april 2015 investor roadshow 'dong fang modern agriculture holding group

DongFang Modern AgricultureHolding Group

LimitedHigh-Margin Citrus Industry Aggregator

ASX IPO Jun 2015

http://www.dongfangmodernagriculture.com.au

This presentation has been prepared by DongFang Modern Agriculture Holding Group Limited forprofessional investors. The information contained in this presentation is for information purposesonly and does not constitute an offer to issue, or arrange to issue, securities or other financialproducts. The information contained in this presentation is not investment or financial productadvice and is not intended to be used as the basis for making an investment decision. Thepresentation has been prepared without taking into account the investment objectives, financialsituation or particular need of any particular person.

No representation or warranty, express or implied, is made as to the fairness, accuracy, completenessor correctness of the information, opinions and conclusions contained in the presentation. To themaximum extent permitted by law, none of DongFang Modern Agriculture Holding Group Limited,its directors, employees or agents, nor any other person accepts any liability, including, withoutlimitation, any liability arising out of fault. In particular, no representation or warranty, express orimplied is given as to the accuracy, completeness or correctness, likelihood of achievement orreasonableness of any forecasts, prospects or returns contained in this presentation nor is anyobligation assumed to update such information. Such forecasts, prospects or returns are by theirnature subject to significant uncertainties and contingencies.

Before making an investment decision, you should consider, with or without the assistance of afinancial adviser, whether an investment is appropriate in light of your particular investment needs,objectives and financial circumstances. Past performance is no guarantee of future performance.

A Prospectus will be Offered by the Company as part of the Initial Public Offering progress. Thedistribution of this presentation is jurisdictions outside Australia may be restricted by law. Anyrecipient of this document outside Australia must seek advice on and observe such restrictions.

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� Capital raising min/max– A$ 39M/50M

� Number of new Shares issued– 39m/50m

� Offering price– A$ 1 per share at 5.0x PER

� Number of Shares on Issue at Completion of the Offer :– 389M-400M

� EPS on 2013/ 2014/2015 F –0.126/ 0.225/ 0.174 (RAISE 39M) – 0.126/ 0.225/ 0.166 (RAISE 50M)

� Planned dividend per share– 0.04 (20% Dividend payout ratio)

Existing Shareholders %

Hongwei CAI 89.0%Super Fusion International Limited 6.0%Huge Ease Limited 5.0%

Pre-IPO Share Holding Structure

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�Investment Highlights

�Who We Are

�Business Overview

�Industry Overview

�IPO Share Offer

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http://www.dongfangmodernagriculture.com.au5

� In top 3 of Chinese citrus producers with over 8,900 hectares in plantations

� Producer of tangerine, pomelo and oranges and camellia seed/fruit products

� Agricultural food production is tax exempt in China

� Excellent financial and production track records since 2008.

� FY14 revenue of A$148m with EBITDA A$64m and a net profit of A$75m

� +15% EBITDA forecast for FY15 with op margin of 40-45% - no debt.

� IPO on ASX provides additional funds for further farm land acquisitions

Camellia oil and products – major opportunity

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GanZhou Chinese Modern

Agriculture Co.,Ltd

(People’s Republic of China)

100%

100%

Dongfang Modern Agriculture Holding Group Limited

(Australia)

Worldwide Network InvestmentGroup Limited(Hong Kong)

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�Mr. Hongwei CAI

Core leader, founder and Chairman, major shareholder

�Mr. Ming Barton Sing TSO

CEO, previously ED & CFO of China Fortune (HK listed)

�Mr. Chiu SO

CFO, previously ED of China Packaging (HK listed)

�Mr. Dan lIN

Non- Executive Director

�Ms. Xiaoci CHEN

Non- Executive Director12


� Region selected by climate, soil and infrastructure.

� GanZhou city located in Special Citrus Zone

� GanZhou brand well known for citrus

� High ave rainfall of about 1500mm pa

� Low cost of irrigation.

� Long frost-free growing season.

