April 2015 Investor Roadshow 'Dong Fang Modern Agriculture Holding Group'

DongFang Modern
AgricultureHolding Group
Limited
High-Margin Citrus Industry Aggregator
ASX IPO Jun 2015

http://www.dongfangmodernagriculture.com.au
This presentation has been prepared by DongFang Modern Agriculture Holding Group Limited for
professional investors. The information contained in this presentation is for information purposes
only and does not constitute an offer to issue, or arrange to issue, securities or other financial
products. The information contained in this presentation is not investment or financial product
advice and is not intended to be used as the basis for making an investment decision. The
presentation has been prepared without taking into account the investment objectives, financial
situation or particular need of any particular person.
No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness
or correctness of the information, opinions and conclusions contained in the presentation. To the
maximum extent permitted by law, none of DongFang Modern Agriculture Holding Group Limited,
its directors, employees or agents, nor any other person accepts any liability, including, without
limitation, any liability arising out of fault. In particular, no representation or warranty, express or
implied is given as to the accuracy, completeness or correctness, likelihood of achievement or
reasonableness of any forecasts, prospects or returns contained in this presentation nor is any
obligation assumed to update such information. Such forecasts, prospects or returns are by their
nature subject to significant uncertainties and contingencies.
Before making an investment decision, you should consider, with or without the assistance of a
financial adviser, whether an investment is appropriate in light of your particular investment needs,
objectives and financial circumstances. Past performance is no guarantee of future performance.
A Prospectus will be Offered by the Company as part of the Initial Public Offering progress. The
distribution of this presentation is jurisdictions outside Australia may be restricted by law. Any
recipient of this document outside Australia must seek advice on and observe such restrictions.
2

Capital raising min/max
– A$ 39M/50M
Number of new Shares issued
– 39m/50m
Offering price
– A$ 1 per share at 5.0x PER
Number of Shares on Issue at Completion of the Offer :
– 389M-400M
EPS on 2013/ 2014/2015 F
–0.126/ 0.225/ 0.174 (RAISE 39M)
– 0.126/ 0.225/ 0.166 (RAISE 50M)
Planned dividend per share
– 0.04 (20% Dividend payout ratio)
Existing Shareholders %
Hongwei CAI 89.0%
Super Fusion International
Limited 6.0%
Huge Ease Limited 5.0%
Pre-IPO Share Holding Structure
3

Investment Highlights
Who We Are
Business Overview
Industry Overview
IPO Share Offer
4

5
In top 3 of Chinese citrus producers with over 8,900 hectares in plantations
Producer of tangerine, pomelo and oranges and camellia seed/fruit products
Agricultural food production is tax exempt in China
Excellent financial and production track records since 2008.
FY14 revenue of A$148m with EBITDA A$64m and a net profit of A$75m
+15% EBITDA forecast for FY15 with op margin of 40-45% - no debt.
IPO on ASX provides additional funds for further farm land acquisitions

6

7

8

9

Camellia oil and products – major opportunity
10

GanZhou Chinese Modern
Agriculture Co.,Ltd
(People’s Republic of China)
100%
100%
Dongfang Modern Agriculture
Holding Group Limited
(Australia)
Worldwide Network Investment
Group Limited
(Hong Kong)
11

Mr. Hongwei CAI
Core leader, founder and Chairman, major shareholder
Mr. Ming Barton Sing TSO
CEO, previously ED & CFO of China Fortune (HK listed)
Mr. Chiu SO
CFO, previously ED of China Packaging (HK listed)
Mr. Dan lIN
Non- Executive Director
Ms. Xiaoci CHEN
Non- Executive Director
12

13

Region selected by climate, soil and infrastructure.
GanZhou city located in Special Citrus Zone
GanZhou brand well known for citrus
High ave rainfall of about 1500mm pa
Low cost of irrigation.
Long frost-free growing season.
GanZhou > 9 m population gives ample labour
19 farms
14

