Chaoda Modern Agriculture (Holdings) Limited Analysis

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Investment and Portolio Analysis Assignment 2 (Q1)

Answer to Question 1 1. Introduction This paper is to review a company called Chaoda Modern Agriculture (Holdings) Limited (the Company). The review hereafter will cover: the Company; the Market & Opportunity for Chaoda; and Financial Figures & Indicative Valuation.

Based on the findings of the review, recommendation on “Buy” or “Don’t Buy” will be attempted to address in the last section of Conclusion. 2. The Company Chaoda Modern Agricutlure (Holdings) Limited (the Company) was listed in the Hong Kong Stock Exchange in December 2000 with its listed code of 00682. At its IPO, the offer price was HK$1.52 per share. Since then, the stock has been trading with its trough of HK$0.59 per share during March 2003 and its peak of HK$11.9 per share during August 2008. As at 29th January 2010, the stock price was closed at HK$7.65 per share.

Chaoda (00682) - Daily Closing Price
14 12 10 8 6 4 2 0

Data Source: Yahoo Finance

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Investment and Portolio Analysis Assignment 2 (Q1)

2.1 Ownership of the Company The Company has authorized shares of 5,000,000,000. At the par value of HK$0.1 per share, the Company therefore has authorzied share captial of HK$500,000,000. As at 7th January 2010, the total number of issued shares was 3,116,927,961 and there were no preference shares or other classes of shares. Thus, taking the share closing price of HK$9.42 per share at that date, the market capitalization was HK$29.36 billion. The major shareholders of the Company are: Major Shareholders Kailey Investment Ltd.* Janus Capital Management Ltd. Blackrock, Inc. Current Holding 643,092,644 315,630,485 171,643,409 % Held 21.13 10.37 5.64 Date 2009/12/24 2009/12/24 2009/12/24

* Beneficially and wholly owned by Mr. Kwok Ho

2.2 Chairman and Chief Executive Officer (CEO) Being the majority of shareholder, Mr. Kwok Ho is also the Chairman and CEO of the Company. However, under code provision A.2.1 of the Corporate Governance Practices*, the roles of the chairman and chief executive officer should be segregated. (* Corporate Governance Practices contained in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited)

2.3 Board of Directors As at 8th January 2010, the Board of Directors of the Company comprises eleven members with six executive directors, four independent non-executive directors and one non-executive director. Details of the Board’s members are Executive Directors Mr. Kwok Ho (Chairman) Dr. Li Yan (Lee Yan) Ms. Huang Xie Ying (Wong Hip Ying) Mr. Kuang Qiao (Fong Jao) Mr. Chen Jun Hua Mr. Chan Chi Po Andy (CFO) Non-Executive Directors Mr. Fung Chi Kin (Independent) Mr. Tam Ching Ho (Independent) Professor Lin Shun Quan (Independent) Ms. Luan Yue Wen (Independent) Mr. Ip Chi Ming

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Investment and Portolio Analysis Assignment 2 (Q1)

As shown in the annual report as at Jun 2008, in addition to the basic salaries, the company granted a total of Rmb 3.3 million share option benefits to the executive directors (not including the Chairman). This amount of share option is much higher than the ones in the previous years. 2.4 Management Apparently, Mr. Kwok Ho is the key decision maker and driver of the Company. The way that he has run and managed the Company is worth to pay attention. First, he has taken various important roles in the company at the same time, namely: The Majority Shareholders The Chairman & CEO The supplier of Fertilizer to the Company

Under his leadership, the Company has had five auditors since 2001. Also, over the same period, there have been numerous captial raising exercises through the debt and equity markets which includes: Nov 2001: Placement of 320 million shares at the price of HK$2.3 per share Jan 2004: Placement of 280 million shares at the price of HK$2.5 per share Feb 2005: Issue of senior notes due on 8 Feb 2010 for US$225 million May 2006: Issue of zero coupon CB...
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