Presentation on theme: "1 Asia Bio-Chem Group September 2009. 2 Forward Looking Information Statement The contents of this presentation contain statements that may constitute."— Presentation transcript:
1 Asia Bio-Chem Group September 2009
2 Forward Looking Information Statement The contents of this presentation contain statements that may constitute “forward-looking statements” within the meaning of applicable securities legislation. Forward-looking statements may include financial and other projections, as well as statements regarding future plans, objectives or economic performance, or the assumptions underlying any of the foregoing. Forward-looking information involves significant risks, assumptions, uncertainties and other factors that may cause actual future results or anticipated events to differ materially from those expressed or implied in any forward-looking statements and accordingly, should not be read as guarantees of future performance or results. Actual results, performance or achievement could differ materially from those expressed in, or implied by, any forward-looking statements made and, accordingly, investors should not place undue reliance on any such forward-looking statements. New factors emerge from time to time, and it is not possible for management to predict all of such factors and to assess in advance the impact of each such factor on Asia Bio-Chem’s business. The agents and the agents’ counsel assume no responsibility or liability of any nature whatsoever for the accuracy, adequacy or completeness of the publicly available information or as to whether all information concerning the Company required to be disclosed by the Company has been generally disclosed. The agents’ counsel and the Company's counsel are acting as counsel to the agents and the Company, respectively, and not as legal counsel to the subscriber. The agents have not engaged in any independent investigation or verification with respect to any of the information concerning the Company. Prospective purchasers are responsible for their own due diligence investigation in respect of any investment in the Company.
Investment Highlights Surging demand for agriculture products Competitive advantages –Raw material supply –Proximity to transportation and infrastructure –Labor and capital costs Track record of growth and profitability Well defined growth strategies Management has successful operating experience with extensive industry and government relationships
4 Company Overview Manufacturer and distributor of corn starch and related products in China with first plant in Liaoning Province (4 th largest producer of corn in China) Established in employees going to 850 First plant processing 300,000 tones/year at full capacity Second plant under construction to process 600,000 tones/ year Completed a $30 million private placement in June 08 Listing on TSX Venture Exchange (Symbol: ABC)
5 Industry Overview
6 Global corn starch industry is over 80 million tones/year representing over $50 billion in revenues
7 Industry Overview China is the second largest producer of corn in the world Industrial processing in China consumes 40 million tones of corn /year Starch production has grown by 20% per annum
8 Chinese Market Consolidation # of producers with over 50,000 tonnes/year1037 # of producers with over 200,000 tonnes/year019 # of producers with over 1 million tonnes/year04 Chinese corn processing industry is in early stage of development: Only 4 companies with over 1 million tones /yr of capacity No major multinational are significant players in China Asia Bio-Chem expects to be the 5 th largest producer in the PRC by the end of 2009
9 Uses for Corn Starch in China Sweeteners Food (Soft drinks, beer, dressings, confectionary goods, children’s vitamins) Pharmaceutical, industrial, feed, food (Noodles, pudding, baked goods, adhesives, detergent, MSG, animal feed, antibiotics) glucose, fructose, malt syrup dextrin, citric acid, MSG, lactic acid, lysine alkali starch, acified starch, sorbitol, maltitol, mannitol Fine chemicals, pharmaceuticals (Toothpaste, cosmetics, plastics) Food, textile, pulp and paper (Textile coatings, paper coatings) Other Fermentation Products Modified Starch Polyols 9.7 million t/yr6.6million t/yr1.7 million t/yr1.2 million t/yr S t a r c h
10 Company Operations
11 Location ChangTu County Beijing 2 Plants Existing plant in ChangTu, Liaoning New Plant in Zhaoyuan, Heilongjiang Advantageous location for: Abundant supply of corn Transportation Zhaoyuan County
12 Products Starch –65% of revenue, 72% of volume –Textiles, food additives, chemicals, plastics, pharmaceuticals, biofuels Germ –12% of revenue, 6% of volume –Cooking oil, margarine, mayonnaise, soaps, and a variety of other products Gluten –16% of revenue, 8% of volume –pork, poultry and cattle feed Fiber –7% of revenue, 14% of volume –cattle feed
13 Changtu Facility Corn Storage Processing equipment 74 m 2 Laboratory 16,000 m 2 Manufacturing Plant Constructed in ,000 Tones per annum processing capacity Operating at full capacity Includes waste water treatment facility
14 Customers Over 30 customers 7 of top 10 have been customers for over 3 years None > 10% of revenue Customers are in high growth industries Our Customers Manufacture: Food products44% Animal feed25% Pharmaceutical14% Pulp and paper3% Trading and other14%
15 Growth Strategy Build Capacity in Starch Expand Customer Base Become a top player in market Phase1: Phase2: Diversify Product base Add technology and/or distribution thru: Acquisitions, JV, Strategic Partnerships
16 Daqing Facility 600,000 Tones /y processing capacity (one of largest in PRC) Heilongjiang Provincial Government has coordinated the local Railroad Bureau to extend the railroad into our plant at its cost. HLJ Provincial Government has also coordinated with the local Electricity Bureau to extend the grid into our plant at its cost.
