Exhibit 99.16
THE BUSINESS PLAN LEGACY WINE & SPIRITS INTERNATIONAL LTD. April/May 2008 | ||||||||||||||
VIP Investments International Inc. Richard Chen Manager, Corporate Finance | April 5, 2008 | |||||||||||||
(778) 991-9608 chenran@vipcan.ca | All values in US dollars unless otherwise noted |
THE CONFIDENTIAL CLAIM AND REQUIRED DISCLOSURE The information presented in this document is sensitive and confidential and is to be used by authorized parties for the purpose of determining an indication of interest in investing in Legacy Wine & Spirits International ltd. (the “Company”). The recipient of the Business Plan Overview agrees by its receipt not to reproduce, duplicate, or reveal, in whole or in part, information presented herein without the written permission of the Company. The information contained in the Business Plan was provided by the Company and its financial advisors. It has been reviewed, approved, and released by the Company and the Company assumes responsibility for its contents. Estimates and projections contained herein have been prepared by the management of the Company and involve necessary reasonable estimations and financial analysis that are based on independent equity research reports issued by third party investment banks and other official data source. The Business Plan Overview offers three standard and most widely accepted evaluation methods, which could be considered as the fair market valuation of this business entity. The business plan developer does seek to do business with the Company’s management team, and due to the relatively high risk nature of the investment, the recipients of the Business Plan are recommended to conduct their own analysis and due diligence process.
THIS PRESENTATION IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY SECURITY. For more information please contact: May Joan Liu Direct: (604) 880 7308 Sathi W. Rajan Direct: (604) 761 7002 |
1
2
3
Market Demand In 2006, the total alcohol consumption in China was 37bn liters. Comparing the consumption amount to that of United States., this represents a six-fold higher volume over the U.S. consumption (approx. 5.36bn ltr. in 2006). However, the wine consumption per capita of China is merely 1/20 of the U.S. With a growing economy and a growing middle class, the wine industry in China will likely to be the fastest-growing segment in the alcohol beverage industry over the next five years. With its headquarters located in the suburb of Beijing, Legacy enjoys a unique transportation advantage and a huge target market population. According to the National Bureau of Statistic of China, in 2006, Beijing’s urban disposable income per capita was 19,978 yuan, a real increase of 12.9% from the previous year. Per capita pure income of rural residents was 8,620 RMB, a real increase of 9.6%. Per capita disposable income of the 20% low-income residents increased 16.7%, 11.4 percentage points higher than the growth rate of the 20% high-income residents. Since Legacy’s target market is the middle class professionals between the age of 22 to 45, this means the target market in the Beijing region will enjoy a healthy growth rate in the next 5 years. Various recent researchers have confirmed the health benefits of drinking red wine. Being an educated group, the middle class consumers will be more willing to drink wine compared to other types of alcoholic beverages, because they understand the health benefit that wine can bring, not mentioning the appealing wine culture and wine romance that the new generation middle class population desires. That being said, Legacy’s entry into the China’s wine market is well timed and strategically located. Like many traditional culinary products in the food industry, wine enjoys a prestigious status and unique culture in both Eastern and Western worlds. It is almost a must have item for most special occasions or celebrations. Also, similar to many traditional culinary products, people can develop special preferences to particular brands of wine overtime. With aggressive marketing, quality control, and promotional efforts, Legacy will create value for its shareholders along with building brand loyalty with its many future customers. As