Posted by: donmihaihai | April 12, 2008

A gift from Pfood.

What is the gift? It a proposal to vote and amend the bye laws in the coming AGM so that after this AGM, shareholder is not required to mail in the proxy form before attending future meeting.

1st of all, why need to mail in proxy form? That has everything to do with the place of incorporation of the listed company. In Pfood case, it is in Bermuda. But it can be in Singapore, BVI or many more. There is no restriction on where the companies incorporate in when coming to list in Singapore exchange. It is good because it open up the possibilities but when come to AGM, there is some problem. For Companies incorporated in Singapore, shareholder is recognised by the amount of shares in the CDP. One can walk in just by bring along its IC. But for Companies like Pfood, which incorporated in Bermuda or Other, technically, only CDP is recognised as shareholders, not us and when its come to AGM, we are required to send in the proxy form to appoint ourselves so that we can attend, listen and vote.

This initiative from Pfood is a big welcome because shareholders are no longer required to mail in the proxy form if the proposal goes through. It save the trouble of mailing and potential missing proxy and shareholders are rejected at the door of AGM or going in the AGM as an observers.

Doing thing with shareholder on their mind show that at least Pfood care. Good. Shareholder should request for the same treatment from companies incorporated outside Singapore. While I am not sure about the exact bye laws, but there is no harm asking.

Pfood belong to one of the oldest group of Chinese companies listed in SGX. Can I say that Pfood is no longer being remembered by most people? It does not help that Pfood itself is not showing the kind of desire results which will make it the market darling. While Pfood has been very profitable all these years, their profitability is decline due to mainly 2 reasons. 1st is that Pfood listed at around the peak of the period where profit margins and return on equity were at the highest. It is so dangerous to extrapolate because competition increases after that. Then the 2nd reason, just when competition increases, the environmental are not helping. With no fault of their own, Pfood must meet the challenge of SARS, bird flu and the latest pig disease. While SARS and bird flu are potentially more dangerous to human, it is the blue ear pig disease that causing the biggest trouble to Pfood as their supplies are being wipe off in big quantity.

I would like to say Pfood is an unfortunate but able company. Unfortunate, because its keep fighting with thing that are out of their control. Able because, these setbacks are not killing or weaken Pfood yet, Pfood is as strong as before in term of financial position and operation wise.

Looking at Pfood or pork industry in China with SARS, bird flu, blue ear pig disease or many others, one can easily conclude that pork industry in China is not a place to invest in, there are better elsewhere. But at the other side of the coin is that companies that survived these setbacks stronger are more prepared to meet future problem and the industry trend, practice, etc may change which can lead to a better future for those that are still in the industry. And because of the poor recent history and outlook, competition is likely to reduce and favour the established firms.

Pfood is going to be one of those companies as it got the scale and financial strength to do it. The management team is intact too. As long as the sky becomes clear, Pfood will fly high again provided that supply side of the commodity is not going to cause bigger problems to the developing world.

Pfood is currently trading at just over $1. PE of about 18X and PB of about 1.6X without taking Pine Agritech contribution into consideration.

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