By: Derek Lim Price: S$0.35 Placement: 98,800,000 Public: 5,000,000 Date of Offer: 2 July 2007 Closing: 11 July 2007, 12:00pm Commence Trading: 13 July 2007, 9:00am Underwriter: Kim Eng Capital "03 July 07 The Business Times by Janice Heng China Angel Food IPO seeks to raise $25.7m CONFECTIONERY maker China Angel Food, which specialises in mooncakes, yesterday launched its initial public offering. The Guangdong-based company sees Singapore as a base for regional expansion. China Angel, which is seeking a mainboard listing, is offering 103.8 million shares at 35 cents each, representing 32.4 per cent of its enlarged capital of 320 million shares. Based on net earnings of 37.7 million yuan (S$7.6 million) for FY2006, the shares are priced at a PE ratio of 11.2 times. The IPO issue comprises 80 million new shares and 23.8 million vendor shares. Five million shares are for public subscription, with the remainder for placement. 'By listing here, our aim is to use Singapore as a base for expansion into South-east Asia, and also to raise the international profile of our Angel brand,' said founder and executive chairman Patrick Liang. Under its flagship brand 'Angel', China Angel sells mooncakes, pastries and snack foods to the high-end market in China. Mooncakes and snacks are also sold under mid-market brand Qi Wang, while the Wang Fu Lai brand targets the mass consumer market. China Angel said its revenue grew at a compounded annual growth rate of 79.9 per cent from 32.8 million yuan for FY2004 to 106.2 million yuan for FY2006. Net profit grew from 5.5 million yuan for FY2004 to 37.7 million yuan for FY2006. Of the expected $25.7 million in IPO net proceeds, $7.7 million will be used to expand capacity. Annual mooncake production capacity alone is expected to rise to 3,450 tonnes from 2,050 tonnes now. Another $5.2 million will be used to expand market presence and distribution, and the rest for brand-building, R&D and working capital. In FY2006, 90.1 per cent of sales were within Guangdong, but China Angel intends to use its Guangdong distribution model in expanding into other Chinese provinces. It also plans to appoint more overseas distributors. 'We are now in a stage of rapid development,' said Mr Liang. China Angel says it is among China's top ten mooncake makers, and aims to be first or second within the next five years. Kim Eng Capital is the manager, underwriter and placement agent for the IPO, while UOB Kay Hian is the sub-placement agent. The offer closes on July 11." I have never thought well of companies specializing in a specific food product but judging for the success of Synear, it made me eat my words. Click here for the full prospectus.