an important economic plus to wine merchants, wine products have shorter consumption periods than most other food: bottled wine is usually completely consumed at the end of a dinner; also, once the bottles are opened, they cannot be preserved well beyond three days. This implies a higher consumption rate, higher purchase frequency, and thus higher revenue compared to many other traditional food products. Currently, grape wine accounts for 4.9% of the total alcohol market and has a market size of US$3.0bn, and the market demand is growing fast. The following are the chart illustrations of the performance of the top three wine producers in China. |
| 2003A | 2004A | 2005A | 2006A |
Revenue |
| |||
Great Wall | 891 | 1,164 | 1,550 | 1,803 |
Changyu | 1,133 | 1,338 | 1,804 | 2,163 |
Dynasty | 709 | 805 | 947 | 1,114 |
Total | 2733 | 3307 | 4301 | 5080 |
%Growth | 21.00% | 30.06% | 18.11% | |
Average %Growth | 23.06% |
|
|
|
Source: Grape expectations-- China winemakers Sector outlook—CLSA Asia Pacific Market Outlook, Nov. 2007:
4
Market Demand (Continued) These charts indicate that the top three players in the market were enjoying an average growth rate of approximately 23%. Moreover, in survey conducted by CLSA, more than 50% of the 21 retailers (including 11 supermarkets and 10 restaurants) reported that wine has the fastest growth in sales among all types of alcoholic drinks. The following is the CLSA beverage sector indices that gauge the performance of each alcoholic beverage category in China. As illustrated below, although the grape wine industry market cap did not achieve the highest market cap growth rate over the 23-month period, it still managed a market cap growth rate of approximately 100%. (Approximately 50% year over year growth) Another sales forecast report conducted by CLSA indicated that the revenue growth rate of the wine industry for year 2007 to 2009 will average around 14%. (Chart attached below) |
5
Operational Strategy Legacy plans to operate its winery production plant and to develop the distribution channel to establish a popular brand among middle class consumers, which comprise the majority of the nation’s population. Legacy’s core operation plan relies on the success of developing a capable work force to start the production and sales at competitive costs and quality assurance. Although there is a one month time lag between the finished bottled wine coming out of the factory and the setup time of the stores, Legacy plans to import bulk finished wines to feed into its distribution channels. Through this strategy, we can realize healthy positive cash flow at a faster rate. Centered by this production and distribution integrated strategy, Legacy will build a management team that will be composed of four persons: a production manager, Legacy Wine & Spirit Boutiques store managers, a retail sales manager and a corporate account manager (covering the development of the franchisee business). Besides its strategic assets and investors, Legacy considers the human resource aspect a vital factor in the Company’s fast growth. The recruitment strategy will be conducted through different approaches: public interviews, recruitment from other winery company’s work force by offering competitive yet reasonable compensation packages, and develop third party strategic partners to minimize initial cash outflows. The estimated recruitment and training time for this project to go forward is about four to five weeks. After the operations have started, Legacy will use the ISO9000 system to manage the producti on and sales workforce.