17 Daqing Facility 480,000 M 3 parcel of land adequate to double the plant size The Heilongjiang Provincial Government is promoting the development of a Bio Chemical Industrial Park based on our Daqing Plant in the Province.
18 Daqing Plant Rationale 1.Favorable location (limited local competition and low corn costs) 2.Acceleration of our expansion of capacity 3.All permits and licenses are in place 4.Relationships with a supportive local government 5.Adds key project management staff
19 Financial Overview
20 Financial Performance ($000 except volumes) FYE 31/12/05 FYE 31/12/06 FYE 31/12/07 FYE 31/12/08 1H 30/6/09 Volume Production (tones/year) 167,265230,617273,735279,048129,821 Revenues $39,279$56,331$75,898$84,449$42,337 Gross Profit$8,899$12,638$18,381$18,486$5,988 Gross Margin22.7%22.4%24.2%21.9%14.1% Improved efficiencies has provided 29% average growth Historically stable margins Softer market conditions and government purchases of corn in North East China in Q4 08 and Q1 09 have created margin pressure
21 Product & Input Pricing Historically there has been a consistent relationship with our product prices and the price of our major input, corn.
22 Product & Input Spread Seasonally higher margins were not experienced in late 08 due to PRC Government regional purchasing of corn in North East China
23 EBITDA and Earnings 21% average growth in EBITDA* Post 2007 additional cost including: Public company costs, Daqing startup costs and taxation ($000 ) FYE 31/12/05 FYE 31/12/06 FYE 31/12/07 FYE 31/12/08 H1 30/6/09 EBITDA$8,207$11,433$19,498$11,691$921 Adjusted EBITDA * $8,207$11,433$16,739$14,361$3,072 Tax$2,399$1,544$627$1,896$222 Net Income$4,869$8,998$18,227$8,723($407) * Adjusted for $2.7mm stock-based compensation charge in 08 ($2.2mm in 1H 09) and $2.8mm in foreign exchange gain and gain on sale of equipment in 07
24 Balance Sheet & Capital Structure As at June 30, 09 Cash$10.3 million Inventory$2.9 million Net Debt$14.2 million The Company has recently secured long and short term debt facilities : RMB 35 million ($6.6 million) Working Capital line from China Construction Bank RMB 100 million ($18.9 million) Long term loan from China Construction Bank RMB 100 million ($18.9 million) Long term loan from Zhaoyuan Government (1% interest)
25 Daqing Construction Summary Completion of the Daqing plant will be financed with two term loans, cash and equipment vendor financing obligations
26 Balance Sheet & Capital Structure Current Shares Outstanding76.8 million Fully Diluted88.7 million Market Capitalization (at $0.86 price) $ 66 million Enterprise Value$ 67.9 million Shareholder Equity (Book Value/sh)$ 88.4 million ($1.05)
Comparables 27 Asia Bio-Chem trades at a significant discount while maintaining superior gross margins Currency Share Price Market CapEnt. Value %GM 08%GM H P/E2009 P/E2010 P/E International Comparables Archer Daniels MidlandUS$$ ,99624,6455.9%3.3%9.2x11.9x10.5x Corn Products IntnlUS$$29.552,2062, %11.7%7.1x15.8x12.1x BungeUS$$65.178,63715,7307.7%2.6%8.3x12.2x9.8x average China ComparablesUS$ Global Bio ChemHK$ , %12.3%4.2x9.0x7.4x China Starch HoldingsRMB %8.8%7.4x8.3x5.9x Xiwang SugarRMB %3.7%6.1x25.0x10.5x average Asia Bio Chem %14.0% 5.0x10.0x2.1x
28 Investment Highlights Surging demand for agriculture products Track record of growth and profitability 300% growth within 6 months Management has extensive operating expertise in China with strong customer and government relationships