China Huiyuan Juice 1886

China Huiyuan Juice 1886

Postby winston » Wed Jul 02, 2008 12:59 pm

Small position to follow story. From UOB-Kay Hian

Downgrade to HOLD due to margin risk and weak cash flows

We downgrade Huiyuan Juice (Huiyuan) from BUY to HOLD, due to several reasons:
a) margin pressure from hike in raw material costs,
b) lower investment returns for new facilities, a result of slower-than-expected pick-up in capacity utilisation and
c) weaker projected cash flows and higher working capital requirement.

We cut our target price from HK$7.60 to HK$5.50, based on 10-year DCF valuation (WACC = 10%; terminal growth = 3%).

Cost pressure.
We believe Huiyuan would experience heavy cost pressure this year, as the natural disasters including snowstorms, earthquake and floods in southern China, as well as soaring farming costs, have affected fruit plantations in China.

Although the company raised the average selling price (ASP) of non-orange juice drinks by 10%, this would not offset the cost hike. We assume the company’s gross margin would drop from 35.7% in 2007 to 35.2% in 2008, 34.7% in 2009 and 34.2% in 2010.

Capacity utilisation remains low. Due to the seasonality of pure juice and juice drinks sales, the average utilisation rate of Huiyuan’s production facilities remained at a low level (<50%). In order to expand its geographical coverage from northern China to eastern and southern China, the company has built five small plants in Jilin, Liaoning, Shandong, Anhui and Jiangxi since mid-07.

It is going to build a large plant there before end-08. However, the sales pick-up is not fast enough to boost utilisation, resulting in lower investment returns.

Foray into low-concentrate juice market presents short-term risk.
Huiyuan plans to expand further from pure juice and nectar into the low concentrate juice market. This year, the company launched the Kiwi fruit juice drink products, which received positive market acceptance within short period. However, the juice market in China is highly competitive, dominated by such major incumbents such as Tingyi, Uni-President and Coca-Cola.

Huiyuan will have to prove if it can succeed in gaining market share in the segment. Huiyuan’s aggressive foray into a market where it does not have an advantage presents a short-term risk.

Weak cash flow.
Despite a 33% growth in core net profit, Huiyuan’s operating cash flow dropped from Rmb293m in FY06 to Rmb10m in FY07, mainly due to a 22-day increase in inventory period to 159 days. Ytd, the company’s cash flow has not improved significantly due to the accumulation of raw materials inventory.

Revise FY08-10 net profit forecasts down by 5-12%. We cut our FY08-10 net profit forecasts for Huiyuan by 5%, 8% and 12% respectively to Rmb356m, Rmb455m and Rmb564m. Our new profit forecasts represent a three-year CAGR of 24%.

Cut target price to HK$5.50.
Huiyuan is trading at 17.9x FY08 PE and 14.0x FY09 PE, as opposed to 20x and 18x respectively for other Chinese beverage companies, such as Tingyi. We attribute Huiyuan’s hefty discount to domestic peers to its lower investment returns and weaker cash flow.

Thus, we cut our target price from HK$7.60 to HK$5.50, based on 10-year DCF valuation (WACC = 10%; terminal growth = 3%). Downgrade from BUY to HOLD with an entry price of HK$4.60.
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Re: China Huiyuan Juice 1886

Postby winston » Wed Sep 03, 2008 9:16 am

Vested. :D :D :D

The Coca-Cola Company, Atlantic Industries and Huiyuan jointly announce that ABN AMRO will, on behalf of Atlantic Industries, a wholly-owned subsidiary of The Coca-Cola Company, subject to the satisfaction of the Pre-Condition, make voluntary conditional cash offers:
(a) to acquire all of the issued shares in the share capital of Huiyuan;
(b) to acquire all the outstanding convertible bonds of Huiyuan; and
(c) for the cancellation of all the outstanding options of Huiyuan.

All references to the Offers in this Announcement are possible Offers which will be made if and only if the Pre-Condition is satisfied.

