Friday, December 17, 2010

Sozo Global plans RM15m factory for halal products

KUALA LUMPUR: China-based Sozo Global Ltd, which made its debut on the Main Market on Friday, Dec 17, plans to invest RM15 million to set up a halal-food processing factory in Malaysia.

Its chief executive officer and co-founder Shen Hengbao said Sozo ' which manufactures ready-to-serve food -- would hire a team to survey the locations for the Malaysian plant. CONSTRUCTION [] could start by mid-2011 and production a year later.

'We are doing a feasible study on the possible location as it should have easy access to our raw materials and export facilities. We are happy that we have the help of Khazanah Nasional Bhd to help us survey the locations and get the proper halal approvals,' he said after the listing ceremony.

The processing plant would produce canned food and ready-to-serve products for the Malaysia market and also Southeast Asia, the Middle East, Europe and the US.

Out of the RM15 million, RM5 million would come from IPO and RM10 million from internal funds.

Shen said the indicative land size for the plant is 8,000 sq metres and its production capacity would be 20,000 tonnes per year.

Khazanah indirectly holds 10.43% stake in Sozo, via its special-purpose fund Agro Treasures, while 57.09% is held by Hengbao Foodstuffs, which is also the promoter of Sozo Global.

'Since we ventured into ready-to-serve food industry five years ago, we have progressed to be one of the leading foodstuff enterprises, as well as the largest manufacturer of cooked duck meat products for export in Shandong province,' he said.

Sozo's initial public offering (IPO) was oversubscribed 3.3 times, and involves a public issuance of 55.4 million new shares at 80 sen each.

Of the total, 24.5 million shares were for the Malaysian public and 30.9 million were placed out to selected investors. Concurrent with the IPO, another 19.1 million shares were offered for sale.

The listing exercise raised RM44.3 million, of which RM15 million was allocated for a third production plan in Shandong, RM5 million for a modern duck breeding farm and RM5 million to set up a processing facility.

Shares of Sozo opened at 79.5 sen, which was a discount of 0.5 sen from its offer price of 80 sen, when it made its debut on the Main Market. There were 1.77 million shares done.

RHB Research said it derived a fair value of 95 sen a share after applying a FY11 target of 4.0 times PER, which is a 10% discount to the weighted average FY11 target PER of the three listed China based companies on Bursa Malaysia.

'We believe it is more relevant to benchmark Sozo against its China listed peers in the KLSE than the Malaysian peers given the large discount usually applied to China listings in Malaysia, irrespective of its business model,' it said.

OSK Research said it expects the group to register revenue and net profit CAGR of 15% and 15.2% respectively in the next two years, and value Sozo's price to earning at six times multiple.

'We value Sozo at RM1.22 based on six times FY10 earnings per share. We believe the stock's price downside is limited given that 66.5% of the company's shares are under a one-year moratorium,' it said.

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