Pigging Good Investment

CHINA - It pays to raise pigs in China, says capital and investment research organisation Beacon Equity Research. Pork is by far the most popular animal protein in the heavily carnivorous nation, accounting for around 65 per cent of total meat consumption. And that level is expected to continue to rise.
calendar icon 8 February 2008
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Integrated Outlook

Beacon says that a good example of success is NASDAQ-traded AgFeed Industries - China’s most significant pig feed manufacturer. The company is well placed to take advantage of the expanding market and is investing for a more integrated and profitable future.

The company’s top and bottom line results have moved along in line with market trends, with revenue expanding from $8.5 million in the quarter ended in December 2006 to $11.9 million three quarters later. Net profit for the same period was $1.2 million and $2.1 million, respectively, and a very clean balance sheet.

Success continued in January, with the acquisition of a major share in five key production units. This sensible and pronounced vertical integration was well-timed as the Chinese government declared tax-exemptions for the pig production sector in a bid to stabilise the market. There is currently a chronic shortage of pork shortage following disease outbreaks and production difficulties.

Agrarian Economy

For such a massive economy, China is still heavily agrarian. It is estimated that 11 per cent of the nation’s GDP in 2007 was derived from agriculture, compared to only 5.1 per cent in Brazil and less than one per cent in developed nations such as the US and UK.
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