2. CONSIDERATION FOR THE OFFERS
The consideration in respect of the Offers is as follows:

The Share Offer
For each Huiyuan Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .HK$12.20 in cash

The Convertible Bond Offer
For each US$1,000 nominal amount of each outstanding

Convertible Bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$18,577.73 in cash
The Option Offers

For each outstanding Pre-IPO Huiyuan Option . . . . . . . . . . . . . . . . . . . . . . .HK$6.20 in cash

For each outstanding Post-IPO Huiyuan Option . . . . . . . . . . . . . . . . . . . . . . .HK$5.81 in cash
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Re: China Huiyuan Juice 1886

Postby winston » Wed Sep 03, 2008 10:39 am

Coca-Cola buying Chinese juice maker for $2.3 bln
HONG KONG, Sept 3 (Reuters) - The Coca-Cola Company The iconic U.S. company will pay HK$17.92 billion cash, or HK$12.20 for each Huiyuan share -- nearly triple the stock's closing price of HK$4.14 on Friday, sending Huiyuan shares up by 164 percent early on Wednesday.
"Huiyuan is a long-established and successful juice brand in China and is highly complementary to the Coca-Cola China business," said Muhtar Kent, chief executive of Coca-Cola, the world's largest beverage company.

Huiyuan, the country's biggest maker of pure juice drinks, is about 23 percent owned by French food giant Groupe Danone Coca-Cola will buy all the outstanding shares, bonds and options of Huiyuan and take the company private after the acquisition.

"They are in the same industry and it would take a lot of effort to build a brand name, especially in China, (which is) such a huge market," said Andrew To, sales director at Tai Fook Securities Co Ltd.

"The premium is being paid for Huiyuan's brand name and sales network," he said.

Huiyuan controls about 43 percent of China's pure juice market, according to AC Nielsen figures cited by Huiyuan.

Shares in smaller competitors Haisheng Juice <0359.HK> and Andre Juice <8259.HK> rallied on Wednesday morning.

Coca-Cola's Atlantic Industries unit was advised by Royal Bank of Scotland ($1=HK$7.807)
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HUIYUAN JUICE (1886 )

Postby eauyong » Wed Sep 03, 2008 10:22 pm

SHANGHAI: US soft drinks giant Coca-Cola said on Wednesday it planned to buy Chinese juice maker Huiyuan Juice Group in a 2.4-billion-dollar deal that would be its biggest acquisition in China.

Coca-Cola will offer 12.20 Hong Kong dollars (1.6 US dollars) per share in Hong Kong-listed Huiyuan, it said in a statement, adding that three shareholders holding a total of 66 percent in the company had accepted the offer.

"It is the largest proposed transaction in China and the second largest for the Coca-Cola Co.," the company said in an email to AFP.

Coca-Cola said it intended for Huiyuan, one of China's best-known juice brands, to carry on its business, but that it would later review its operations.

"Huiyuan is a long-established and successful juice brand in China and is highly complementary to the Coca-Cola China business," said Muhtar Kent, CEO of Coca-Cola Co., in the statement.

He said the deal was "a unique opportunity to strengthen our business in China, especially since the juice segment is so dynamic and fast-growing in China".

According to Coca-Cola's Chinese website, its investment in China since 1979 totals 1.25 billion dollars.


- AFP/so
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Re: HUIYUAN JUICE (1886 )

Postby eauyong » Wed Sep 03, 2008 10:28 pm

Nominal Price: 10.94
Previous Close : 4.1400
Net Change : 6.8
Change (%) : 164.251 :o
Bid : 10.92
Ask : 10.94
P/E(x) : 20.99
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Re: HUIYUAN JUICE (1886 )

Postby winston » Wed Sep 03, 2008 10:32 pm

Hi eauyong,

We already have a thread on Huiyuan Juice. It is filed under their full name, China Huiyuan Juice.

I will be merging your thread later with that thread.

Take care,
Winston
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Re: China Huiyuan Juice 1886

Postby winston » Thu Sep 04, 2008 10:50 am

Sold yesterday...

Coca-Cola's bid to buy Huiyuan Juice may be subject to approval by mainland authorities in accordance with a newly imposed anti-monopoly law in China amid concerns about the deal's impact on competition, according to an expert in China.
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Re: China Huiyuan Juice 1886

Postby winston » Thu Sep 04, 2008 10:52 am

HONG KONG ECONOMIC TIMES

-- Polls conducted by mainland websites showed many people opposed Coca-Cola's planned takeover of Huiyuan Juice. A poll conducted by Sina.com showed 84 percent of some 30,000 respondents opposed the deal.
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Re: China Huiyuan Juice 1886

Postby winston » Thu Sep 04, 2008 7:07 pm

Huiyuan Falls on Concern Coca-Cola Deal May Collapse (Update2)
By Stephanie Wong

Sept. 4 (Bloomberg) -- China Huiyuan Juice Group Ltd. dropped the most in seven months in Hong Kong trading on concern regulators may block Coca-Cola Co.'s $2.3 billion acquisition bid, which would be the largest foreign takeover of a Chinese company.

