Celestial Nutrifoods a cheaper bet than Pine Agritech

FOR a company that produces products from soybeans, Pine Agritech is doing very well. Shares of the Shandong-based Pine is up 258 per cent this year, and closed $2.70 on Friday, up from its IPO price of 57.5 cents in May last year.

On Friday alone, Pine shares rose 10.2 per cent, partly thanks to a 429 million yuan (S$84.6 million) order it said it secured for the China market; it is also the company's biggest contract. From now till 2011, Pine will have at least 700 million yuan of orders a year from this customer, its master distributor.

Brokers CIMB and Kim Eng issued an 'outperform' and 'buy' recommendation on the same day, helping the stock touch an all-time high of $2.75 during the day.

For financial year 2005, Pine sold 797.03 million yuan worth of soybean products, 51 per cent more than in the previous year. In the first quarter of FY2006 which ended March 31, sales was up 30 per cent at 223.68 million yuan, while net profit rose 41 per cent to 68.07 million yuan.

With the new orders of 468 million yuan to be delivered before the end of FY2006, Pine looks set to beat last year's sales.

Margins are also improving, rising 7.3 percentage points for FY2005 to 40.2 per cent.

So should investors be queuing up for the stock?

A Chinese company also producing soybean products is Celestial Nutrifoods, based in Beijing. Compared to Pine's 31 times price-earnings, Celestial is trading at 14.2 times.

Celestial listed on Jan 9, 2004 at 28 cents and on Friday closed at $1.49. At its peak on May 11 this year, it was trading at $1.95.

This year, the stock is up 156 per cent, nothing to be laughed at, considering the Singapore market rose only 4.1 per cent this year.

Celestial Nutrifoods also has a healthy operating margin of close to 35 per cent, a 39.7 per cent return on equity and healthy debt-to-asset ratio of 3.79 per cent.

In comparison, Pine has a 34.47 per cent return on equity and a debt-to-asset ratio of 8.54 per cent.

At the end of 2005, Celestial earnings was 53 cents per share, and Pine's 43 cents. This translates to a full-year profit of 281 million yuan for Celestial, compared with 234.6 million yuan for Pine.

While Pine has got investors excited about the prospect of steady earnings for the next few years, Celestial looks like an equally good bet, but cheaper.

Late last month, Celestial also started manufacturing at its new plant, which will quadruple its annual capacity. It's time the market took a second look at Celestial.