By Donavan Lim
DMG & Partners Securities, the independent financial adviser (IFA) of Tianjin Zhong Xin Pharmaceutical Group Corporation, has urged the independent shareholders of the group to vote in favour of the proposed RMB486-million (S$97.8 million) business restructuring plan in an Extraordinary General Meeting to be held on 12 June 2012.
The proposed plan should see the company shedding its non-core western medicinal business and strengthening its core Chinese medicinal business, which will allow the management to focus on its main strength.
Adding weight to the DMG’s call is the group’s audit committee who had concurred with the views and recommendation of the IFA.
The restructuring plan will involve the disposal of its non-core western medicinal business, selling 51 per cent of Tianjin Central Pharmaceutical Co for approximately RMB255.5 million to Tianjin Lisheng Pharmaceutical Co and 10.01 per cent of Tianjin Jinkang Pharmaceutical Co for approximately RMB19.0 million to Tianjin Pharmaceutical Group Co.
Also riding on the deal is the sale and purchase agreement inked earlier this year with Tianjin Pharmaceutical Group to acquire 40-per cent equity interest in the capital of Tianjin Hongrentang Pharmaceutical Co for approximately RMB211.7 million which is conditional upon the proposed disposal of Tianjin Central.
One of the key factors evaluated by DMG is the P/E (price to earnings) ratios of the assets to be disposed and acquired. The P/E ratio of Tianjin Central is 31.95 times, which is higher than that of the group and comparable peer companies listed on the Singapore Exchange, and the P/E ratio of Tianjin Hongrentang is 15.41 times, which is lower than that of the group and comparable companies.
For the financial year ending December 2011, the company chalked up a turnover of RMB4.392 million or 26 per cent increase year-on-year. Its share price has been trading near its year high of US$0.715 apiece.