Yamada Green Resources IPO

Yamada Green Resources, the mushroom grower offers 74.91m new shares and 30.09m vendor shares. Priced at 22 cents per share. Considering...considering...

For easier understanding of IPO prospectus, check out the Investor Web-clips (Yamada Green Resources being the first one making use of this platform!) on the websites of Singapore Exchange, SGX Academy.

CHINA-based shiitake mushroom grower Yamada Green Resources has launched its initial public offering of 105 million shares for a Singapore Exchange (SGX) mainboard listing.

The offer comprises 74.91 million new shares at 22 cents each - from which Yamada seeks to raise net proceeds of $13.8 million - and 30.09 million vendor shares.

Of the invitation shares, two million are for public offer and 103 million for placement.

The company plans to use about $5 million of the net proceeds to acquire 30,000 additional mu (a Chinese unit of area measure of about 730 square metres) of plantations of eucalyptus, the wood which Yamada converts into sawdust and makes into logs to grow its modified shiitake mushrooms on. Yamada currently owns 20,000 mu of eucalyptus plantations, the size of 1,800 football fields.

Yamada is one of the largest shiitake mushroom producers and cultivation base operators in China's Fujian province, with 2,614 mu of shiitake cultivation bases.

It also sells dried produce and processed convenience food made from konjac - a plant which most people know as what the Japanese use in oden and konnyaku jelly - in China, Japan and the US.

Speaking at a media briefing yesterday, Yamada's executive chairman and CEO Chen Qiuhai said that acquiring more eucalyptus plantations made sense for the company as the Chinese government pays more attention to the indiscriminate logging of trees.

He foresees that more stringent environmental regulation might create a shortage and hence price increase of frutex, plants that are smaller than trees but larger than shrubs which shiitake cultivators grow the mushrooms on.

'So we have to be one step ahead of the competition. Having our own eucalyptus plantations ensures us upstream resource sustainability,' he says.

'It gives us an added advantage moving on before our other competitors realise that making synthetic logs is going to be a problem.'

Yamada's net profit grew from FY2007's 10.4 million yuan (S$2 million) to 81.7 million yuan for FY2009. It posted revenue of 236.2 million yuan for FY2009, a compounded annual growth rate of 80 per cent from 2007's 73 million yuan.

Yamada intends to use $4.6 million of the net proceeds to increase its leasing area of cultivation bases by 2,500 mu; $2 million to establish its own distribution and marketing network in cities like Shanghai, Guangdong and Hubei by FY2011; and $1.8 million to strengthen the processing capabilities of its konjac-based food products. The remaining $400,000 will go towards general working capital for its existing and expanded operations.

The acquisition of the 2,500 mu of additional plots of cultivation land is essential for Yamada to maintain its dominant position as a shiitake mushroom supplier.

Output has grown tremendously from 9,061 tonnes in 2008 to 21,618 tonnes in 2009, but utilisation of land is almost at 100 per cent, says Mr Chen, who expects demand for the mushrooms in increasingly affluent and green foods-conscious China to reach 1.82 million tonnes by 2012.

The invitation closes at noon on Oct 6. Trading of Yamada shares is expected to start at 9am on Oct 8.

DMG Partners and Securities is the issue manager, underwriter and placement agent for the IPO.

From Business Times, "Yamada plants IPO on SGX".



Update on 09/10: Yamada closed its first day trading yesterday at 37 cents. It hit the intra-day high of 41 cents, intraday low of 35.5 cents. Also as expected from any IPO-s on their first day of trading, Yamada was the mostly traded with 140,972 lots changing hands.

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