The future success of the Company is based on two areas of growth: upgrades and expansion of the plant to increase production and sales potential, the expansion of the distribution channels to increase brand reputation and total sales. The wine stores are scheduled to open at a rate of three per month in the future. The first two will be corporately owned and continuously operated by Legacy. The Company’s franchise wine stores model includes: § Develop the structured design (200 to 300 sq. ft max.) with rich store aesthetics, maximized for high volume storage, stunning display (POP), sampling area and payment area. § Locations will be numerous and located in high density areas, with protected territories. § Develop detailed franchise documentation after the operations of the corporate owned boutiques are well under management. The Franchisee Manual will include Operation Steps, Accounting, Marketing, HR System, and Wine Appreciation. Corporate Account Distribution:our sales force will reach out to chain stores, restaurants, karaoke, bars and business brokers to further expand our private label distribution network. We have already secured exclusive wine supply for a Chain of 45 stores to carry our product in Guangzhou, Canton province. This chain is growing and has a mandate to reach 300 stores by 2010. Nine Dragons Winery Development Ltd.: the winery facility is located in Beijing just 15 minutes away from the Beijing International Airport. The facility will be developed over the next 6 to 7 months to begin producing wines from internationally sourced viniferous grape juice into Legacy’s own private label of wines, reducing costs dramatically from import lines. The winery will also act as a packaging facility capable of packaging wines, spirits and mixed drinks for delivery to the Chinese market. |
6
Marketing Strategy As mentioned above, the demand for wine in China is growing rapidly as the emerging middle class starts to shift the consumption style of alcoholic beverages. The supply, on the other hand, has not caught up with the same speed due to the fact that so far China has not developed a distribution system sophisticated enough to organize its shipment effectively and efficiently; secondly, China has not developed a modernized wine storage system. As of 2007, wine cellars and refrigerated storage, which are crucial to wine storage, are not commonly utilized in China; moreover, in recent years, China started limiting liquor producers by limiting liquor production licenses. This has created a barrier to new entries. Foreign wine producers who want to tap into the Chinese wine market will have to establish a joint venture with an existing Chinese wine producer. Legacy will enter the Chinese wine market through its strategic partnership with Nine Dragons Winery Development Ltd. (Beijing). Nine Dragons Winery Development Ltd. has a fully functional industrial facility conveniently located 15 minutes away from the Beijing International Airport. Legacy will implement the following strategies to efficiently reach the vast majority of its target market: § Franchised wine boutiques: Legacy will open elegantly designed wine boutiques in prime shopping districts of major cities. By establishing elegant boutique stores, Legacy will be able to reach its targeted customers as well as promoting their brand image. Legacy’s goal is to open three wine boutiques each month on average. The first two boutiques will be owned by the company. After the demo boutiques have successfully established their reputation, new boutiques will be opened on a franchised basis, which means they will be owned and operated by entrepreneurs. § Direct promotion and distribution through strategic alliances with wholesalers, retailers, restaurant owners, and supermarket chains. By forming strategic alliances with major players in the distribution channels, Legacy will be able to secure a strong network to efficiently deliver its products to consumers. So far Legacy has established an exclusive wine distribution alliance with a convenience store chain with 45 stores to carry Legacy’s product in Guangzhou, China. This convenience store chain is expected to grow to a 300 stores by 2010. § Over the long term, a competitive price and quality combination will be the core value offered to the Chinese consumer, which will eventually create and strengthen brand loyalty for Legacy’s long term sustainable growth. § As the strategic partner of Legacy, Crown Star Holdings will represent Legacy’s production to Crown’s ready developed distribution channels in China (e.g. a chain store which has 45 outlets in China), which is considered as an effective risk mitigation to the joint venture especially for the early stage. |
7
