Pine Agritech - Weak Demand To Weigh Heavily On Performance

As warned by management on 4 May ’09, the company swung into the red (-RMB22.6mln) in 1Q ‘09 versus profit of RMB70.16mln last year and profit of RMB8mln in 4Q ‘08. Sales plunged 57% yoy and 16% qoq to RMB190mln. The weak set of results reflect lower export as well as domestic demand due to the global financial crisis.

Looking ahead, management remains very cautious as the slow down in the domestic market will continue to weigh heavily on its performance while overseas demand will also remain weak due to the on-going global financial crisis. Selling prices will remain under pressure and management will be very vigilent on cost control measures.

Fortunately the company has cash of RMB2.619bln (up from RMB2.394bln last year) against debts of RMB1.973bln, giving a net cash position of RMB646mln. Shareholders funds total RMB1.81bln.

At 14.5 cents a share, market cap is S$435mln, trailing PE is 24x, price to sales is 1.8x and price to book is 1.2x. Since mid-2008 the stock has been stuck between mid single digits and mid-high teen levels and with the stock coming close to the upper end of the range coupled with management’s very cautious remarks we would be looking to sell it on further strength.

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