Eagle Health is the latest Chinese company to list on the ASX aiming to raise up to $30 million in a deal that values the ‘health food’ focussed company at around $130 million.
Eagle Health is a growing and profitable manufacturer and distributor of nutritional products and dietary supplements to Chinese consumers. Under its own brand, the company sells protein powder or amino acid based products through pharmacies, supermarkets and online channels.
In the past few years we have witnessed an increasing number of Chinese companies floating in Australia: Traditional Therapy Clinics (TTC), China Dairy Corporation (CDC), Tianmei Beverage Group (TB8) or XPD Soccer Gear Group (XPD) just to name a few. None of these companies have performed to date, in fact, Wise-owl’s analysis suggests that ASX listed Chinese companies have declined over 20% on average since the beginning of the year. Some have performed even worse since their IPO, burning thousands of investors, who are now left wondering where their money went.
Despite the obvious challenges and increased costs of going public in a foreign market, a growing list of Chinese companies will do about anything to list on the ASX. The official reason to come to Australia is usually the ‘prestige’ of an ASX listing, which seems to justify paying exorbitant brokerage costs and management fees.
Eagle Health believes an ASX listing makes sense as the company plans to expand operations into Australia in order to source local ingredients and import them into China to meet the growing demand for Australian made products. Management forecasts to pay a dividend as early as 2017 as a result of strong top line growth and steady earnings margins. Investor confidence has been shattered by Chinese listings, but can Eagle Health buck the trend?
Favourable health and wellness product consumption trends in China offer an attractive market opportunity, but regulatory hurdles dampen the outlook. Despite the company’s sound financials, geopolitical risks associated with China are quite significant and will likely dictate market sentiment during early trade.
ASX Code: EHH Shares on Offer: 75m Listing Price: $0.40 Market Capitalisation: $130m Listing Date: June 29
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Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.
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