Yamada Green Resources

I would have thought ROA was more suitable for companies with a heavy focus on assets, as the term means Return on ASSETS. Whereas ROE means return on equity, which is more in line with return on investment as the equity portion is the amount of initial investment stumped up.

For me, ROIC or Return on Invested Capital would be a more rigorous measure as it incorporates both equity and debt in the denominator and lets you see the returns when adjusting for the capital structure of a Company.

Good sharing, thanks.

(20-02-2013, 11:56 AM)Musicwhiz Wrote: I would have thought ROA was more suitable for companies with a heavy focus on assets, as the term means Return on ASSETS. Whereas ROE means return on equity, which is more in line with return on investment as the equity portion is the amount of initial investment stumped up.

For me, ROIC or Return on Invested Capital would be a more rigorous measure as it incorporates both equity and debt in the denominator and lets you see the returns when adjusting for the capital structure of a Company.

Good sharing, thanks.

I agree with you ROIC is a more rigorous measure. I use ROA/ROE instead due to its readily available for all stocks, make it easily for comparison with adjustment if needed.

CEO sold 8,326,000 Yamada shares, off market, for 11.9c per share, which is the price of the placement shares to be issued to Mr Sam Goi.
As the number of new placement shares (82,187,000) is the maximum allowed under the Share Issue Mandate, parties spurred by Mr Goi's intended investment in Yamada have to acquire existing Yamada shares.
The share sales by the CEO and issue of placement shares, both at 11.9c apiece, could have been related events, and the buyer(s) must be of a certain standing, to be treated on the same footing as Mr Goi.
The CEO's stake in Yamada will be 47% of the enlarged company shares.

Yamada Green Resources Limited has secured the logging licence for the upcoming cultivation season:

"The logging licence allows the Group to harvest eucalyptus trees from an aggregated plantation area of 5,534 mu (1 mu is equivalent to approximately 667 square metres). This will produce enough eucalyptus sawdust for more than half of the total synthetic logs used in FY2014 for our cultivation of shiitake mushrooms."

As the 5,534 mu covered by the licence can provide saw dust for more than half of the synthetic logs required for the upcoming cultivation season (commencing Oct 2013), the 51,193 mu of Yamada' entire eucalyptus plantations should produce enough saw dust to meet the full demand for 5 years.

For the current cultivation season, Yamada spent RMB 234m on synthetic logs, the bulk being on cost of wood. At 50%, RMB 120m would have been incurred for wood.

Eucalyptus trees will therefore save the company around RMB 600m cash outlay. The low cost of the trees, at RMB 189m, will also result in better profit.

Yamada can be credited for its far-sightedness as government is set to be stricter in logging.

Interesting counter. CEO seems to be quite in tune with Japanese culture and its way of doing things...

how widely are the following brands sold in supermarkets around the China. and which parts of China?
1. 7th Manor
2. Xian Xian Mian
3. 7th Element

Currently, share price is already traded close to NAV of 24 cents, bearing in mind this is still an S-chip afterall even with Sam Goi's one foot inside ...

Growing mushroom should not be too difficult. Then what is the moat of Yamada?

is it that it is able to do so on a large scale and the forward/backward integration advantage?

is the following a cause for alarm? seem to notice that a lot of business in china show a similar characteristic or trend.
initially very high GPM but later on, GPM dropped a lot and even into negative territory.

Company has made it very clear that it has no pricing power in mushroom. Afterall, like what underdogger mentioned, what is so difficult about growing mushroom?
what is the real moat of Yamada? How intense is the competition ? How long can Yamada defend its moat? Did Sam Goi make the right investment decision?

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Extract from 3Q results announcement..
The gross profit margin for our self-cultivation business segment decreased from
approximately 41.3% in 9M2012 to approximately 18.7% in 9M2013 mainly due to the rising
raw material cost of synthetic logs whereas the average selling price of edible fungi did not
increase in tandem.
Cost of synthetic logs had been on rising trend since year 2008 at a
pace of approximately 10% year on year, whereas the average unit selling price of fresh
shiitake mushroom are largely market driven.

