Japfa - CGS-CIMB Research 2023-01-03: Post-AustAsia Group (AAG) Listing Update

Japfa - Post-AustAsia Group (AAG) Listing Update

JAPFA LTD. (SGX:UD2) | SGinvestors.ioJAPFA LTD. (SGX:UD2)
  • Japfa (SGX:UD2)’s subsidiary AustAsia Group (AAG, 2425.HK) was listed on the Hong Kong Exchange (HKEX) on 30 Dec 2022 at HK$6.40 per share. With the listing of AAG, eligible Japfa (SGX:UD2) shareholders would be required to elect for one of four options regarding their entitled AAG shares.
  • Japfa's shareholders should take note that the default standing instruction has been changed from Option 3 (receive a physical AAG share certificate) previously to Option 4 (disposal of AAG shares by Japfa’s appointed broker and receive the net proceeds from the sale afterwards). See Japfa's announcement dated 29 Dec 2022.
  • We think that poor market sentiments have led to a less-than-ideal IPO valuation of HK$4.48bn for AAG despite its growing milking capacity, compared to the price tag of ~HK$9.12bn in 2021 when AAG onboarded new strategic shareholders, i.e. New Hope (002946 SZ), Genki Forest and Honest Dairy.
  • Given the growth prospects of China’s dairy industry, we believe that opting for Options 1, 2 or 3 may allow shareholders to benefit over the longer term. However, the default option (Option4) is convenient for shareholders entitled to less than the lot size of 1,000 AAG shares to dispose of odd lots, or for investors who do not wish to have exposure to AAG’s business.
  • We reduce our target price for Japfa to S$0.42, based on 8x FY24F P/E on Japfa’s remaining animal protein businesses after removing its stake in AAG from FY23F.
  • The current Japfa's share price of S$0.315 (3 Jan 2023) implies a 16% discount to its ~55% stake in Japfa Comfeed (JPFA), while disregarding the value behind its Animal Protein Other (APO) business, although we understand that persistent losses in its APO business due to the persistent recurrence of African Swine Fever (ASF) have weighed on Japfa’s valuations.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.

TAY Wee Kuang CGS-CIMB Research | https://www.cgs-cimb.com 2023-01-03

Previous report by CGS-CIMB:
2022-12-19 Japfa - Listing Of AustAsia Group (AAG) In Sight.

Price targets by other brokers at Japfa Target Prices.
Listing of research reports at Japfa Analyst Reports.

Relevant links:
Japfa Share Price History,
Japfa Announcements,
Japfa Dividends & Corporate Actions,
Japfa News Articles

SGX Stock / REIT Search


Trust Bank God Of Fortune Referral Code PGKPSWAE Trust Bank Referral Code 🧧