Yamada Green Resources Limited - Can Sam Goi solve its problems?

28/2/2013 – Yamada’s Founder, Chairman and CEO Chen Qiuhai sold 8.3 mln shares in a married deal at 11.9 cents.

However, this was not the reason for 156% surge in Yamada’s share price.

The real reason was Mr Sam Goi Seng Hui buying 16.5% stake in the group through a private placement.

Sam Goi is Executive Chairman of food maker Tee Yih Jia Group.

Goi has interests in TungLok Group and Super Coffeemix, as well as property development.

After the private placement, CEO's stake will be down to 47.5%.

The net proceeds of S$9.5 mlnwill be used to fund acquisitions and expansion, as well as general working capital.

Just a week ago, Investor Central wrote an article on Yamada – "What if it does not obtain the logging license?" (February 14).

We raised concerns to management about its falling cash balance and whether it would raise cash for additional funding.

And that's exactly what they did.

Lim & Tan Research recommends TAKE PROFIT or SELL as YAMADA’s valuation is double that of its much bigger, more established and much more diversified peer China Minzhong.

Meanwhile, Yamada has finally managed to obtain the logging licence from the Longyan Municipal Bureau of Forestry to harvest its eucalyptus plantations to produce sawdust as raw materials.

Strangely, the licence will be valid only until 21 April 2013.

It will continue to apply for new licence to harvest mature eucalyptus trees in the subsequent years.

The licence to harvest an area of 5,534 mu will allow the company to produce enough raw materials for more than half of the total synthetic logs to be used for the cultivation of shiitake mushrooms for year ending June 2014.

Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.

Question

1. Can Sam Goi solve its problems?

Sam Goi, also known as the Popiah King, has ownership stakes in several listed companies, and these holdings are either in his name or under his personal vehicle, food company Tee Yih Jia.

Tee Yih Jia Group sells Asian food in 49 countries and remains the largest manufacturer of popiah skin for spring rolls.

Goi, who has interests in TungLok Group and Super Coffeemix, has been actively involved in businesses in China and has invested not only in food businesses but also property development.

So, first question is what - if anything - he can do to turn Yamada's fortunes around.

After all, the problems identified in our earlier report are not all internal. Some also fall into the domain of Chinese regulators. Can Goi really change this?

2. What role will Goi have?

Goi bought the shares in Yamada using a new special purpose vehicle, Hydrex International Private Limited.

What role will he have in the running of the business?

3. Which business segment does it plan to expand?

Yamada highlighted that it will use S$9.5 mln of net proceeds to fund acquisitions and expansion, as well as general working capital.

But it did not mention the time frame for using the proceeds, and the business segment that it intends to expand.

Yamada generates revenue from self-cultivation business and processed food products.

We have sent these questions to the company to invite them for an on-camera interview, and/or seek their written response.

Sofar, we have not had a reply (which is why you are seeing this message).

Sources & further information

Sources

Statutory disclosure
Lim & Tan Research Report


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