Eggriculture (8609 HK) - SG egg farm

Eggriculture (ticker 8609 HK) is an interesting Singapore food security play. They did an IPO in Hong Kong GEM market in Sep 2018 raising around S$11mil. They are the 3rd largest local producer of eggs in Singapore, behind Seng Choon (private) and Chew’s Group (which is no longer listed). The company produces eggs in SG under the name N&N Agriculture. The company’s website is https://www.eggriculturefoods.com/en/.

At current share price, the company has a market cap of around HKD 63 mil (or S$11.5mil), and trades at a trailing 12 mth P/E ratio of just 2.7x.

In the 9 mths ended Dec 2019 (note fiscal year end is Mar), the company recorded a net profit of S$3.2mil.

In the 12 mths ended Dec 2019, (i.e. adding up the latest 4 quarters), the company recorded a net profit of S$4.3 million.

The company is likely to benefit from a friendlier environment towards domestic SG food producers going forward. Firstly, in Dec 2018, Malaysia indicated it might restrict the export of eggs. Secondly the covid-19 situation has demonstrated the need for Singapore to accelerate its food security. All this is likely to result in friendlier government policies towards local producers.

One should generally be wary of small cap Singapore companies which decide to list in HK without a strong rationale. Yet this company looks to be a real business. Its auditor is PWC Singapore. Its egg products are readily available in local supermarkets and even 7-11. Balance sheet looks ok with around S$4mil of net debt (as of Sep 19). it has a long 20 year land lease from gov for its farm in Lim Chu Kang. 

Chairman & CEO, Ma Chin Chew, who is also 59% shareholder, took a salary of S$195k for the year ended Mar 2019 which looks reasonable in these times of management indulgence.

2030 : 30% local produce
https://www.sfa.gov.sg/food-farming

SFA LAUNCHES GRANT CALL FOR 30X30 EXPRESS TO RAMP UP LOCAL FOOD PRODUCTION
The Singapore Food Agency (SFA) has launched an open grant call for the ‘30x30 Express’ today. The grant will provide $30 million of funding support for the local agri-food industry to ramp up local production in eggs, leafy vegetables and fish over the next six to 24 months.
2 As part of the ‘30x30 Express’ grant call, local agri-food players producing any of the three food types listed above are invited to submit proposals that make use of highly productive farming systems that can be constructed and implemented quickly to achieve high production levels.

https://www.eggriculturefoods.com/en/abo...-structure
look at the org. structure

eggs from malaysia are the cheapest for sg!

(05-05-2020, 11:12 AM)brattzz Wrote: https://www.eggriculturefoods.com/en/abo...-structure
look at the org. structure

eggs from malaysia are the cheapest for sg!

Holding company incorporated in Cayman and listed in HK.
Holding company only holds a company incorporated in BVI.
BVI company holds the money making subsidiary incorporated in Singapore.
And then most of the eggs are procured in Malaysia.

There are 5 different countries when we review the STRUCTURE from top to down (listed company to the raw material source)!

We can have real ASSETS and real BUSINESS. Rather than asking why it list itself in HK GEM, the real interesting question has to be expanded to ask why does it has a HK-Cayman-BVI-Spore layer kind of STRUCTURE.

(05-05-2020, 12:40 PM)weijian Wrote:

(05-05-2020, 11:12 AM)brattzz Wrote: https://www.eggriculturefoods.com/en/abo...-structure
look at the org. structure

eggs from malaysia are the cheapest for sg!

Holding company incorporated in Cayman and listed in HK.
Holding company only holds a company incorporated in BVI.
BVI company holds the money making subsidiary incorporated in Singapore.
And then most of the eggs are procured in Malaysia.

There are 5 different countries when we review the STRUCTURE from top to down (listed company to the raw material source)!

We can have real ASSETS and real BUSINESS. Rather than asking why it list itself in HK GEM, the real interesting question has to be expanded to ask why does it has a HK-Cayman-BVI-Spore layer kind of STRUCTURE.

Actually, Cayman entities are very commonly used for listings on HKSE. So your question is narrowed to why do they need a BVI layer in between Cayman and SG layers, which could have all sorts of structuring related answers including undoubtedly ones which facilitate sinister motives or much more mundane ones.  https://www.vantageasia.com/why-use-a-ca...-the-hkse/

It comes down to corporate governance. They are honest farmers or they are not.

"Common" doesn't mean it is the right or optimized structure for the OPMI. For the OPMI, simply "been common" does nothing to answer the question. Quoting the article you posted, the follow up question to ask would be "what about the 60% of mainboard companies that are non-Cayman?"

As OPMI, we need to be careful of committing the mistake of confirmation bias by looking for evidence to confirm our findings. On the contrary, our decision making gets more robust when we look for dis-confirming evidence.

"They are honest farmers or they are not" --> Unfortunately, the world is not exactly that binary as all of us would hope it is. The right question to ask is "Is there a disincentive to commit fraud?"

(05-05-2020, 03:08 PM)weijian Wrote: "Common" doesn't mean it is the right or optimized structure for the OPMI. For the OPMI, simply "been common" does nothing to answer the question. Quoting the article you posted, the follow up question to ask would be "what about the 60% of mainboard companies that are non-Cayman?"

"what about the 60% of mainboard companies that are non-Cayman?"

Bermuda. 26%. Cayman. 49%. Hong Kong. 11%. PRC. 12%. Others 2%. 
Source: https://www.applebyglobal.com/wp-content...-final.pdf

Where are their n&n eggs distributed and sold in Singapore?
That 30 million n grant supported by government doesn't really move an inch or show deep sincerity compared to the almost 20billion aid given to sia,

There is a thousand and one reasons to incorporate or register a company in tax favorable jurisdictions and have multiple layers of network, in any case oecd is getting them to commit more governance and transparency

(05-05-2020, 07:47 PM)pianist Wrote: Where are their n&n eggs distributed and sold in Singapore?
That 30 million n grant supported by government doesn't really move an inch or show deep sincerity compared to the almost 20billion aid given to sia,

There is a thousand and one reasons to incorporate or register a company in tax favorable jurisdictions and have multiple layers of network, in any case oecd is getting them to commit more governance and transparency

Apparently their egg products are readily available acorss different supermarkets outlets in Singapore. Just that we don't pay particular attention to egg brand during grocery shopping. This fact is quite comforting, knowing that a company's products are part of our daily consumption.

Looks like a unique egg farm. Besides supply of fresh eggs as other farms, they also provide processed eggs like pasteurised eggs and Japanese rolled omelette (Tamagoyaki). This is a direct play into Singapore food security strategy.

Only issue is its small mkt cap and little liquidity. Can't really accumulate much.

Latest fy announced - The Board does not recommend the payment of any final dividend to shareholders of the Company for the FY2024.

Fast forward to 4 years later since the last post, the share price has this week shot up almost five times more....any similar faithful still holding onto this zero dividend multibagger counter.....?