Dongfang Modern Agriculture Holding is seeking to raise up to...

Dongfang Modern Agriculture Holding is seeking to raise up to $50 million to acquire camellia orchards and related businesses.

The company is currently engaged in the business of cultivation and sales of various agricultural produce including the citrus fruits tangerine, pomelo and navel oranges and also camellia seed, camellia fruit and related products in Ganzhou City District, Jiangxi Province of China.

It has achieved sales revenue of $133.3 million in FY2014, up 23.7% from the previous year.

EBITDA was $56.6 million on a pro-forma EBITDA margin of 42.5%.

Dongfang envisions significant further growth as it benefits from a large growing population in China, rising living standards and a growing share of fruit in the population’s diet.

In addition, Chinese consumers have started to realise the health benefits of using camellia oil in salads and in pan cooking, which has increased the demand for camellia fruit and seeds.

The rapid changes in the living standards in the PRC since 2000 have created many opportunities in the ways of doing business with one of the most important being the aggregation of what are highly fragmented industries across the range of domestic and consumer sectors.

The total output value of China’s fruit and vegetable processing industry in 2015 is expected to reach about 300 billion yuan (A$64.6 billion), with the total production of fruit and vegetable juice reaching about 3 million tonnes; and the total production of canned fruit and vegetable reaching more than 2 million tonnes.

Dongfang is also greatly assisted by Chinese Government policies that not only directly encourage domestic self-sufficiency in agricultural foodstuffs through direct policy initiatives but have since 2009 made most agricultural foodstuff production exempt from income and VAT.

This exemption is expected to continue for the foreseeable future. Dongfang has therefore been able to reinvest almost all its earnings in growing its business.

It plans to not only increase the size and profitability of its core businesses but to also create new related businesses to take advantage of the fragmented nature of these industries in China with its large and increasingly wealthy markets.

Its prospectus invites investors to apply for up to 50 million shares priced at $1 each with a minimum subscription of $39 million.

The company seeks to trade as DFM on the ASX.

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