In view of the moderate growth of economy in China and the uncertainty of global
economy, the Management will closely monitor the Group’s operations and seek
further growth in its core business, in particular the processed food business
segment. The Management will continue to closely monitor the Group’s operations
amid the intense competition in the food and beverage industry.

Profit margin seems to be rather tight for producers...

a lot of keen competitors coming up...Yamada is not a dragon head company ??

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Dragon companies



In early February, representatives from VPN, LEI and C-point visited China, in connection with an exchange project between the Chinese LEI, LEA and CEFA, the lobby group for mushroom growers in China. The idea behind the project is to improve commercial relationships and exchange knowledge of both markets. An important part of the project is introducing Chinese and Dutch trading partners.


This first visit by the Dutch delegation was aimed at getting to know the other participants. The problems facing the mushroom growing sector in China and the Netherlands were inventoried and expectations from the project drafted.

The time in China was also used to visit various growing facilities and see some of the amazing range of varieties offered for sale on the Beijing market. The programme included visits to an Awei mushroom grower, a Shii-take grower and the market in Beijing.

Both growing facilities are so-called Dragon companies, that offer many thousands of small growers the chance to produce fungi and market their produce via these organisations. This satellite system has a social responsibility for the small companies in the surrounding area. They may be called private companies but in China the interest and influence of the government are still strongly felt in the organisation. Funding comes from the local authorities, which complicates the conflict of interests.



Market

On one of the wholesale markets in Beijing the “mushroom street” houses some 30 dealers who trade 300 tons of mushrooms each day. This is around 1.5 % of the total 8.6 million tons produced in the entire country (in 2002). See graph below.

The rise in total mushroom production in China is impressive. In 1996 production levels of the whole range of mushrooms reached 3.5 million tons. An increase of 250 % in six years!

Exports have been lagging behind growth in recent years. Export is stable and in fact dropping as a result of import restrictions imposed by Japan, the USA and Europe. These trade barriers look like staying in place for the time being. In the USA, people even expect them to be extended. If the export restrictions in the European Union were lifted for mushrooms for the canning industry, the results for the sector would be disastrous.



General developments

Most growers use quite primitive lean-to buildings, with the plastic part being south-facing. Reed matting is placed over the plastic at night to improve the insulation properties. These lean-to sheds generally provide 1 or sometimes 2 crops a year. The huge variation in temperature zones in this country permits year-round production. With major effects on logistics and homogeneity.

Supermarkets are springing up and developing faster than the production units. The demand for fresher, quicker, larger volumes and food safety guarantees is becoming increasingly important here too.

Another development is a shift in production areas. A shortage of raw materials such as wood has forced activities to relocate to other provinces, where there are still forests. China is one of the countries that imports much illegally felled timber. As well as this threat, chiefly to wood fungi, many logistic changes take place throughout the year. As only one crop can be yielded each season, purchasers have to move to colder regions to create a form of year-round production. The mushroom growers often move with them. Mushrooms such as oyster mushrooms and Agaricus grow on waste products from rice harvesting. The availability of this raw material is not (yet)a problem.

There are about 900 different types of fungi in China. In the region of 50 types are grown commercially. China has a rich and long traditional of mushroom consumption. As well as for culinary purposes, many fungi are grown for their medicinal properties. The Chinese are great believers in natural healing, where mushrooms fulfil a large role.


Nanchen Tianhong

Shii-take growers Nanchen Tianhong Agriculture CO., LTD is based in Daxing, Beijing. This company is a kind of satellite, and also described as a ‘Dragon Company’.

Production occurs in small cylindrical bags weighing 1 kilo. The thousands of suppliers fill their sheds with 2000 to 100,000 of these bags, which are supplied by the mother company Nanchen Tianhong. They are filled by hand with chippings made from wood pruned from fruit trees. The suppliers make sure the length and blend of the wood chips is the same each year, plus the basic mixture must be between 3 and 6 months old. The humidity of the ‘sawdust’ must be below 20 %. This material is then sterilized and inoculated in a sterile room. After a month of incubation the bags are transferred to the growing areas and encouraged to start fruiting.After harvesting, the mushrooms are delivered to the mother company. This is more or less an obligation, as the substrate is supplied free and minimum prices have been agreed.