Cultivation
• Annual cultivation plan prepared after harvesting season.
• Fertilization and pest control exercises are then carried out
• Labour requirement assessed by villagers’ committees
Harvesting
• Annual harvesting is September until end of December.
• Harvesting schedule determines labour demand
Grading and
packaging
• Manually conduct grading by size, color and overall appearance.
• Selection criteria is set against PRC national standards.
• Higher quality produce can sell for higher prices.
• Packed in approximately 10 kg paper boxes
Sun drying
(Only
Camellia)
• Previously camellia fruits were sun dried but now sold directly
15

Areas
(Ha)
FY12 FY13 FY14 FY15F
Camellia
Acquired 60 60 60 60
Leased 2,187 2,187 2,187 2,453
Sub Total 2,247 2,247 2,247 2,513
Pomelo Leased 840 1,433 1,433 1,433
Orange Acquired 45 542 542
Tangerine
Leased 1,367 3,751 3,751 4,017
Acquired 400
SubTotal 1,367 3,751 3,751 4,417
Total 4,453 7,475 7,972 8,906
2,247
840
1,367
0
2,247
1,433
3,751
45
2,247
1,433
3,751
542
2,513
1,433
4,417
542
C AM ELLI A POM ELO TANGERI NE NAVEL ORANGE
PLANTATION AREA (HECTARE)
FY2012 FY2013 FY2014 FY2015F
Plantation Area by Key Products Change in Area by Product
16

.
Long-term relationships with a range of
wholesale customers
Citrus fruits delivered quickly and
efficiently to major fruits markets
throughout China.
Largest customer ~13% revenue in 2014.
Top 5 clients provided ~50% of revenue. 23,589
51,600
128,958
21,438
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
Camellia Pomelo Tangerine Navel orange
metric
tonnes
FY2012 FY2013 FY201 4 FY2015F
200,548 tonnes of fruits produced in FY14.
Tangerine accounted for 52% of the
Company’s output ( >Australia’s annual
mandarin production).
Production by Fruit from FY12 to FY15
DistributorDongfang Wholesaler Retailer
17

20,159 23,606 23,300
12,655
25,644 29,271
18,159
60,652
83,723
517
11,949
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
2012 2013 2014
A$'000
Camelia Produce (note 1) Pomelo
Tangerine Navel Orange
0
46,577 51,374
18,591
0 0
146,405
00 0
59,766
0
178,282
240,476
0 0
0
50,000
100,000
150,000
200,000
250,000
300,000
Sep Oct Nov Dec
(A$'000 ) Camellia Pomelo Orange Tangerine
Revenue by Key Products Revenue Seasonality in 2014
18

9.4
36.0
29.2
39.6
25.3
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Camellia Pomelo Tangerine Navel orange Total Average
Yield
( T O N N E S / H A )
FY2012 FY2013 FY201 4 FY2015F
10.51
17.90
16.17
11.50
5.98
9.28
20.60
23.98
28.41
7.91
0.00
5.00
10.00
15.00
20.00
25.00
30.00
Camellia Pomelo Tangerine Navel orange Total Average
Yield
(AUD'000/HA)
FY2012 FY2013 FY201 4 FY2015F
Plantation Volume Yield per Hectare Plantation Revenue Yield per Hectare
19

FY14 revenue $148m, EBITDA $64.6m
and net profit of $75m (due to int
income)
FY15 EBITDA growth forecast
Operating EBITDA margin 40-45%.
FY15 to gain from acquisitions and
efficiencies
50,973
110,419
148,244
174,155
22,743
49,816
64,668
74,389
21,849
49,411
76,292 74,487
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
FY2012 FY2013 FY201 4 FY201 5F
Revenue Operation EBITDA NPAT EBITDA Margin
A$’000
20

Optimise plantation efficiencies by yield and costs
Expand land tenure through strategic acquisition.
Develop national and international GanZhou Chinese brand.
Develop Camellia Oil business
Extend distribution chain, and enhance the industry control position
21

Taxation benefit -25% extra profit
Effective from 1 January 2008 Article 27 of the New Tax Law gives enterprises engaging
in certain agricultural activities, including growing of fruits and selection and
cultivation of new agricultural species, are exempt from China Enterprise Income Tax
(EIT) and business tax.
Encourage on import replacement and export
Citrus fruits, including pomelos, is in high demand in China, with the import value and
volume growing at a CAGR of about 40% and 34% respectively in the past 5 years.
Chinese G0vernment encourages import replacement and export and helps plantation
company to expand their business.
22