Risk and Mitigating Factors A major risk in the wine production business is the macro economic conditions. Because in China, middle and high quality wine is considered a luxury product; the probability of wine sales being negatively affected in an economic downturn is relatively high. Since in recent years, China has experienced a period of prosperous economic growth and is very likely to continue in the foreseeable future, Legacy’s downturn risks due to such factors are minimized. A second risk that needs to be considered is raw material price fluctuations. Because grape juice or grape, accounts for approximately 40% of the total cost of production, a sudden fluctuation in raw material price will have significant impact on cost. The price fluctuation will in turn affect the demand, thus the revenue and profit of the Company. Therefore, any natural disasters or abnormal weather change in the raw material production regions will have a great impact on the sales of the Company. To minimize such risk, Legacy will diversify its raw material supply source by utilizing its partnership with Crown Star International Ltd., a Hong Kong based company specializing in international supply and sourcing of wine and spirits raw materials.
As Legacy will be actively engaged in international trade, exchange rate risks will be another risk factor. Because Legacy may need to purchase raw materials shipping from abroad, exchange rate risks will need to be hedged in this trading process. Moreover, due to the fact that a substantial portion of Legacy’s share holders will be foreign entities, when dividend incomes are converted back to the domestic currency, exchange rate risks will surface and therefore should be hedged. Fortunately, as the Chinese Yuan is appreciating in the recent years and is predicted to appreciate in the foreseeable future, there is a very high probability that exchange rate will be working in Legacy’s favor. When Legacy imports raw material, the probability of incurring loss due to Chinese Yuan depreciation is low; secondly, when foreign investors convert Chinese Yuan back to their domestic currency, the probability of incurring loss is also lo w. In fact, foreign investors may be able to enjoy an additional return due to the appreciation of Yuan on top of the return from the enterprise. In conclusion, there are numerous risk factors that can be associated with wine production companies, what Legacy will do is to avoid avoidable risks and hedge unavoidable risks as much as possible. It is said that developmentally, China is where the U.S. was in 1950 but estimates are it will catch-up in just one decade. The opportunity is now for Legacy Wine and Spirits International. |
8
Equity Valuation We applied three methods to evaluate the winery project : Discounted Free Cash Flow, Enterprise Value, and Earning Multiple methods. The weighted average value of the three valuation method: USD $7,762,427 | ||||||||||
Projected Revenue | ||||||||||
Assumptions | ||||||||||
Price/Bottle (China) | CNY ¥50.00 | Wholesale | ||||||||
Exchange Rate (CNY/US$) | 7.02 | Sales/Day (Units) | 125 | |||||||
Quarterly Sales Growth | 30.0% | |||||||||
Store | Price Discount | 15.0% | ||||||||
Sales/Day (Units) | 30 | Begin Quarter | 3 | |||||||
Quarterly Sales Growth | 20.0% | |||||||||
Franchisees | ||||||||||
Retail Distribution | Sales/Day (Units) | 10 | ||||||||
Sales/Day (Units) | 60 | Quarterly Sales Growth | 20.0% | |||||||
Quarterly Sales Growth | 20.0% | Price Discount | 20.0% | |||||||
Price Discount | 15.0% | Begin Quarter | 3 | |||||||
Inputs | Initial Franchisees | 2 | ||||||||
Days/Quarter | 91 | New Franchisees/Quarter | 1 | |||||||
Store Selling Price/Bottle (US$) | $7.12 | Franchisee Fee/Year | $8,000.00 | |||||||
Retail Purchase Price/Bottle (US$) | $6.05 | |||||||||
Wholesale Purchase Price/Bottle (US$) | $6.05 | |||||||||
Franchisee Purchase Price/Bottle (US$) | $5.70 | |||||||||
Projected Sales | ||||||||||
Quarter | 0 | 1 | 2 | 3 | 4 | |||||
Store1 (Units) | 2730 | 3276 | 3931 | 4717 | ||||||
Store2 (Units) | 2730 | 3276 | 3931 | 4717 | ||||||
Retail Distribution (Units) | 5460 | 6552 | 7862 | 9435 | ||||||
Wholesale (Units) | 0 | 0 | 11375 | 14787.5 | ||||||
Franchisees (Units) | 0 | 0 | 1820 | 3094 | ||||||
Projected Revenue | ||||||||||
