SunMoon former chairman Loh sells shares; Golden Agri-Resources ID Lew buys shares

Gary Loh, former executive chairman and controlling shareholder of SunMoon Food Co, has been loosening his hold on the company. Loh, via his private-equity firm, First Alverstone Capital, sold 19 million shares for $821,542.50, which works out to an average price of 4.3 cents a share.

The transaction was disclosed in a Nov 29 filing by the company. Loh disposed of the shares through a married deal. The date of the sale and identity of the buyer were not specified. Upon completion of the sale, Loh is left with just over 61.7 million shares, or 7.87% of the company, down from 10.29% previously. Year to date, SunMoon Food shares have gained 35.29% to close at 4.6 cents on Dec 5, valuing the company at $35.8 million.

For years, Loh tried to turn SunMoon Food around. It was previously a fruit producer, growing mainly apples. When Loh assumed control, he focused on distribution instead, although he expanded the product range to other fruits such as avocado. He also sourced fruit from other markets before selling them to the end-markets, including China.

In 2016, Yiguo General Food, an entity-linked to China’s e-commerce giant Alibaba Group Holding, took control of the company. It paid $15 million for a 51% stake via a placement exercise at 4.5 cents a share. Subsequent additional investments raised Yiguo’s stake in SunMoon Food to 56.21% as at June 29. As a result, Loh became the company’s second-largest shareholder. On April 1, Loh was redesignated as a non-executive director.

Like Alibaba, Yi Guo is also in the e-commerce space. It specialises in the sale of fruits and foodstuff, and SunMoon Food is tapped to be a supplier.

For FY2019 ended March 31, SunMoon Food’s turnover surged from $44.9 million to $72.6 million. However, the company sunk into losses of $4.3 million, from earnings of $1.6 million in the previous year.

On Nov 12, the company reported that revenue for 2QFY2020 ended Sept 30, was $1.95 million, down 86% y-o-y from $14.25 million. The company attributes the sharp drop in revenue to its new direction that took effect in September: “from growing revenue at an uncertain margin” to “ensuring sustainable growth with more certain margin”.

As a result of this shift, SunMoon managed to achieve a gross margin of 3% for 2QFY2019, compared with a gross margin of -10% in the year-earlier quarter. Accordingly, it reported a loss of $304,000, versus nearly $2.1 million in the red a year earlier.

The company has warned that shortterm prospects remain tough because of “evolving market conditions” in China. The company’s revenue for the current financial year will be lower than the previous year.

Lew Syn Pau, non-executive lead independent director of Golden AgriResources, bought two million shares from the open market on Nov 29. Lew, who has been on GAR’s board since 2017, paid $430,000 for the shares, which works out to an average price of 21.5 cents a share. Prior to this, Lew held just one million GAR shares.

Lew’s 2017 appointment to the GAR board marks his second tenure with the company. Between 1999 and 2007, he was also a director of the company, which is controlled by Indonesia’s Widjaja family, which also controls a sprawling empire of other listed and non-listed entities. In addition to GAR, Lew is a director of two other Singapore Exchange-listed companies that are part of the Widjaja group: Golden Energy and Resources and Sinarmas Land.

Year to date, GAR shares have dropped 6.12% to close at 23 cents on Dec 5, valuing the company at $2.9 billion. At this level, it is trading at 64.95 times historical earnings and 84.43 times forward earnings.

On Nov 14, GAR reported earnings of US$800,000 ($1.1 million) for 3QFY2019 ended Sept 30, reversing losses of US$65 million recorded in the year-earlier quarter. Revenue in the same period increased marginally by 1% y-o-y to US$1.56 billion, as both production increased and prices rose. “We expect the positive trend in CPO (crude palm oil) prices to continue from 4Q2019,” says Franky Widjaja, GAR’s chairman and CEO.

“We expect additional demand combined with the slowing-down of CPO production growth to create strong support for CPO prices. We remain positive on the long-term industry prospects on the back of the resilient supply and demand fundamentals of palm oil.”