Already citrus industry leader
Perfect location for fruit cultivation
Established early-development advantage in scale and size
Very strong revenue, profitability, cashflows, - no debt.
PRC Government incentives support business plans
Well-established and stable network for supply of inputs
Experienced management teams
Proven track record of delivering growth and profitability
23

Robust market growth
2013 refined tea oil production in China
was~464kt (~0.34kg pp) up from 0.22kg in 2009
-- CAGR ~9.8%.
China tea oil consumption ~0.7% of the total
edible vegetable oil production vs OECD where
olive oil consumption is generally 40% of total.
China produces ~90% of global tea oil.
(Source: Ipsos report)
Products for future
consumption trends
Camellia oil (also known as tea tree oil) is one of the
healthiest cooking oil in the world. It has higher smoking
point than olive and canola oils and can be used for
cooking and salad.
It has many therapeutic properties:
⁻ Antioxidant – Excellent antioxidant. Resists rancidity
⁻ Cicatrizant – promotes recovery of wounds and scrapes.
⁻ Anti-microbial – Bacteriacide with anti-fungal properties.
⁻ Lipid Lowering Effects – reduces LDL cholesterol and
triglycerides.
⁻ Insecticide – useful for certain crops.
⁻ Immune booster.
⁻ Cancer anti-mutation – Prevents certain cancers
⁻ Cancer prevention- colon, uterus and breast cancers
24

25

Rising household disposable income
for both urban and rural.
0
5
10
15
20
25
30
35
40
45
2009 2010 2011 2012 2013 2014F2015F2016F2017F2018F
Urban residents Rural residentsRMB ($‘000)
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2009 2010 2011 2012 2013
Million tonnes
Rising consumption volume of
citrus fruits in China
Consumption volume of citrus fruits in China
from 2009 to 2013
Average Annual Household Disposable Income
in China from 2009 to 2018
Source: Ipsos report
26

Fruits are playing more important
role in Chinese food consumption
Citrus fruit in China is expected to grow
at CAGR of ~24% in value and ~12% in
volume respectively from 2014 to 2018.
Million tonnes
0
50
100
150
200
250
300
0
5
10
15
20
25
30
35
40
45
50
2009 2010 2011 2012 2013 2014F2015F2016F2017F2018F
Thousands
Production volume in
China
Production value in China RMB in billion
27

Market demand Selected Market Sale Value
28

29

Use of funds:
The IPO funds will be
used for acquiring the camellia
plantations and developing
downstream activities.
30
Capital Structure
Minimum
Subscription
Maximum
Subscription
Number of Existing Shares 351,000,000 351,000,000
Number of new Shares issued by the
Company under this Prospectus
39,000,000 50,000,000
Total Number of Shares on Issue at
Completion of the Offer
390,000,000 401,000,000
Offer Price per Share $1.00 $1.00
Market Capitalisation at the Offer
Price
$390,000,000 $401,000,000
The Share capital structure post-Offer

31
Company ASX Product Market Capitalisation
A$m*
Est. PE
Ratio*
EPS*
(A$/share)
DPS*
(A$/share)
Div Yield*
DongFang Modern
Agriculture
(DFM) citrus fruits
390 5.0 0.17 0.05 3.60%
Select Harvest SHV almond 573 12.9 0.49 0.15 2.97%
Tassal Group TGR salmon 523 11.4 0.31 0.07 4.43%
Huon Aquaculture HUO salmon 400 12.3 0.37 -n/a n/a
Webster WBA walnut 155 28.0 0.59 0.02 2.99%
Tandou Limited TAN Irrigation 135 57.0 0.01 0.01 1.46%
Fonterra FSF Diary 8,347 17.8 0.30 0.10 2.70%
Ruralco Holdings RHL
agriculture
products 282 13.8 0.26 0.08 6.30%
Weighted average - exclude DFM 17.5 0.31 0.09 2.78%
* Bloomberg data – 15th April 2015

April 2015 Investor Roadshow 'Dong Fang Modern Agriculture Holding Group'

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April 2015 Investor Roadshow 'Dong Fang Modern Agriculture Holding Group'