CCM: Loss-making Star Lake Bioscience suspends stock trading for possible restructuring 09-27-2016

On 2 Sept., 2016, Guangdong Zhaoqing Star Lake Bioscience Co., Inc. (Star Lake Bioscience, stock code: 600866) announced that it had suspended stock trading, possibly for asset restructuring, failing to give a specific date for resumption.


Source: Baidu

The company is very likely to be acquired given the fact that it has been “in the red” for two consecutive years.


According to the Rules Governing the Listing of Stocks on Shanghai Stock Exchange, in April 2016, it was put under “special treatment” and renamed “ST Star Lake” to distinguish it from other stocks. Later that month, the company issued a Delisting Risk Warning, stating that its stock may face listing suspension if the company’s full-year 2016 audited net profit is still in the red.


Star Lake Bioscience's financial performance, 2012-2016 (H1)

Source: Guangdong Zhaoqing Star Lake Bioscience Co., Inc.


In H1 2016, Star Lake Bioscience improved its financial performance, but still suffered losses – net profit increased by USD13.44 million (RMB89.78 million) to -USD2.72 million (-RMB18.19 million), according to its interim report released in Aug. Therefore, it is vital that the company realise a financial turnaround in H2.


The company’s total revenue also fell by 25.03% YoY to +USD48.51 million (+RMB324 million). “Affected by the production suspension of threonine, our revenue from feed additives decreased by 90.57% YoY,” explained Star Lake Bioscience.


Threonine used to be Star Lake Bioscience’s leading amino acid feed additive. Yet, with a relatively small production capacity and output, the company is not very competitive in the domestic threonine market. In 2015, its sales volume of threonine reached a mere 8,112 tonnes, vs. 168,000 tonnes from Meihua Holdings Group Co., Ltd. (the largest domestic threonine producer). According to some trade sources, given the company’s financial performance and intense market competition, there is a small possibility that Star Lake Bioscience will resume production of threonine.


Star Lake Bioscience mainly offers food & feed additives and biochemical active pharmaceutical ingredients (APIs). In H1, the gross profit margin of biochemical APIs reached +31.84%, vs. -24.33% of food & feed additives. Given this, the company is now focusing on developing its API business in order to make a financial turnaround in H2 2016.


However, Star Lake Bioscience must improve its performance by the end of the year, according to rules formulated by the Shanghai and Shenzhen Stock Exchange. With only a short time remaining to turn things around, it is very likely that the company will be pushed to be acquired.

There have been precedents for this in the past and the acquired enterprises often have to transform their business: Henan Lotus Flower Gourmet Powder Co., Ltd., later renamed Henan Lotus Health Industry Holding Group, transferred to the healthcare industry after being acquired.


Star Lake Bioscience's revenue by product, H1 2015 & H1 2016

Source: Guangdong Zhaoqing Star Lake Bioscience Co., Inc.

This article comes from Amino Acids China E-News 1609, CCM


About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.


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