Chicken supplier DaChan plans US$200m initial public offering

PUBLISHED : Monday, 10 September, 2007, 12:00am
UPDATED : Monday, 10 September, 2007, 12:00am

DaChan Food (Asia), a major supplier to KFC in the mainland planning an up to US$200 million initial public offering, expects to benefit from growing chicken consumption in the country on the back of a rising economy.

'With fast-food chain operators doubling their sizes every three years and the growing purchasing power of mainland residents, we'll have a good prospect to grow our customers,' chairman Mark Han Jia-hwan said.

Mr Han did not give figures of the company's sales volume or market share, but had said its parent company aimed to double market share in the mainland's chicken meat market to about 10 per cent in five years, from 4 to 5 per cent at present.

Consumption of chicken meat in the mainland was 22 grams per capita per day in 2005, below the 35 grams in developing countries and 50 grams in developed countries, Mr Han said.

DaChan Asia, the mainland unit of Taiwan-listed DaChan Great Wall Enterprise, plans to launch a US$100 million to US$200 million Hong Kong initial public offering this month.

Analysts said the company could use the proceeds from the public offering to fund mainland expansion to capitalise on the fast-growing demand for quality and safe chicken meat.

It is a major chicken supplier to fast-food chains such as McDonald's and KFC in the mainland.

'One out of three chickens KFC used [in the mainland] are provided by us,' Mr Han said.

DaChan Asia has a chicken meat capacity of 23,264 tonnes per month and food-processing capacity of 2,905 tonnes per month in the mainland.

Its total feed production capacity is 157,580 tonnes per month in the mainland, Malaysia and Vietnam, according to Mr Han.

It is the largest chicken slaughterer and the 10th largest feed producer in the mainland. It is also the No2 feed producer in Malaysia and No3 feed producer in Vietnam.

DaChan Asia's net profit was US$13.36 million last year on a turnover of US$637 million. Between 2004 and 2006, its turnover grew at a compound rate of 22 per cent while earnings growth was at 130 per cent, market sources said. About 59 per cent of its turnover came from chicken meat, 35 per cent from the sale of feed to external customers, and 6 per cent from processed food.

Mr Han said the company planned to expand its food-processing business and wanted to have a more balanced mix for its three core businesses.