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Goodfarmer IPO Could Raise RMB 1.1 Billion

July 23, 2019

Goodfarmer, one of China's leading importers and distributors of fresh fruit, has passed a key regulatory hurdle as it plans an IPO of A shares on the Shanghai Stock Exchange. The company announced recently that the China Securities Regulatory Commission (CSRC) had accepted Goodfarmer's IPO prospectus on June 17.

According to Goodfarmer, the sale will be limited to 64 million shares and the company hopes to raise approximately RMB 1.1 billion ($160 million) in capital. If successful, the sale is expected to lower the controlling stake in Goodfarmer of father-son team LIU Zijie and LIU Xin from 96.17% to 81.65%. China A shares are denominated in RMB (unlike B shares, which are in US dollars) and cannot be traded by foreign individual investors.

Goodfarmer's prospectus states that the company plans to use the capital it raises from the IPO for the following projects: RMB 117 million for a building a new distribution center in Shanghai; RMB 586 million for upgrades to its distribution network and facilities around the country; RMB 208 million for refrigeration equipment; RMB 83 million for a residue testing R&D center and upgrades to the company headquarters; and RMB 70 million for brand marketing and shoring up cash reserves.

As for the largest investment item of RMB 586 million for upgrades to its distribution network, Goodfarmer operates 24 distribution centers around China, 11 of which have fruit ripening facilities for bananas. Each center is running at greater than 70% use of its cold storage space and 8 of the ripening facilities are running at full capacity. Thus the need for Goodfarmer to expand its cold storage and ripening capacity nationwide.

Founded in 2002, bananas are Goodfarmers core product—especially imported bananas for domestic consumption in China. In 2018, its sales of bananas were RMB 1.7 billion ($247 million). However, it also trades a total of 27 different types of fruits and nine types of vegetables.

In addition to importing bananas, dragon fruit, and other fruits from countries like the Philippines, Vietnam and Ecuador, Goodfarmer also exports Chinese apples, garlic, ginger and other products to countries including Indonesia, Bangladesh, the Philippines, Malaysia and Pakistan.

 

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