Events:
On July 29, 2019, the company signed a share subscription agreement with 11 shareholders of Royale Marine IMP-EX Private Limited of India (hereinafter referred to as "Royale") and will use its own funds of US $4 million to subscribe for 25.30% of the newly issued shares of Royale. After the completion of this investment, the company will become the second largest shareholder of Royale.
Comments:
Through 4 million US dollars (valuation premium is only 20%), the company pried the shrimp industry chain in India, the most important producing area in the world, to accelerate the global industrial layout, win the momentum of sustainable development in the future, and improve the company's anti-risk ability and global resource integration and mobilization ability. At the same time, the good domestic development momentum of the company has not diminished, and if the domestic market companies can make a breakthrough in the future, there will be great prospects.
1. The valuation is only 20% premium, accelerating the global industrial layout.
The valuation is only 20% premium and enjoys a veto over major issues, demonstrating the League of Nations' ability and influence on the integration of the industrial chain. Royale mainly engaged in shrimp products processing, refrigeration and sales business, with BAP four-star certification, products are mainly sold to the United States, the European Union, China and other countries and regions. According to the audit report issued by Lixin India, as of Q1 2019, the company had total assets of US $21 million and net assets of US $9.84 million; the company had operating income of US $31.3 million from April 2018 to March 2019, with a profit of US $1.57 million and a net interest rate of 5%. Taking into account the business basis of the underlying company and other factors, the parties agree that the valuation of the underlying company before this investment is 11.81 million US dollars. By reversing the transaction amount and the investment ratio, the premium rate of the underlying company is only 20%, which is very cheap. At the same time, the League of Nations can appoint not less than 2 board members to the Royale company and enjoy the right of veto over major matters, thus having a significant impact on the strategic decision-making and production and operation of the invested company. This also shows the company's ability and influence on the integration of the industrial chain.
India currently has a production capacity of more than 800,000 tons, accounting for about 20% of the global shrimp production. Due to its huge production, India is also one of the countries with the lowest shrimp prices in the world. This investment will help the company to take advantage of the rapid development of the Indian shrimp industry. Through global layout operations to ensure the company's future rapid development of strategic resources and international trade advantages, to lay a better foundation for the company's long-term development.
2. The stock price has been dragged down by the Sino-US trade friction, but the good domestic development trend remains unchanged.
Affected by Sino-US trade frictions, increased costs and non-recurrent profits and losses, the company's share price continues to fall, but the good development trend of the domestic market remains unchanged. As the company's main sales area is the United States, affected by Sino-US trade frictions, the company's sales in the United States have been affected to a certain extent. The crayfish business, which the overlay company is vigorously expanding, is currently in the investment period, with a larger increase in costs. at the same time, non-recurrent profit and loss decreased by more than 70 million, resulting in a sharp decline in the performance of the China report, and the company's stock price continued to decline. However, we should see that, as the only new retail target of all A shares backed by Yonghui (holding 10%) and BABA (strategic cooperation), the company's e-commerce business still maintains a trend of rapid development. at the same time, under the background of the full recovery of the downstream catering industry and the rise of large B-end customers, the market demand for large-scale, safe and stable food suppliers has increased significantly. Companies in the domestic market will have a bright future if they can make a breakthrough in the future.
Risk factors: equity participation projects fall short of expectations, exchange rate fluctuations, foreign policy risks (including but not limited to trade frictions, equity participation projects are affected by local government policies), internal management risks, food safety risks, Yonghui or BABA cooperation falls short of expectations, factory farming falls short of expectations.