March 1, 2012

Chinese pork supplier sets sights for retail investors

China's Putian Food Holdings opens for retail subscriptions, in an aim to raise HKD306 million (US$39 million) for its initial public offering in Hong Kong.

The Fujian-based company is an integrated pork supplier involved in farming, slaughtering and the sale of pork.

With only one hog farm of its own in operation, Putian has to rely heavily on five contracted suppliers, which were accounting for 90.1% of the total output of hogs as of September last year.

According to reports, to reduce its dependence on outside suppliers and to strengthen its business, the company plans to build six additional farms funded by 62.6% of the IPO proceeds which is HKD189.7 million (US$24 million).

The new farms are expected to be operational in the second half of next year with a capacity of 374,500 "commodity hogs" a year - at least 10 times the current output.

Putian also intends to expand its retailing network by setting up more sales points. Most would be in supermarkets, including Walmart outlets in China. Another 12 sales counters will be added by the end of this year.

Putian sold its pork at RMB25.4 (US$4.03) per kilogramme as of September, up by 26.4% on 12 months earlier. "Prices are expected to stabilise this year and may rise slightly next year," said chairman and chief executive officer, Cai Chengyang.

The company set the IPO's indicative price range between HK$1.09 (US$0.14) and HKD1.53 (US$0.20) per share, representing a price-to-earnings ratio of 7.7 times to 10.8 times.

A minimum one board lot of 2,000 shares costs HKD3,090 (US$394.43). Book building closes on March 5 and trading debut is set for March 9.