CHINA Animal Healthcare

DMG & Partners Research on 27 Sept 2012

CHINA Animal Healthcare (CAL) announced that it entered into a conditional subscription agreement with Themes Dragon International and SEB SICAV 2- SEB Listed Private Equity Fund to raise around S$48 million, to be primarily used to partly fund its possible de-listing from SGX.

The subscription agreement includes 53 million subscription shares at an issue price of S$0.30 and 106 million warrants at an exercise price of S$0.30, and is conditional upon the company obtaining approval from its shareholders at a general meeting for the possible de-listing exercise and for the listing of new shares by March 31 next year.

Although CAL has high cash-generative characteristics that would warrant better valuations comparable to regional consumer counters, uncertainty over its de-listing plan and a paltry dividend payout despite a hefty 821 million yuan (S$159.9 million) cash pile would likely continue to weigh in the near-term. Maintain "neutral" at TP of S$0.30, pegged to 3.6x blended FY12-13F EV/EBITDA.

NEUTRAL