Asia Bio-Chem Group May 2010 1
Forward Looking Information Statement The contents of this presentation contain statements that may constitute forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements may include financial and other projections, as well as statements regarding future plans, objectives or economic performance, or the assumptions underlying any of the foregoing. Forward-looking information involves significant risks, assumptions, uncertainties and other factors that may cause actual future results or anticipated events to differ materially from those expressed or implied in any forward-looking statements and accordingly, should not be read as guarantees of future performance or results. Actual results, performance or achievement could differ materially from those expressed in, or implied by, any forward-looking statements made and, accordingly, investors should not place undue reliance on any such forward-looking statements. New factors emerge from time to time, and it is not possible for management to predict all of such factors and to assess in advance the impact of each such factor on Asia Bio-Chem s business. The agents and the agents counsel assume no responsibility or liability of any nature whatsoever for the accuracy, adequacy or completeness of the publicly available information or as to whether all information concerning the Company required to be disclosed by the Company has been generally disclosed. The agents counsel and the Company's counsel are acting as counsel to the agents and the Company, respectively, and not as legal counsel to the subscriber. The agents have not engaged in any independent investigation or verification with respect to any of the information concerning the Company. Prospective purchasers are responsible for their own due diligence investigation in respect of any investment in the Company. 2
Investment Highlights Surging demand for agriculture products Competitive advantages Raw material supply Proximity to transportation and infrastructure Labor and capital costs Track record of growth and profitability Well defined growth strategies Management has successful operating experience with extensive industry and government relationships
Company Overview Manufacturer and distributor of corn starch and related products in China, established in 2003 First plant processing 300,000 tones/year at full capacity Completed a $30 million private placement in June 08 Listing on TSX Venture Exchange (Symbol: ABC) Second 600,000 tonne/year plant completed construction in late 09 and contributing to earnings in Q1 2010 4
Industry Overview 5
Industry Overview Global corn starch industry is over 80 million tones/year representing over $50 billion in revenues 6
Chinese Market Consolidation Chinese corn processing industry is in early stage of development: Only 4 companies with over 1 million tones /yr of capacity No major multinational are significant players in China 1996 2006 # of producers with over 50,000 tonnes/year 10 37 # of producers with over 200,000 tonnes/year 0 19 # of producers with over 1 million tonnes/year 0 4 Asia Bio-Chem expects to be the 5 th largest producer in the PRC by the end of 2009 7
Industry Overview China is the second largest producer of corn in the world Industrial processing in China consumes 40 million tones of corn /year Starch production has grown by 20% per annum reaching 20 million tonnes China Corn Starch Production (000's tonnes/year) 2000 1800 1600 1400 1200 1000 800 600 400 200 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 8
Wet Milling Process Steeping Corn Germ separation Grinding screening Starch-gluten separation Starch conversion Fermentation Germ Fiber Gluten Starch drying Syrup refining Oil Refining Sweeteners Alcohol, Ethanol, Chemicals Feed products Starch Corn Oil 9
Uses for Corn Starch in China S t a r c h 9.7 million t/yr 6.6million t/yr 1.7 million t/yr 1.2 million t/yr Sweeteners Other Fermentation Products Modified Starch Polyols glucose, fructose, malt syrup dextrin, citric acid, MSG, lactic acid, lysine alkali starch, acified starch, sorbitol, maltitol, mannitol Food (Soft drinks, beer, dressings, confectionary goods, children s vitamins) Pharmaceutical, industrial, feed, food (Noodles, pudding, baked goods, adhesives, detergent, MSG, animal feed, antibiotics) Food, textile, pulp and paper (Textile coatings, paper coatings) Fine chemicals, pharmaceuticals (Toothpaste, cosmetics, plastics) 10
Company Operations 11
