There is one stock that give impressive revenue & profit growth since its birth in 2005, and is currently trading at PE of 3.14!
Sozo, a china-based food company (Rizhao Hengbao), a Bursa IPO in 2010, was founded in China just in 2005, and incorporated in Singapore and Malaysia in 2006 & 2009 respectively.
Sozo's product can be divided into 4 categories: Ready-to-serve food, frozen vegetables, canned food and others. The main products are the meat and poultry (duck). It has exported some products to Japan, Korea and US.
Sozo can food
With the cash raised from the IPO, Sozo plans to set up new poultry farming, breeding and processing facility, its third production plant in China and Halal food processing facility in Malaysia. It has inked the MoU for the Malaysia facility back in April this year.
Sozo's financial performance:
RM mil | Revenue | Net Profit | Profit Margin % | Profit Growth % |
2006 | 58.1 | 7.1 | 12.3 | N/A |
2007 | 98.8 | 18.9 | 19.2 | 166 |
2008 | 200.1 | 45.7 | 22.9 | 142 |
2009 | 313.9 | 83.5 | 25.4 | 83 |
2010 | 381.6 | 94.0 | 24.6 | 13 |
Business growth since 2006 is impressive but becomes slower and slower where the net profit growth is just 13% in 2010. The profit margin is quite incredible! The IPO may come at the right time for Sozo to expand its business and geographical presence. However, the completion of new facility may take 2 more years.
2011Q1 result:
Q1 (RM mil) | 2011 | 2010 | Growth % |
Revenue | 86.1 | 77.3 | 11 |
Net Profit | 34.1 | 23.1 | 47 |
Sozo looks ready to achieve another record year in 2011. However, the share price performance is bad, like most other China-based stocks. Investors still don't like China stocks I guess. Recently the share price has dropped 10% in one week last week to close at RM0.63, which is 21% lower than the IPO price of RM0.80! Anyone knows the real reason?
Because of lower than expected dividend? Do you see a danger or an opportunity here?
Sozo declares first & final dividend of 1.8sen for FY2010, which is about 2.8% yield for the current share price of RM0.63, which from my calculation, is just 9% payout from 2010's profit. The ex-date is 25/8/2011. Looking back at the prospectus, Sozo said it intends to payout approximately 3 sen as FY2010 dividend. So Sozo does not keep up to its promise, which I think could be the main reason why its share price plunged 16% since the annoucement of dividend on 2nd June 2011. China's style?
Sozo also plans for secondary listing in Singapore instead of Hong Kong as mentioned during the IPO. Is this good or bad or neutral?
Food industry should be a resilient and viable one, but subject to fierce competition too. Sozo is growing well, is cash-rich and China is a huge market. Is it the time to get Sozo?
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