This method gives the mother company a considerable supply so they are able to meet the demands of their customers. This system gives a good insight into what is produced where so provides a certain level of assurance for food safety. Substrate preparation is done by the company itself and when the produce is readied for sale inspections can be made for compliance with the strict standards of ‘Westerns’ buyers.



Buyers

The company produces for the top of the domestic market and counts Carrefour and Wall-mart as customers. With its 1000 satellite companies the main production concerns Shii-take for the convenience market with a turnover of around 3 million euro. The fresh shii-take is blanched and vacuum packed in plastic. Various flavourings can be added to the product as required. The final product has a storage life of 6 months. The production capacity of the substrate and marketing company is 1.5 to 2 tons of shii-take daily - this is 70 % of the total production. The remainder is sold fresh at the wholesale market. As well as shii-take, 10% of the production is of other varieties, including White-Elf mushrooms and Pleurothus eryngii.

30 % of consumer purchases of mushrooms are done in supermarkets. This percentage is low, but increasing. The company gets a price of approximately 4 RMB (€ 0,40)/ 100 gram. The produce is mainly sold as a snack and eaten with Chinese noodles or rice.

Health aspects are a deciding factor when purchasing mushrooms. The healthy and medicinal working of certain mushrooms is viewed very positively in China. The motto is beneficial and delicious.



Beijing Yuxue Awei Mushroom Technological Development CO.

The Dutch delegation also enjoyed a guided tour around the Beijing Snowy-Awei farm in Yuxue in Beijing. Awei stands for White-Elf mushroom, a beautiful white, fleshy mushroom. The current company, co-owned by Mr.Zhaobing, was started in 2000 and already comprises 1500 units of 800 m².The mother company has around 250 lean to sheds and controls the chain in the Beijing region. The company takes care of substrate preparation and buys back the produce of the 1250 associated (part-time) growers. The company conserves Awei mushrooms and packages the results in a variety of forms. Last year, the same company also opened a growing facility in Japan, where an agent handles sales. Like Nanchen Tianhong, this is a private enterprise, but the government is co-owner of this “Dragon Company”.



The Awei

Awei mushrooms were discovered by the present owner in the mountains to the north of Beijing. He noticed that women from a certain local tribe quickly recovered after giving birth by eating this type of mushroom - they rapidly regained their strength and could resume working. Awei only grow in the wild in Mulei, the Tuoli desert and the area around Gobi in Xinjiang. The local population uses it to prevent fever and gastrosis. It also lowers cholesterol levels in the bloodstream and stimulates digestion.

It took Zhaobing 5 years of experimentation before he could produce the mushroom commercially.



Production

The raw materials for substrate consist of wood chippings and waste from the cottonseed industry. 5 % of spent substrate is also reused. The waste material is allowed to ferment aerobically. The material is stacked in windrows of 75 centimetres high, with an opening every 50 centimetres for the oxygen supply. When the bags have been filled with substrate, they are sterilized for 12 hours at 100 degrees Celsius, cooled then inoculated.

The production units are so-called lean-to sheds with a growing surface area of between 600 and 800 square metres. Each unit holds 5000 bags filled with 1.3 kilos of substrate. The yield per kilo of substrate is 15 to 20 %. The growing cycle lasts 90 days and depends on the season. Colonization takes 60 days. Peak production is between February and April, while production comes to a near standstill during the hot summer months.



Market

Total production is 500 to 800 tons annually, of which 40 to 50 % is canned. The majority is sold fresh. Most of the production is destined for the Chinese market (80 %), one fifth of the total production is exported to Taiwan and Japan. Japanese buyers come and inspect the process twice a year. Zhaobing indicated that a hygiene standard is a necessity to export this produce.