Location 2 Plants Existing plant in ChangTu, Liaoning New Plant in Zhaoyuan, Heilongjiang Beijing Zhaoyuan County Advantageous location for: Abundant supply of corn Transportation ChangTu County 12
Cost Advantage Changtu Plant Daqing Plant 13
Changtu Facility Constructed in 2003 300,000 Tones per annum processing capacity Operating at full capacity Includes waste water treatment facility 16,000 m 2 Manufacturing Plant Corn Storage Processing equipment 74 m 2 Laboratory 14
Daqing Facility 600,000 Tones /y processing capacity (one of largest in PRC) Heilongjiang Provincial Government has coordinated the local Railroad Bureau to extend the railroad into our plant at its cost. HLJ Provincial Government has also coordinated with the local Electricity Bureau to extend the grid into our plant at its cost. Government-Funded Power Grid Government-Funded Rail Spur 51,000 m 2 Manufacturing Plant 15
Daqing Facility 480,000 M 3 parcel of land adequate to double the plant size The Heilongjiang Provincial Government is promoting the development of a Bio Chemical Industrial Park based on our Daqing Plant in the Province. 16
Products Starch 70% of revenue, 72% of volume Textiles, food additives, chemicals, plastics, pharmaceuticals, biofuels Germ 10% of revenue, 7% of volume Cooking oil, margarine, mayonnaise, soaps, and a variety of other products Gluten 13% of revenue, 6% of volume pork, poultry and cattle feed Fiber 7% of revenue, 14% of volume cattle feed 17
Customers and Transportation ChangTu Daqing Trucks, Rail and container ships are used to transport product to Southern China Beijing Shanghai Customers Mix (2009) : Food products 44% Animal feed 25% Pharmaceutical 14% Pulp and paper 3% Over 30 customers 7 of top 10 have been customers for over 3 years Trading and other 14% 18
Growth Strategy Phase1: Build Capacity in Starch Expand Customer Base Become a top player in market Phase2: Diversify Product base Add technology and/or distribution thru: Acquisitions, JV, Strategic Partnerships 19
Financial Overview 20
Financial Performance 29% average growth in revenues from the ChangTu plant Historically stable margins Softer market conditions created some margin pressure in 2009 ($000 except volumes) FYE 31/12/06 FYE 31/12/07 FYE 31/12/08 FYE 31/12/09 Q1 31/3/10 Revenues $56,331 $75,898 $84,449 $88,731 $39,933 Gross Profit $12,638 $18,381 $18,486 $14,396 $6,769 Gross Margin 22% 24% 22% 16% 17% Adjusted EBITDA * $11,433 $16,739 $14,361 $8,341 $5,438 Net Income $8,998 $18,227 $8,723 $2,109 $2,133 * EBITDA adjusted to add back Stock Based Compensation expense Revenue and cash flow contribution from Daqing in Q1 2010 21
Gross Margin Recovery Product Pricing has improved continuously for 12 months Daqing Begins Production 22
2009 Performance Five quarters of improvements in Gross Profit and EBITDA 23
Balance Sheet & Capital Structure The Company has recently secured long and short term debt facilities : RMB 35 million ($6.6 million) Working Capital line from China Construction Bank RMB 145 million ($22.1 million) Working Capital line from China Construction Bank RMB 100 million ($18.9 million) Long term loan from China Construction Bank RMB 60 million ($11.3 million) Long term loan from Government (1% interest) As at December 31, 09 Cash Inventory Net Debt $4.6 million $7.3 million $48.8 million 24
Balance Sheet & Capital Structure Current Shares Outstanding Fully Diluted Market Capitalization (at $1.30 price) Enterprise Value Shareholder Equity (Book Value/sh) 76.8 million 89.3 million $ 100 million $ 148.8 million $ 76.8 million 25
Comparables Asia Bio-Chem trades at a significant discount while maintaining superior growth Currency Sh. Price Mkt. Cap 2010 EV/EBITDA 2011 EV/EBITDA 20010 P/E 2011 P/E International Corn Processing Comparables Archer Daniels Midland US$ $28.03 17,996 6.7x 6.6x 9.5x 9.3x Corn Products Intnl US$ $29.55 2,206 6.6x 6.2x 14.4x 12.8x Bunge US$ $65.17 8,637 8.8x 7.9x 11.5x 10.3x average 7.4x 6.9 11.8 10.8 China Corn Processing Comparables US$ Global Bio Chem HK$ 1.99 595 9.8x 6.2x 17.9x 8.0x China Starch Holdings RMB 0.83 280 Na na 26.4x 14.4x Xiwang Sugar RMB 2.00 219 na 12.4x 35.6x 10.8x average 9.8 9.3 26.6 11.1x Canadian Listed China Comparables Migao Corporation CA$ $7.07 328 6.4x 5.6x 9.5x 9.0x Hanfeng Evergreen CA$ $6.61 408 na 11.3x na 16.1x average 6.4x 8.5x 9.5x 12.6x Asia Bio Chem 1.30 100.0 3.2 4.3x 26
Investment Highlights Surging demand for agriculture products Track record of growth and profitability Funded capacity for 3X growth Management has extensive operating expertise in China with strong customer and government relationships 27