Huiyuan fell 7.7 percent to close at HK$10.10 in Hong Kong, below Coca-Cola's offer price of HK$12.20. The stock surged 164 percent yesterday after the two companies announced the deal.

Coca-Cola's bid for Huiyuan, China's biggest maker of fruit juice by market share, could test an anti-monopoly law that took effect on Aug. 1. The deal would be the biggest overseas acquisition by the world's largest soft-drink maker as it tries to boost its share of non-carbonated drink sales.

``We do not see significant reasons why the authorities would approve this deal, allowing a major acquisition by a foreign firm of a highly visible domestic company in a visible industry,'' Donald Straszheim, vice chairman of Roth Capital Partners, a U.S. investment bank specializing in emerging markets, said in a note yesterday.

The purchase would double Coca-Cola's share of China's fruit-juice market, which Euromonitor International Plc estimates is growing more than twice as fast as carbonated drinks.

Coca-Cola's acquisition of Huiyuan, which is subject to Chinese regulatory approval, would be the biggest foreign takeover of a company in the Asian country, according to data compiled by Bloomberg.

`Famous Brands'

The deal may violate China's anti-monopoly rules, Straszheim said. He cited a regulation that protects ``famous brands'' from foreign acquisition.

Kenth Kaerhoeg, spokesman for Coca-Cola Asia, refused to comment in a phone interview today.

China's regulators will probably approve the takeover because the country benefits from U.S. investment, said Pauline Loong, China political analyst at CIMB-GK Securities (HK) Ltd.

Still, more than 80 percent of 76,000 participants in an online poll by Sina.com voted against Coca-Cola's purchase of Huiyuan, the official Xinhua News Agency reported today.

Huiyuan was among the top 25 domestic brands last year, according to the China Brand Union Association, Xinhua said.

Regulatory Requirements

Chinese law requires that regulators be notified of deals increasing business ``concentration'' that meet ``certain criteria.'' Companies with ``dominant'' market share in any product and who ``abuse'' their position can be investigated under the legislation.

``The legislation, with its broad language and concepts, leaves large pockets of uncertainty,'' Loong wrote in a note to clients. ``The implementing regulations are also vague.''

Chinese rules issued separately require the government be notified of all deals involving companies with combined worldwide sales of more than 10 billion yuan ($1.46 billion) or combined China sales of more than 2 billion yuan in the previous financial year. Regulators also need to be informed when the China sales of each of at least two companies involved in a deal exceed 400 million yuan in the previous financial year.

Getting approval for the deal shouldn't be a ``major problem,'' said Shaun Rein, managing director of China Market Research Group in Shanghai. The transaction involves beverages ``which don't threaten national security in China.''

Xugong Group

Carlyle Group, the world's second-biggest private-equity firm, in July was forced to drop its plan to invest in China's Xugong Group Construction Machinery Co. after failing to gain approval from the government for the transaction even after changing its bid three times and cutting the size of the stake.

Huiyuan is the biggest fruit and vegetable juice company in China by market share with 10.3 percent, followed by Coca-Cola with 9.7 percent, according to Euromonitor. The Beijing-based company had 42.6 percent of the market for 100 percent juices last year, Huiyuan said March 31, citing AC Nielsen.

Chinese fruit and vegetable juice sales will probably increase 16 percent to $12.3 billion this year, according to Euromonitor International. That's more than double the growth of carbonated drinks, forecast to rise 7 percent to $7.94 billion.

Zhu Xinli, Huiyuan's founder and president, has agreed to sell his 42 percent stake and will become honorary chairman after the takeover. Group Danone SA, the second-largest shareholder with 23 percent, also agreed to sell.

Coca-Cola's offer price beats Huiyuan's highest closing price of HK$12.10 in July 2007.
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Re: China Huiyuan Juice 1886

Postby winston » Mon Sep 08, 2008 4:55 pm

Sold at HK$11.00.

China to make anti-monopoly review of Coca-Cola deal

China said it will submit Coca-Cola's proposed takeover of juice producer Huiyuan to an anti-monopoly review, amid reports that rival Chinese companies would seek to block the deal.

The US soft drink giant's application for the bid will be reviewed under the anti-monopoly law once the ministry receives it, spokesman Yao Shenhong was quoted as saying by state-run China Central Television over the weekend.

Yao said a review was necessary because of the large sum of money involved, according to the television station.

Coca-Cola announced last week plans to buy Hong Kong-listed Huiyuan Juice Group for US$2.4 billion (HK$18.72 billion), the US soft drink maker's largest acquisition in China.

AGENCE FRANCE-PRESSE
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