Dongfang plans to list on the ASX

14^th August 2015

A leading food producer operating in the world’s largest agricultural market is headed to the Australian Securities Exchange (ASX).

Dongfang Modern Agriculture Holding Group Limited (“DFM”) has recently lodged its prospectus to raise up to A$50 million by way of an initial public offering (IPO) on the ASX.  Funds raised will augment A$56 million in current cash, enabling the company to fund growth initiatives including the acquisition of new plantations in China’s premier fruit growing region, Ganzhou City region in the Jiangxi Province.

Founded in 2009, DFM has since grown to become the second largest company in China harvesting citrus fruits.  The company’s strong growth has come on the back of two key trends in China; firstly, the sustained increase in household disposable income; and secondly, the growing preference for fruits and nuts in modern Chinese diets, which is seen as a healthy choice.

Last year, the company produced in excess of 200,000 tonnes of tangerines (mandarins), pomelos, navel oranges and camellia seed and fruit products on nearly 8,000 hectares of farms.  This led to revenues in excess of A$133 million, and net profit of A$67 million for FY2014.   Importantly, the company has a clean balance sheet with no debt, and expects the year ahead to be even more prosperous.

The tax exempt status of agricultural food production, which was initiated in 2008 to offset the production shortages caused through the rapid drain of farmers to the cities in China, has allowed the company to reinvest over RMB560 million (over A$100 million) from 2012 in acquisition of plantations.

Board and management team with proven track record

DFM is led by chief executive officer Mr Ming Sing Barton Tso, who has broad experience in successfully operating within China.  He previously was chief financial officer for HK-listed diversified telecommunication and resources company China Fortune Holdings.  Also on the board is prominent former Queensland politician and parliamentary secretary for Natural Resources, Water and Energy and Trade, Mr Michael Choi.

The IPO is supported by lead manager Paradigm Securities. At the issue price of A$1.00 per share and assuming the maximum subscription, the company will have a market capitalisation in excess of A$400 million upon listing.

Commenting on the listing, CEO Mr Tso said, “We are excited to progress the company’s IPO, and look forward to trading on the ASX shortly.

“DFM provides investors exposure to the massive and growing Chinese agribusiness sector, and we are ideally positioned to continue expanding the business and rewarding our shareholders.

“Produce output has grown from just 75,000 tonnes since 2012 to over 200,000 tonnes in 2014.  We think acquisition of more plantations will increase our market share, presence and profitability.”

DFM Chairman HongweiCai added, “The company has recognised a great opportunity in the aggregation of plantations and has been able to successfully bring modern cultivation, tree husbandry and harvest distribution together to achieve a high margin business that has strong long term growth.

“The continuing growth in the Chinese market place and the highly fragmented plantation sector underpins a long term strategy of market leadership through operational excellence and adoption of astute marketing programs.  A better quality product, delivered in large volume, is exactly what the Tier 1 Chinese cities demand.  That is what we provide.”

Mr Cai indicated that the long delays accessing the Shanghai and Shenzhen Stock Exchanges made it difficult for even successful companies like DFM to gain listings and access capital in China.  “Many investors in Ganzhou and other parts of China have wanted to support DFM, so the ASX listing will achieve that and offer a speedier process and more transparent system of corporate governance, which should allow the company to be better rated in international equity markets.”

The Australia China Free Trade Agreement should help pave the way to more successful Chinese companies coming to ASX and providing investment opportunities not usually available to Australian investors.

Lead Manager Paradigm Securities’ Chairman Barry Dawes was pleased with the interest in DFM: “I have been travelling to China since 1982 and have seen dramatic changes in the cities and in the rural areas.  The opportunity of investing in a fundamental industry such as citrus plantations that has a very large, growing and increasingly sophisticated market is simply unavailable in Australia’s small market.   Investing in DFM is participating in that agricultural market expansion in China without involving export transportation or chasing expensively marketed niches.”

The IPO shares are expected to commence first trading on the ASX in September 2015.

To download the full announcement, please click on the link below.