When the mushroom is sliced there is no brown discolouration through oxidation. Slices can be eaten as a meat or fish substitute, or it can be used as a salad ingredient. Fresh mushrooms can be stored for around two weeks. Zhaobing sees excellent prospects for the product. “The Awei will take over the position of shii-take and white Agaricus ” he predicts. “It's now a niche market, but at the same time one with gigantic growth potential; the Awei will become a mass product.”

The market for Awei offers many opportunities. Mr. Zhaobing is careful to protect his process, but realises that the competitors are following at his heels. He sees great possibilities in producing close to the Japanese sales market. He plans rapid expansion to retain and consolidate his market share.



Price build-up from producer to consumer:

· Producer 10-20%

· Local purchase company (village collectors) 10%

· Wholesaler at wholesale market 30-50%

· Retailer 30-50%

· Consumer

Given the various types of food scare in China to date, and the latest one concerning RICE, best to avoid all F&B counters in China...

Are the mushrooms grown by Yamada safe?

My Chinese friend told me that most of the soils in China are contaminated, especially those in the coastal provinces..

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International Herald Tribune
INHT
English
2013 The New York Times Company. All Rights Reserved.
‘‘Cadmium rice,’’ as it is dubbed, or rice laced with levels of the metal cadmium that exceed national safety standards, has become the latest food scare in China, prompting a health and public relations scandal in a nation long used to — and deeply worried about — unsafe food.
Last week, the authorities in the southern province of Guangdong found that more than 44 percent of rice or rice products tested there contained too-high levels of the poisonous metal, which is found in zinc ores and, to a lesser extent, in the mineral greenockite. Its presence in soil as a contaminant is closely associated with zinc mining.
But the authorities at the Guangzhou Food and Drug Administration then clammed up, declaring it was ‘‘not convenient to reveal’’ the affected brands, thus leaving consumers unable to protect themselves.
That incited consternation, and a storm of criticism, in the news media and online. Over the weekend, the authorities relented, releasing the names of eight rice brands and products, out of 18 tested, that had unacceptably high levels of cadmium. The findings were part of random food safety tests in the first quarter of the year and did not cover all of the rice available on the market, the government said. Levels of as much as 0.4 milligram per kilogram of rice were found, twice China’s safety limit, according to Xinhua, the state-run news agency.
Xinhua offered this practical, if short-term, advice, as did People’s Daily, the Communist Party mouthpiece: ‘‘Experts recommend that people should not consume food and drink from one particular region for long, instead they should diversify to lower the risk.’’
That prompted some hilarity online, with netizens marveling that the party newspaper would offer such advice. ‘‘That’ll ensure that everyone gets their share of cadmium,’’ someone called Ning Fushen remarked in a post on Sina Weibo.
In the longer term, Xinhua and People’s Daily noted, the problem must be solved by cleaning up China’s soil, known to be contaminated in many areas from industrial waste and mining. It also needs better environmental protection laws and implementation, as well as better testing, they said.
The articles singled out lead as another soil contaminant. Cadmium is used in nickel-cadmium batteries in mobile phones, cameras and computers. As a major battery producer, China is a major consumer of cadmium.
‘‘Cadmium in rice usually comes from the soil where it grows, and the soil was polluted by mining and chemical wastes,’’ Fan Zhihong, a food safety expert at China Agricultural University in Beijing, told the state-run Global Times.
Cadmium, a known carcinogen, builds up in the body and damages the kidneys and lungs and can cause bone disease. Ingestion via food is the main source for nonsmokers, while smokers’ intake may be twice that of nonsmokers, according to the Web site of the International Cadmium Association.
Cadmium contamination is an issue around the world: the main sources are phosphate fertilizers, the burning of fossil fuels and iron and steel production, according to the group.
Contaminated rice has long been a problem in China, with a Nanjing Agricultural University research project in 2011 finding that about 10 percent of rice sold across the nation contained too much cadmium, Global Times reported.

International Herald Tribune

should be ok since they are using wood from the forest. And in that region if you look at the pics looks like quite rural area not so polluted...

Only way to know for sure is to go take some samples from the eucalytus trees they are growing...