July 28, 2010


Sichuan New Hope's trading suspended


Sichuan New Hope Agribusiness Co Ltd, the listed arm of China's largest animal-feed producer, New Hope Group, announced its share trading has been suspended for undisclosed reasons that may cause the company's share price to fluctuate irregularly.


Industry experts said the reason behind the suspension may be that an unlisted subsidiary of the group - Shandong Liuhe Co Ltd - has plans in the works to inject capital into Sichuan New Hope. The Shenzhen-listed company declined to comment and did not signal when trading will resume.


Shandong Liuhe is China's largest poultry product processor and Shandong's top feed enterprise with more than 200 subsidiaries engaged in feed, animal husbandry and meatpacking.


"Combining the listed and unlisted assets is the inevitable choice for Liu Yonghao, president of New Hope Group, who wants to develop his company into a world-class agriculture enterprise," said industry analyst Sun Guodong.


According to Sun, meat sales of four unlisted units of Sichuan New Hope were eight times that of Sichuan New Hope last year. Meanwhile, their total sales revenue was 6.6 times the listed company.


Sun said that Shandong Liuhe is more likely to make the investment, because of its good asset quality and capacity for profitability.


The combined sales revenue of Liuhe was RMB40 billion (US$5.9 billion) last year. While, that for Sichuan New Hope Agribusiness was RMB6.8 billion (US$1 billion), 6.4% lower than a year earlier.


New Hope Group acquired a 45% stake in Shandong Liuhe in 2005. According to Du Juan, head of the office of New Hope Group, Shandong Liuhe saw a 100% increase in its business every year since it joined New Hope.


Sun estimated a 32% increase in New Hope's sales, which is expected to hit RMB9 billion (US$1.3 billion) in 2010.


By Friday (Jul 23), the share price of Sichuan New Hope Agribusiness on the Shenzhen exchange was RMB8.56 (US$1.26), 64% lower than its highest price of RMB24 (US$3.54) per share in 2008.


Industry expert said it's a suitable time for Liuhe to make an investment because of the low share price.