Tuesday, July 28, 2009

China XLX Fertiliser dual-listing in Hong Kong

XLX Fertiliser
China XLX is seeking dual listing in Hong Kong. Hong Kong listed competitor China Bluechemical is trading at 11x PE, 2x price to book and 3.3x price to sales relative to XLX’s 5x PE, 1.5x price to book and 1.1x price to sales, hence with the dual listing, hopefully CXLX’s valuation gap can be narrowed.


Fundamentals remain weak.
Earnings to plunge in 2Q09.
Valuation gap should be narrowed in the event of successful dual-listing.


Maintain FV, TP raised to S$0.44. Share price has run ahead on speculation of the dual-listing in HK, where discussion is still preliminary at this point. We roll over our valuation to blended FY09/10 earnings and TP is raised to S$0.44, still pegged to 9x PE. In the event of a successful dual-listing, we believe the fair value should be adjusted to S$0.53 at 11x PE, which is a 10% discount to its closet peer, China Bluechem. We advise investors to sell into strength.

Investment Tips:

Need further evaluation of peers like Bluechem. Also, from a fundamental investor point of view, it does not make sense because the business does not change.


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