� GanZhou > 9 m population gives ample labour19 farms

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Cultivation

• Annual cultivation plan prepared after harvesting season. • Fertilization and pest control exercises are then carried out• Labour requirement assessed by villagers’ committees

Harvesting

• Annual harvesting is September until end of December. • Harvesting schedule determines labour demand

Grading and packaging

• Manually conduct grading by size, color and overall appearance. • Selection criteria is set against PRC national standards. • Higher quality produce can sell for higher prices.• Packed in approximately 10 kg paper boxes

Sun drying (Only

Camellia)

• Previously camellia fruits were sun dried but now sold directly

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Areas (Ha) FY12 FY13 FY14 FY15F

Camellia

Acquired 60 60 60 60

Leased 2,187 2,187 2,187 2,453

Sub Total 2,247 2,247 2,247 2,513

Pomelo Leased 840 1,433 1,433 1,433

Orange Acquired 45 542 542

Tangerine

Leased 1,367 3,751 3,751 4,017

Acquired 400

SubTotal 1,367 3,751 3,751 4,417

Total 4,453 7,475 7,972 8,906

2,24

7

840

1,367

0

2,24

7

1,433

3,75

1

45

2,24

7

1,433

3,75

1

542

2,51

3

1,433

4,41

7

542

C A M E L L I A P O M E L O T A N G E R I N E N A V E L O R A N G E

PLANTATION AREA (HECTARE) FY2012 FY2013 FY2014 FY2015F

Plantation Area by Key Products Change in Area by Product

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.

� Long-term relationships with a range of wholesale customers

� Citrus fruits delivered quickly and efficiently to major fruits markets throughout China.

� Largest customer ~13% revenue in 2014.

� Top 5 clients provided ~50% of revenue. 23,589

51,600

128,958

21,438

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Camellia Pomelo Tangerine Navel orange

metric tonnes

FY2012 FY2013 FY201 4 FY2015F

� 200,548 tonnes of fruits produced in FY14.

� Tangerine accounted for 52% of the Company’s output ( >Australia’s annual mandarin production).

Production by Fruit from FY12 to FY15

DistributorDongfang Wholesaler Retailer

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20,159 23,606 23,300

12,65525,644 29,27118,159

60,652

83,723

517

11,949

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2012 2013 2014

A$'000

Camelia Produce (note 1) PomeloTangerine Navel Orange

0

46,577 51,374

18,591 0 0

146,405

0 0 0

59,766

0

178,282

240,476

0 0 0

50,000

100,000

150,000

200,000

250,000

300,000

Sep Oct Nov Dec

( A $ ' 0 0 0 ) Camellia Pomelo Orange Tangerine

Revenue by Key Products Revenue Seasonality in 2014

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9.4

36.0

29.2

39.6

25.3

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

Camellia Pomelo Tangerine Navel orange Total AverageYield

( T O N N E S / H A ) FY2012 FY2013 FY201 4 FY2015F

10.51

17.90

16.17

11.50

5.98

9.28

20.60

23.98

28.41

7.91

0.00

5.00

10.00

15.00

20.00

25.00

30.00

Camellia Pomelo Tangerine Navel orange Total AverageYield

( A U D ' 0 0 0 / H A )

FY2012 FY2013 FY201 4 FY2015F

Plantation Volume Yield per Hectare Plantation Revenue Yield per Hectare

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� FY14 revenue $148m, EBITDA $64.6m and net profit of $75m (due to intincome)

� FY15 EBITDA growth forecast

� Operating EBITDA margin 40-45%.

� FY15 to gain from acquisitions and efficiencies

50,973

110,419

148,244

174,155

22,743

49,816

64,668 74,389

21,849

49,411

76,292 74,487

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

FY2012 FY2013 FY201 4 FY201 5F

Revenue Operation EBITDA NPAT EBITDA Margin

A$’000

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� Optimise plantation efficiencies by yield and costs

� Expand land tenure through strategic acquisition.

� Develop national and international GanZhou Chinese brand.

� Develop Camellia Oil business

� Extend distribution chain, and enhance the industry control position

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�Taxation benefit -25% extra profitEffective from 1 January 2008 Article 27 of the New Tax Law gives enterprises engaging in certain agricultural activities, including growing of fruits and selection and cultivation of new agricultural species, are exempt from China Enterprise Income Tax (EIT) and business tax.

�Encourage on import replacement and exportCitrus fruits, including pomelos, is in high demand in China, with the import value and volume growing at a CAGR of about 40% and 34% respectively in the past 5 years.

