Shanghai Dajiang leads the way with first agricultural share issue

POULTRY breeder Shanghai Dajiang Co, which is 50 per cent owned by C.P. Pokphand International, will raise about 250 million yuan (HK$337 million at official rates) through a flotation of A and B shares on the Shanghai Stock Exchange.

The 50 million shares, priced at about five yuan each, will be equally divided between A and B shares.

The A-share issue with Shanghai Shenyin as underwriter is expected to come first, within next two months, while the B shares will be issued by the end of the year.

Shanghai Dajiang will be the first agricultural stock on the mainland tapping the fast-growing consumer market.

The company raises chickens and swine for both domestic and overseas markets as well as producing poultry feed.

China's total export of chicken is around 100,000 tonnes annually, with Shanghai Dajiang making up 16 per cent to 20 per cent.

''Because of the competition among mainland firms for a listing and the quota assigned for the total shares issue, the flotation plan has taken a longer time to materialise,'' said Shanghai Dajiang financial controller Teo Haneng.

Shanghai Dajiang is understood to have trimmed the issue from 500 million yuan to 250 million yuan.

The new capital will be used to expand feed-mill plants and broiler farms, as well as setting up a fast-food chain in Shanghai and nearby provinces.

''With the large volume of chickens produced every year, the company has the advantage of downstream integration in establishing fast-food stores,'' Mr Teo said.

Shanghai Daijiang will also move into property development by participating in a Government plan to construct an amusement park and holiday resorts in the Sheshan area of Shanghai.

The company's diversification move is driven by growing competition in poultry feed production, its original core business.

The poultry feed share of total sales was 70 per cent in 1989, gradually declining to 41.5 per cent last year.

The chicken share increased from 14.7 per cent to 41.6 per cent in the same period.

Mr Teo acknowledged that the company would have to find more sources of income, considering the establishment of many more feed-mills in China.

With the setting up of 10 more broiler farms later this year, the company's annual chicken output would be increased significantly, and its share of the country's total export increase to 30 per cent, he believed.

Shanghai Dajiang experienced a 23 per cent drop in net profit to 68.8 million yuan in 1992 despite a slight rise in sales revenue to 769 million yuan.

Mr Teo said that was due to stiff competition in the feed-mill industry and depressed prices in broiler market.

He also cited the surge in raw materials prices plaguing the agri-business industry over the past 12 months.

However, for 1993 sales revenue and net profit of 1 billion yuan and 120 million yuan respectively are forecast.

Foreign currency earnings was expected to increase from US$23 million to $35 million due to increased chicken exports, he added.

C.P. Pokphand is the Hongkong flagship of the Charoen Pokphand Group of Thailand, controlled by the Chearavanont family.

Shanghai Dajiang's remaining 50 per cent stake is shared between China's Songjiang Livestock & Poultry Co and Songjiang Feed Co.