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This Week's China IPOs: Agria Corp., AirMedia Group, China Nepstar Chain Drugstore

by: SA Editor Abbi Adest November 04, 2007 | about: AMCN / GRO / NPD    
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There are three Chinese companies set to go public in the U.S. this week: Agria Corporation (GRO), a provider of agricultural upstream products such as corn seeds, sheep breeding products and seedling productions; AirMedia Group (AMCN), a company that operates the largest digital media network in China dedicated to air travel advertising; and China Nepstar Chain Drugstore (NPD) the largest retail drugstore chain in China.

All quotations are from the companies' most recent S-1 filings with links provided.

AGRIA CORPORATION (GRO)
Business Overview (from prospectus)

We are a fast-growing China-based agri-solutions provider engaged in research and development, production and sale of upstream agricultural products. We currently offer corn seeds, sheep breeding products and seedling products. Our goal is to become a leading provider of a variety of agricultural upstream products to meet evolving demands of other participants in the agricultural industry, including producers of corn, sheep and other agricultural products that are used to manufacture products such as animal feed, mutton and wool. We have experienced substantial growth in revenues and profitability in recent years.

Offering: 17.2 million shares at $14.50 - $16.50 per share. Net proceeds of approximately $167.7 million will be used to fund expansion, R&D, repay debt, and for general corporate purposes.

Lead Underwriters: Credit Suisse, HSBC Corporation

Financial Highlights:

Our total revenues increased from RMB152.3 million in 2004 to RMB489.7 million ($64.3 million) in 2006, representing a compound annual growth rate, or CAGR, of 79.3%. Our net income increased from RMB57.8 million in 2004 to RMB253.9 million ($33.4 million) in 2006, representing a CAGR of 109.6%. In the six months ended June 30, 2007, we generated total revenues of RMB279.4 million ($36.7 million) and net income of RMB143.4 million ($18.8 million). In 2006, we achieved gross margins of 41.1%, 72.9% and 79.7% from our corn seed, sheep breeding and seedling segments, respectively, while revenues from our corn seeds, sheep breeding and seedling segments accounted for 50.2%, 39.4% and 10.4%, respectively, of our total revenues. In the six months ended June 30, 2007, revenues from our corn seeds, sheep breeding and seedling segments accounted for 47.9%, 39.6% and 12.5%, respectively, of our total revenues.
Additional Resources:

AIRMEDIA GROUP (AMCN)


Business Overview (from prospectus)

We operate the largest digital media network in China dedicated to air travel advertising. We operate over 95% of the digital TV screens that display advertisements in the 15 largest airports in China, according to an August 2007 report of Sinomonitor, or the Sinomonitor report. The advertising portion of our programs accounts for over 80% of the total length of the advertisements played on the digital TV screens for each of the three largest airlines in China. We operate over 2,000 digital TV screens in airports and place our programs on over 16,000 digital TV screens on airplanes. Due to PRC regulatory restrictions on foreign ownership of advertising businesses in China, we operate our advertising business through our consolidated variable interest entities and their subsidiaries in China. We have a series of contractual arrangements with these variable interest entities and their record owners that enable us to effectively control and derive substantially all of the economic benefits from these variable interest entities.

Offering: 15.0 million shares at $9.00 - $11.00 per share. Net proceeds of approximately US$105.7 million will be used to fund capital expenditures and for other general corporate purposes, which may include strategic acquisitions of businesses that could complement our existing capabilities and businesses.

Lead Underwriters: Morgan Stanley, Lehman Brothers

Financial Highlights:

Our net revenues increased substantially from US$6.7 million for the six months ended June 30, 2006 to US$15.9 million for the six months ended June 30, 2007... Our cost of revenues increased from US$4.2 million for the six months ended June 30, 2006 to US$9.0 million for the six months ended June 30, 2007... Our operating expenses increased by 61.3% from US$1.7 million for the first six months of 2006 to US$2.8 million for the six months of 2007. Operating expenses as a percentage of our total net revenues decreased from 25.5% for the six months ended June 30, 2006 to 17.5% for the six months ended June 30, 2007... As a result of the foregoing, we achieved net income of US$4.0 million for the six months ended June 30, 2007, as compared to US$0.9 million for the six months ended June 30, 2006.

Additional Resources:

CHINA NEPSTAR CHAIN DRUGSTORE (NPD)
Business Overview (from prospectus)

We are the largest retail drugstore chain in China based on the number of directly operated stores. As of September 30, 2007, our store network was comprised of 1,791 directly operated drugstores located in 62 cities in China, and we believe that we have the leading market position in a number of the most developed cities in China, including Shenzhen, Guangzhou, Dalian, Hangzhou, Ningbo, Suzhou and Kunming, in terms of store count. According to the China Drugstore Magazine, we had the highest revenue among all directly operated retail drugstore chains in China in 2004, 2005 and 2006. As the drugstore industry in China is highly fragmented, we estimate that our share of the retail market of pharmaceutical products in China was less than 0.5% of the total transaction value in each of these three years.

Offering: 20.6 million shares at $11.50 - $13.50 per share. Net proceeds of approximately US$231.7 million will be used to open new stores, to set up two new distribution centers, and to upgrade the company's information management and inventory control system.

Lead Underwriters: Goldman Sachs, Merrill Lynch

Financial Highlights:

Our revenue increased by 31.9% to RMB1,732.4 million (US$227.6 million) in 2006 from RMB1,313.2 million in 2005... Our cost of goods sold increased by 20.6% to RMB1,124.2 million (US$147.7 million) in 2006 from RMB932.0 million in 2005, and our gross profit increased by 59.5% to RMB608.2 million (US$79.9 million) in 2006 from RMB381.2 million in 2005. Our gross margin increased to 35.1% in 2006 from 29.0% in 2005... Our operating expenses increased by 47.2% to RMB579.6 million (US$76.1 million) in 2006 from RMB393.8 million in 2005... income from operations of RMB28.6 million (US$3.8 million) in 2006 compared to loss from operations of RMB12.6 million in 2005. Our operating margin was 1.6% in 2006 compared to negative 1.0% in 2005...

Additional Resources:

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