Peanut oil lends new flavour of growth for Xinghe Holdings

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KUCHING: Xinghe Holdings Bhd (Xinghe) is leveraging on the production of peanut protein, a new market segment which has ready market potential in China and throughout the world.

The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) in a report yesterday said the steady demand for peanut oil has prompted Xinghe to embark on expanding its operations.

Citing market research, MIDF Research said peanut oil demand has been forecast to grow by five to 10 per cent per year from 2012 to 2015.

The research firm noted peanut oil has been regarded as the premium cooking oil due to its nutty aromatic flavour and high smoke point at 232 Celsius, which is suitable for deep-frying purposes.

Thus, it said Xinghe has patented its protein extraction technology from peanuts through its co-development with Henan University of Technology in China to produce more peanut oil to meet the increasing demand.

The research firm observed that for Xinghe’s next phase of growth, the group has proposed to build a second manufacturing plant to produce peanut protein either in Zhengzhou, the capital of Henan Province or in Anyang, Henan Province, both in China.

Following a company’s visit, MIDF Research added the peanut protein concentrate produced by Xinghe will be exported mainly to overseas markets such as US and Europe.

The research firm noted a total capital expenditure of remimbi (RMB) 400 million or equivalent to RM226 million will be allocated for the new plant construction with the first phase involving an expenditure of RMB130 million (or equivalent RM73 million).

In a related development, MIDF Research said Xinghe also plans to build its first overseas plant in Malaysia to blend peanut oil.

The research firm said the group intends to make Malaysia as its regional hub for marketing and distribution centre to penetrate the consumer oil market in Southeast Asia, covering Singapore and Indonesia.

To recap, MIDF Research said Xinghe was listed on the ACE Market on April 29, 2014 following a reverse takeover of Key West Global Telecommunications Bhd (Key West) which involved the injection of Supreme Global Group’s effective 91.15 per cent interest in Henan Xinghe into Key West.

The research firm noted Supreme Global’s vendor, Testa Holdings Ltd (Testa) has guaranteed the profits of Henan Xinghe for financial year 2014 (FY14) and FY15 to be at least RMB135 million by deposited 675 million shares of Xinghe into a securities account managed by a trustee company.

MIDF Research observed Testa is currently the largest shareholder of Xinghe with a 62.39 per cent interest.

To ehance its visibility and profile, MIDF Research said Xinghe is also planning to seek a transfer to the Main Market in the medium term.

Hence, due to Xinghe’s venture to expand its operations in meeting the increasing demand of peanut oil with good market potential, MIDF Research believed that the company will be to enhance its earnings growth.