Small Talk: Asian Citrus finds orange market ripe for growth in China
Monday 31 January 2011
China is typically a long way behind Spain, Brazil or the US when most British people think of orange-producing countries. But Asian Citrus Holdings, an Aim-listed orange producer, is delivering profit growth from the fruit in the world's most populous country.
The company, which has two operational plantations in China, last week revealed it expects interim net profits to more than double for the six months to 31 December. It reported net profits of RMB247m (£24m) for the same period in 2009. The recent profits surge was boosted by a 25.5 per cent rise in the winter crop's yield and higher average selling prices for its oranges. That 9 per cent rise was driven by climate problems, such as floods and cold weather, which hit the supply lines of small farmers in China. Eric Sung, Asian Citrus's finance director, said: "The reason for the increased price was the decrease in supply in China."
While Asian Citrus, which is also listed on the Hong Kong market, is already the largest orange producer in China, Mr Sung see plenty of growth ahead. He explains that as Chinese people "become richer" they will grow more concerned about their quality of life, health and diet.
In fact, the Chinese currently eat about 10.5 kilograms of oranges a year, compared with closer to 30 kg in the Western world. Furthermore, Asian Citrus plans to start producing from a third plantation in China in 2014. Before then, the company is likely to generate substantial growth from its acquisition of BPG Food and Beverage at the end of November.
BPG is a Chinese producer of fruit-juice concentrate and Mr Sung says the wholesale opportunity is huge, as only a tiny percentage of the fruits produced in the country are turned into juice. In fact, Mr Sung says there is so much overall demand to shoot for in China that there is no need for Asian Citrus to export to other countries. He says: "We only account for 3 per cent of market share in terms of production volumes [in China]. There is still a big opportunity for Asian Citrus to supply here."
Shares in Asian Citrus have jumped sharply in the past year and closed last week just shy of 80p. Seymour Pierce has a price target of 84p and, as long as Chinese people keep eating their oranges, it could be one to watch.
Nautilus seeks gold under the sea
These are exciting times for Nautilus Minerals. Two weeks ago, the Vancouver-based group was granted the world's first deep-sea mining lease, for its Solwara 1 project in the Bismarck Sea off Papua New Guinea. Last week it confirmed that the "sulphide system" covered by the 59 square kilometre-area of the lease is made up of unusually high-grade gold and copper. And Nautilus is now expected to conclude within weeks the joint-venture talks crucial for moving from exploration to production.
Insiders suggest that although there is the still the possibility of a standard JV arrangement – with the partner buying in at the project level – the most likely outcome is for a deal with a partner who will provide the technical equipment up front and thereby help to keep the capital costs down.
According to the company – which counts the mining giant Anglo American among its shareholders – the first ever sea-floor copper/gold mine should be up and running within 30 months of the JV, with production levels scaling up to 200,000 ounces of gold and 90,000 tonnes of copper per year.
Solwara, which means salt water in the local language, is just the first of 35 deposits found by Nautilus in the waters around Papua New Guinea, 19 of which it is developing, in an exploration area of 520,000 square kilometres, or twice the size of the UK.
There are significant technical challenges with such a ground-breaking plan. But the idea is to mine Solwara 1, and once that is exhausted, simply lift up the riser and float the barge onto the next deposit. Numis, the house broker, put out a suitably upbeat analysis last week, describing the company as "a good value play on a potentially highly lucrative new direction for the mining industry".
Greece is the word for IT group Globo
Apply the words Greece and investment, and even those with a strong appetite for risk might head for the exit. The country's economic problems have been well documented, and it is still not out of the woods. But there are signs of life.
The Aim-listed Greek software company Globo has not had the most comfortable of experiences on the junior market. The company's early days were characterised by changes of advisers and difficulty in winning support as a result. However, Globo has just announced a £17m share issue – at only a slim discount of just over 10 per cent – to fund international expansion.
Its shares have shot up in recent weeks and the announcement of the placing appeared to cause them little harm (the shares closed up on Friday). The placing, handled by Daniel Stewart, was over subscribed and represents something of a milestone for the firm, with the money raised being used to fuel international expansion, particularly into emerging markets. Perhaps just as much to the point, the cash call will significantly reduce its reliance on bank funding and will leave the company with net cash at the bank.
The Greek issue has caused problems: there were jitters last year around the company over the payment of receivables owed by the Greek government. Following the sovereign-debt crisis, the government announced that there would be a delay in the payments owed to Globo for some public-sector contracts the company had undertaken. All the same, Globo has been attracting interest among investors as a result of its CitronGO! Product – a mobile-communication software system that was launched two years ago.
It is billed as effectively providing an alternative to buying smartphones such as the iPhone or ones using Google's Android technology. CitronGO! has tweaked the interest of mobile-network operators in emerging economies and the company is in talks with a number of handset manufacturers as well as mobile network operators and value-added service providers.
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