JAPFA LTD. (SGX:UD2)
Japfa - Got Milk?
- Japfa (SGX:UD2) entered third sales and purchase agreement (SPA) in 10 days to divest of its stake in AustAsia Investment Holdings (AIH), its China raw milk business.
- A milk supply agreement is tagged to each SPA, where AIH will supply raw milk to the new investors on a five-year rolling basis, renewable annually.
- Japfa will retain a 62.5% stake in AIH and continue to pursue its ambitions to become China’s largest independent raw milk producer.
3 new investors for Japfa's AustAsia Investment Holdings in 10 days
- On 7 Sep 2021, Japfa announced the divestment of 5% of its stake in AIH to GGG Holdings Limited, the nominated affiliate of New Hope Dairy (002946 SZ), subject to authorities’ approval. This marks the third divestment in 10 days and a total divestment of a 12.5% stake in AIH to three investors for a total consideration of US$146m, representing a 1.59x price-to-book valuation.
- The divestment is a follow-up to Japfa’s recent exercise to add strategic milk processors as shareholders of AIH in 2020, where Meiji Holdings (2269 JT) came on board as a strategic partner with a 25% equity stake for a consideration of US$254.4m.
Locking in demand for next five years
- As part of the respective SPAs, Japfa enters into a milk supply agreement with raw milk to the investors at prevailing market prices in return.
- Given the persistent shortage of raw milk in China, we do not foresee any early termination of the agreements.
Strengthened financial position, no capital expansion plans for now
- Proceeds from divestments will be used for general working capital in July.
Strong aspirations supported by well-thought-out plans
TAY Wee Kuang
CGS-CIMB Research
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https://www.cgs-cimb.com
2021-09-08
SGX Stock
Analyst Report
1.060
SAME
1.060
