmon company, the company cuts into the high-value link of the industrial chain, and relying on scarce resources such as licenses, the company is expected to further strengthen industry barriers; and long-term benefit from the tight balance between supply and demand in the salmon market, with the gradual recovery of overseas demand, the prosperity of the salmon industry continues to improve, the company's revenue continues to grow, and profitability is greatly improved. At the same time, the company has realized the integrated whole industry chain operation of salmon business from egg incubation, fresh water breeding, mariculture, harvesting and processing to brand sales, and built an ecological closed loop of the industrial chain. and has unique advantages in each process link, "overseas + domestic", "offline + online" double-end force.
Investment suggestion
We believe that, as the mainstream consumer fish products in Europe and the United States, the demand for salmon is relatively rigid, while the culture license and harvest have become scarce resources in the world. The corresponding market value of the company's salmon is much lower than that of the major overseas leading enterprises (the average market value of the overseas leading enterprises is about 2.1 billion RMB / 10,000 tons, and the company's 21-year harvest is 84000 tons). The company has a scarce salmon culture license and the layout of the industrial chain, is expected to benefit from overseas and domestic consumption recovery trend, seafood sales revenue is expected to increase rapidly. We expect the company's revenue for 2022-24 to be $6.48 billion and net profit to be $8.51 billion for $7.27 billion, maintaining a "buy" rating.
Risk hints: natural disaster risk, market price fluctuation risk of raw materials and products, trade environment and exchange rate risk, lower-than-expected sales risk, recurrent epidemic risk, consumption recovery and consumption upgrade are less than expected risk, transfer still has some uncertainty.
