ndamental View Technical View

Still a gd stock to invest in..before the herd comes in, 20c presents gd value dyodd!

Source: NextView

Yamada could be forming a cup-and-handle chart look alike

pattern. Resistance is currently at S$0.24 while support

appears at S$0.19.

Financials

Year to 30 Jun

(Rmbm) 2010 2011 2012F 2013F 2014F

Net turnover 314.0 364.4 533.4 626.9 716.8

Gross Profit 131.2 181.0 211.6 249.9 287.1

Operating profit 118.0 126.1 174.2 206.9 240.8

Net profit 103.3 112.7 169.0 201.7 235.5

EPS (Rmb cent) 86.1 27.7 41.6 49.6 57.9

Net margin (%) 32.9 30.9 31.7 32.2 32.9

Dividend yield (%) 3.4 0.0 6.6 7.9 9.3

PE (X) 1.5 4.5 3.0 2.5 2.2

P/B (X) 1.5 1.3 0.8 0.6 0.5

ROE (%) 29.8 28.1 27.8 24.8 23.5

Source: Bloomberg, UOB Kay Hian

Background

Investment highlights

•

from a larger production capacity, improved gross margins

and increased sales with a wider distribution network.BUY with a target price of S$0.33 due to stronger earnings

•

70% discount to Singapore-listed peers’ average. Yamada

Green Resources (Yamada) is currently trading at 4.0x

FY11 PE and 2.6x FY12F PE vs an earnings growth of

50.0%.The target price translates to 4.0x 2012F PE, pegged at a

Our view

•

government continues to encourage rural agriculture.Macroeconomic should favour Yamada as the

To curb food inflation, the Chinese government plans to

allocate Rmb1.2t for developing the agricultural industry,

improving rural areas and farmers' livelihood this year. At

the fifth session of the 11

Chinese Premier Wen Jiabao reiterated that the

government remains committed in its efforts to boost

agriculture production by developing technology and

investing in rural infrastructure. We believe Yamada will

benefit from such policies as the government can use

Yamada as a conduit to encourage corporate high

technology farming.th National People’s Congress,

•

for FY12.

1HFY12 to Rmb252.0m due mainly to higher sales of selfcultivated

fungi as the group almost doubled its shiitake

mushroom cultivation base from 2,614mu in 1HFY11 to

5,134mu in 1HFY12. As a result, PBT escalated 130% to

Rmb81.2m from Rmb35.3m in the previous period if we

exclude the Rmb14.6m valuation gains of the eucalyptus

trees in 1HFY11. We believe earnings growth momentum is

likely to continue for the second half, particularly so as they

have signed on new exclusive distributors for their

mushrooms.Expansion in mushroom cultivation to boost earningsYamada reported a 70.1% surge in revenue for

•

will improve margins.

profit margins in the fungi segment from 49.8% in 2QFY11

to 42.2%, mainly due to rising raw material cost of

synthetic logs. With the acquisition of 21,000mu of

eucalyptus trees in Dec 11, it will fulfill 20% of the

synthetic logs requirement in FY13 and 50% in FY14, thus

controlling cultivation costs and consistency in the quality

of their edible fungi. Gross margins are likely to improve

going forward.Completed acquisition in the Eucalyptus plantationsYamada reported lower gross

Peer Comparison

Company

Ticker Price

(S$)

Market

Cap

(S$b)

PE

FY11

(x)

PE

FY12F

(x)

CEREBOS PACIFIC

SINO GRANDNESS

PEOPLE'S FOOD

CHINA MINZHONG

Average 12.9 8.6CER SP 5.520 1748.5 17.5 14.2SFGI SP 0.405 107.4 3.6 3.1PFH SP 0.585 661.2 25.7 --MINZ SP 1.000 557.4 4.8 --

YAMADA GREEN RES YGR SP 0.205 84.2 4.1 --

Source: Bloomberg, UOB Kay Hian

Yamada is a major supplier of self-cultivated shiitake

mushrooms. The group operates one of the largest shiitake

mushroom cultivation bases in China. It also manufactures

and supplies processed food products such as mushrooms,

vegetables and convenience