On 2 Sept., 2016, Guangdong Zhaoqing Star
Lake Bioscience Co., Inc. (Star Lake Bioscience, stock code: 600866) announced
that it had suspended stock trading, possibly for asset restructuring, failing
to give a specific date for resumption.
Source: Baidu
The company is very likely to be acquired
given the fact that it has been “in the red” for two consecutive years.
According to the Rules Governing the
Listing of Stocks on Shanghai Stock Exchange, in April 2016, it was put under
“special treatment” and renamed “ST Star Lake” to distinguish it from other
stocks. Later that month, the company issued a Delisting Risk Warning, stating
that its stock may face listing suspension if the company’s full-year 2016
audited net profit is still in the red.
Star Lake Bioscience's financial performance, 2012-2016 (H1)
Source: Guangdong
Zhaoqing Star Lake Bioscience Co., Inc.
In H1 2016, Star Lake Bioscience improved its
financial performance, but still suffered losses – net profit increased by
USD13.44 million (RMB89.78 million) to -USD2.72 million (-RMB18.19 million),
according to its interim report released in Aug. Therefore, it is vital that
the company realise a financial turnaround in H2.
The company’s total revenue also fell by
25.03% YoY to +USD48.51 million (+RMB324 million). “Affected by the production
suspension of threonine, our revenue from feed additives decreased by 90.57%
YoY,” explained Star Lake Bioscience.
Threonine used to be Star Lake Bioscience’s
leading amino acid feed additive. Yet, with a relatively small production
capacity and output, the company is not very competitive in the domestic
threonine market. In 2015, its sales volume of threonine reached a mere 8,112
tonnes, vs. 168,000 tonnes from Meihua Holdings Group Co., Ltd. (the largest
domestic threonine producer). According to some trade sources, given the
company’s financial performance and intense market competition, there is a
small possibility that Star Lake Bioscience will resume production of
threonine.
Star Lake Bioscience mainly offers food
& feed additives and biochemical active pharmaceutical ingredients (APIs).
In H1, the gross profit margin of biochemical APIs reached +31.84%, vs. -24.33%
of food & feed additives. Given this, the company is now focusing on
developing its API business in order to make a financial turnaround in H2 2016.
However, Star Lake Bioscience must improve
its performance by the end of the year, according to rules formulated by the
Shanghai and Shenzhen Stock Exchange. With only a short time remaining to turn
things around, it is very likely that the company will be pushed to be
acquired.
There have been precedents for this in the past and the acquired
enterprises often have to transform their business: Henan Lotus Flower Gourmet
Powder Co., Ltd., later renamed Henan Lotus Health Industry Holding Group, transferred
to the healthcare industry after being acquired.
Star Lake Bioscience's revenue by product,
H1 2015 & H1 2016
Source: Guangdong Zhaoqing Star Lake
Bioscience Co., Inc.
This article comes
from Amino Acids China E-News 1609, CCM
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