what Beaufort said30 Sep 2015 18:03
Jiasen International Holdings (JSI.L, 73.0p) – Speculative Buy
Jiasen International Holdings, whose PRC operations focus on design, manufacture and wholesaler of wooden home furnishing and fittings yesterday announced the appointment of Beaufort Securities as the Group’s Joint Broker, with immediate effect. Cairn Financial Advisers LLP will continue to act as the nominated adviser. Jiasen (PRC) was established in 2001 and is based in Quanzhou City, Fujian province, located in south-eastern China. Jiasen was first quoted on AIM in July 2014. Its products are sold and marketed under the ‘Fuyou’ brand and produced in its 83,000 sq m factory in Nan’an City, Fujian province by its workforce of more than 1,400 employees. The company’s main products include doors, wall panels and assorted fixtures, such as fitted wardrobes, cupboards and skirting boards, as well as furniture which are sold principally to property development projects.
Our view: The absolute scale of Jiasen’s long-term market opportunity takes some comprehending. From 2010 to 2025, for example, it is estimated by the Ministry of Housing and Urban-Rural Development that 300 million Chinese now living in rural areas will move into cities. The fast pace of urbanization will create giant opportunities; possibly matching the estimated 1 trillion yuan in annual investment across building water supply, waste treatment, heating and other public utilities in the cities during the period. Yet Jiasen’s industry, as one might expect remains both immature and highly regional. According to Euromonitor, for example, Jiasen PRC, ranked first in terms of manufacturer sales value for the year ended 31st December 2012 within the high-end solid wooden doors segment in China, with an estimated market share of 6.1%. The company’s main products include doors, wall panels and assorted fixtures, such as fitted wardrobes, cupboards and skirting boards, and furniture which are sold principally to property development projects, through branded ‘Fuyou’ retail stores and to export markets to retailers such as B&Q in the UK. The company’s products are sold in three main segments: residential and property development projects; wholesale; and export. In FY13, the Directors estimate the company sold in excess of 300,000 solid wooden doors, fixture items and furniture pieces and generated revenue of RMB 782.8m (circa £77.2m) and net profit after tax of RMB177.8m (circa £17.5m). The pace of Chinese urbanisation, together with an increasingly wealthy and product-aware customer, will ensure Jiasen meets high visibility and increasingly valued-added demand. It is also ideally positioned to expand through the ‘bolt-on’ acquisition of regional competitors and distributors. This is expected to allow Jiasen to sustain and surpass compound annual growth in excess of 10% achieved over the past five years. The business is nat