Chinese G0vernment encourages import replacement and export and helps plantation company to expand their business.

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�Already citrus industry leader

�Perfect location for fruit cultivation

�Established early-development advantage in scale and size

�Very strong revenue, profitability, cashflows, - no debt.

�PRC Government incentives support business plans

�Well-established and stable network for supply of inputs

�Experienced management teams

�Proven track record of delivering growth and profitability

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� Robust market growth

2013 refined tea oil production in China was~464kt (~0.34kg pp) up from 0.22kg in 2009 -- CAGR ~9.8%.

China tea oil consumption ~0.7% of the total edible vegetable oil production vs OECD where olive oil consumption is generally 40% of total.

China produces ~90% of global tea oil.

(Source: Ipsos report)

�Products for future consumption trends

Camellia oil (also known as tea tree oil) is one of the healthiest cooking oil in the world. It has higher smoking point than olive and canola oils and can be used for cooking and salad.

It has many therapeutic properties:

⁻ Antioxidant – Excellent antioxidant. Resists rancidity

⁻ Cicatrizant – promotes recovery of wounds and scrapes.

⁻ Anti-microbial – Bacteriacide with anti-fungal properties.

⁻ Lipid Lowering Effects – reduces LDL cholesterol and triglycerides.

⁻ Insecticide – useful for certain crops.

⁻ Immune booster.

⁻ Cancer anti-mutation – Prevents certain cancers

⁻ Cancer prevention- colon, uterus and breast cancers

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� Rising household disposable income for both urban and rural.

0

5

10

15

20

25

30

35

40

45

2009 2010 2011 2012 2013 2014F2015F2016F2017F2018F

Urban residents Rural residentsRMB ($‘000)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

2009 2010 2011 2012 2013

Million tonnes

� Rising consumption volume of citrus fruits in China

Consumption volume of citrus fruits in China from 2009 to 2013

Average Annual Household Disposable Income in China from 2009 to 2018

Source: Ipsos reportSource: Ipsos report

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� Fruits are playing more important role in Chinese food consumption

� Citrus fruit in China is expected to grow at CAGR of ~24% in value and ~12% in volume respectively from 2014 to 2018.

Million tonnes

0

50

100

150

200

250

300

0

5

10

15

20

25

30

35

40

45

50

2009 2010 2011 2012 2013 2014F2015F2016F2017F2018F

Th

ou

san

dsProduction volume in

China

Production value in China RMB in billion

Source: Ipsos report

Source: Ipsos report27


� Market demand � Selected Market Sale Value

Source: Ipsos reportSource: Ipsos report

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Use of funds:

The IPO funds will be used for acquiring the camellia plantations and developing downstream activities.

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Capital Structure Minimum Subscription

Maximum Subscription

Number of Existing Shares 351,000,000 351,000,000

Number of new Shares issued by the Company under this Prospectus 39,000,000 50,000,000

Total Number of Shares on Issue at Completion of the Offer 390,000,000 401,000,000

Offer Price per Share $1.00 $1.00

Market Capitalisation at the Offer Price $390,000,000 $401,000,000

The Share capital structure post-Offer


Company ASX Product Market CapitalisationA$m*

Est. PE Ratio*

EPS* (A$/share)

DPS* (A$/share)

Div Yield*

DongFang Modern

Agriculture

(DFM) citrus fruits

390 5.0 0.17 0.05 3.60%

Select Harvest SHV almond 573 12.9 0.49 0.15 2.97%

Tassal Group TGR salmon 523 11.4 0.31 0.07 4.43%

Huon Aquaculture HUO salmon 400 12.3 0.37 -n/a n/a

Webster WBA walnut 155 28.0 0.59 0.02 2.99%

Tandou Limited TAN Irrigation 135 57.0 0.01 0.01 1.46%

Fonterra FSF Diary 8,347 17.8 0.30 0.10 2.70%

Ruralco Holdings RHL

agriculture

products 282 13.8 0.26 0.08 6.30%

Weighted average - exclude DFM 17.5 0.31 0.09 2.78%

* Bloomberg data – 15th April 2015

Thanks

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april 2015 investor roadshow 'dong fang modern agriculture holding group

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