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13 Jun | Asian Citrus Holdings

We first squeezed a little Asian Citrus into our portfolio back in October 2009, taking up 254 shares in China’s largest orange plantation owner and operator at £4.27 a share. Before we had time to shake the tree a ten for one stock split was in the works which multiplied our holding by ten to 2,540 shares (and divided each shares worth by that very same multiple).

I like a stock split. I know splitting a stock is often nothing more than a venture in rhetoric but what it does do is produce news (although when a stock split is coupled with negative more business-defining developments it can have more devastating effects on price) and possibly put the company in the sights of a whole new body of investors. Anyway, I digress.

When a holding goes close to doubling in price within 12 months of getting on board, I’ll tend at least consider selling off half of that holding, so what’s left in the portfolio becomes a freebie in essence. It won’t stop me jumping back in if the timing’s right, but occasionally it’s nice to get some money in the bank, pat yourself on the back for a job well done and move your investment funds onto financial pastures new.

So in November of last year – rather serendipitously as Asian Citrus’ price near-peaked at 82 pence – we sold half of our holding (1,270 shares).

Today we still hold those 1,270 shares as Asian Citrus’ price continues its 2011 downtrend flirting with 60 pence as I type.

There was a failed acquisition in May of this year in which Asian Citrus would have acquired more than six square kilometres of Chinese citrus groves, and increased its tree numbers by one-third (more on that at AgriMoney).

This news, whilst probably expected by a lot of those in the know, could go some way to explaining the 25% drop in price since the peaks of late last year, but let’s be honest, AIM share prices across the board have pretty much sucked in 2011. At the end of the day, Asian Citrus has probably been one of the stalwarts of our portfolio this year.

But the news isn’t all bad. Today Asian Citrus announced:

its latest production volume of its Summer Orange crop at its Hepu Plantation was 73,194 tonnes compared with 72,408 tonnes for the harvest undertaken at the same time last year, representing an increase of 1.1%. The yield of the Summer crop is in line with management’s expectations for summer production.

The annual production volume for the Group increased from approximately 186,938 tonnes to about 216,892 tonnes in the current year which represents an increase of approximately 16.0%.

Interactive Investor in a Stock to Watch piece from March of this year, touched on a very important macro-economic factor that alone highlights the massive growth potential for Asian Citrus:

The demand for fresh fruit continue to enjoy support from China’s burgeoning middle class which has a taste for various Western lifestyle products. There appears to be a social trend towards drinking fresh orange juice and Asian Citrus has taken initiative by way of last October’s £165 million acquisition of Beihai BPG Food & Beverage, a producer of fruit juice concentrate. Management said the overall benefits to the group put it in a strong position for this “booming, though largely unexploited fruit juice market”.

There were also some very encouraging highlights from Februaury’s interim results. Notably that:

  • Revenue from the sale of oranges grew by approximately 36.6% to approximately RMB525.7m (1H 2009/10: RMB: 384.8 m)
  • Increased direct sales volumes to supermarkets up by approximately 21.9% to 38,572 tonnes (1H 2009/10: 31,632 tonnes). Renewed supply contracts with all existing supermarket customers

And this from Tony Tong, Chairman of Asian Citrus Holdings:

“The Group is progressing well and is increasing its presence in the Chinese retail market with higher production volume of direct sales to supermarkets. The completion of the acquisition of Beihai BPG is an important milestone for the Group in moving downstream and offers the Group better flexibility in dealing with the ever-changing needs of the consumer market. With the expected growth of the Chinese economy, we are confident that the demand for high quality oranges and juice concentrates in China will continue to grow, providing the Group with an exciting opportunity to further expand its business in both the agricultural and fruits processing businesses. The Group will continue to build on its existing market leading position by expanding its distribution network, increasing its production capacity and enhancing its sourcing capability through further development of its nursery business.”

So with 2.6 million fruit-producing trees doing their thing between their Hepu and Xinfeng Plantations and another 740,000 trees in the ground on their way to producing fruit, Asian Citrus remains a juicy hold for Investor Trader.

Sorry ’bout that, thanks again for dropping by.