Quarter | 0 | 1 | 2 | 3 | 4 | |||||
Store1 | $0.00 | $19,444.44 | $23,333.33 | $28,000.00 | $33,600.00 | |||||
Store2 | $0.00 | $19,444.44 | $23,333.33 | $28,000.00 | $33,600.00 | |||||
Retail Distribution | $0.00 | $33,055.56 | $39,666.67 | $47,600.00 | $57,120.00 | |||||
Wholesale | $0.00 | $0.00 | $0.00 | $68,865.74 | $89,525.46 | |||||
Franchisees | $0.00 | $0.00 | $0.00 | $10,370.37 | $17,629.63 | |||||
Franchisee Fees | $0.00 | $0.00 | $0.00 | $16,000.00 | $8,000.00 | |||||
Total Revenue, Year 1 | $596,588.98 | |||||||||
US alcoholic drinks operation comparison | ||||||||||
Company | Code | 2008A | ||||||||
Beta (Stock’s risk measurement against market) | ||||||||||
Atlantic Wine Agencies Inc. | AWNA.OB | 1.42 | ||||||||
Central European Distribution Corporation | CEDC | 1.42 | ||||||||
Constellation Brands, Inc. | STZ | 0.99 | ||||||||
Scheid Vineyards Inc. | SVIN.PK | 0.72 | ||||||||
Willamette Valley Vineyards, Inc. | WVVI | 0.52 |
9
Industry Peer Group (China Wine Makers) | |||||
Chinese alcoholic drinks players’ operation comparison | |||||
Company | Code | 2003A | 2004A | 2005A | 2006A |
Total revenue |
|
|
|
|
|
China Foods - Great Wall (HK$m)¹ | 506 HK | 891 | 1,164 | 1,550 | 1,803 |
Changyu (Rmbm) | 200869 CH | 1,133 | 1,338 | 1,804 | 2,163 |
Dynasty (HK$m) | 828 HK | 709 | 805 | 947 | 1,114 |
Wuliangye (Rmbm) | 000858 CH | 6,333 | 6,298 | 6,419 | 7,386 |
Kweichow Moutai (Rmbm) | 600519 CH | 2,401 | 3,010 | 3,931 | 4,896 |
Tsingtao Brewery (Rmbm) | 168 HK | 7,508 | 8,621 | 10,020 | 11,677 |
Revenue growth (%) |
|
|
|
|
|
China Foods - Great Wall¹ | 506 HK | 86.6 | 30.7 | 33.1 | 16.3 |
Changyu | 200869 CH | 22 | 18.2 | 34.8 | 19.9 |
Dynasty | 828 HK | -3 | 13.6 | 17.8 | 17.6 |
Wuliangye | 000858 CH | 11 | -0.6 | 1.9 | 15.1 |
Kweichow Moutai | 600519 CH | 30.9 | 25.4 | 30.6 | 24.6 |
Tsingtao Brewery | 168 HK | 8.2 | 14.8 | 16.2 | 16.5 |
Net profit |
|
|
|
|
|
China Foods (HK$m) | 506 HK | 413 | 286 | 257 | 342 |
Changyu (Rmbm) | 200869 CH | 151 | 204 | 312 | 444 |
Dynasty (HK$m) | 828 HK | 124 | 166 | 179 | 115 |
Wuliangye (Rmbm) | 000858 CH | 703 | 828 | 791 | 1,170 |
Kweichow Moutai (Rmbm) | 600519 CH | 587 | 821 | 1,119 | 1,504 |
Tsingtao Brewery (Rmbm) | 168 HK | 245 | 285 | 307 | 448 |
Operating profit |
|
|
|
|
|
China Foods - Great Wall (HK$m)¹ | 506 HK | 139 | 212 | 295 | 319 |
Changyu (Rmbm) | 200869 CH | 237 | 308 | 422 | 613 |
Dynasty (HK$m) | 828 HK | 164 | 220 | 210 | 123 |
Wuliangye (Rmbm) | 000858 CH | 1,095 | 1,283 | 1,200 | 1,790 |
Kweichow Moutai (Rmbm) | 600519 CH | 975 | 1,488 | 1,919 | 2,484 |
Tsingtao Brewery (Rmbm) | 168 HK | 526 | 591 | 579 | 654 |
Yield (%) |
|
|
|
|
|
China Foods | 506 HK | 1.6 | 1.1 | 1.5 | 0.8 |
Changyu | 200869 CH | 0.1 | 0.8 | 1.1 | 1.6 |
Dynasty | 828 HK | 2.6 | 7 | 1.7 | 1.2 |
Wuliangye | 000858 CH | 0.5 | 0 | 0.3 | 0.2 |
Kweichow Moutai | 600519 CH | 0.1 | 0.3 | 0.2 | 0.3 |
Tsingtao Brewery | 168 HK | 0.8 | 0.6 | 0.7 | 0.9 |
Net debt/equity (%) |
|
|
|
|
|
China Foods | 506 HK | 30.8 | 22.9 | 2.5 | -15.5 |
Changyu | 200869 CH | -55.8 | -59.8 | -61.5 | -57.8 |
Dynasty | 828 HK | -61.1 | -50.3 | -57.1 | -53.5 |
Wuliangye | 000858 CH | -16.7 | -13.4 | -26.7 | -33.7 |
Kweichow Moutai | 600519 CH | -67.4 | -68.7 | -75.4 | -74.4 |
Tsingtao Brewery | 168 HK | 11.4 | 2.2 | -4.9 | -9.2 |
Gross margin (%) |
|
|
|
|
|
China Foods - Great Wall¹ | 506 HK | 46 | 47 | 47.5 | 48.1 |
Changyu | 200869 CH | 49.9 | 55.7 | 58.5 | 59.3 |
Dynasty | 828 HK | 50.9 | 53.1 | 51.8 | 50.9 |
Wuliangye | 000858 CH | 34.3 | 39.2 | 37.6 | 43.5 |
Kweichow Moutai | 600519 CH | 67.3 | 71.4 | 69 | 72.1 |
10
Continued from previous page | |||||
Tsingtao Brewery | 168 HK | 31.8 | 31 | 30.4 | 31.5 |
Operating margin (%) |
|
|
|
|
|
China Foods - Great Wall¹ | 506 HK | 15.6 | 18.2 | 19.1 | 17.7 |
Changyu | 200869 CH | 21 | 23 | 23.4 | 28.4 |
Dynasty | 828 HK | 23.2 | 27.3 | 22.2 | 11 |
Wuliangye | 000858 CH | 17.3 | 20.4 | 18.7 | 24.2 |
Kweichow Moutai | 600519 CH | 40.6 | 49.4 | 48.8 | 50.7 |
Tsingtao Brewery | 168 HK | 7 | 6.9 | 5.8 | 5.6 |
Net margin (%) |
|
|
|
|
|
China Foods | 506 HK | 46.3 | 24.6 | 16.6 | 19 |
Changyu | 200869 CH | 13.4 | 15.3 | 17.3 | 20.5 |
Dynasty | 828 HK | 17.6 | 20.6 | 18.9 | 10.3 |
Wuliangye | 000858 CH | 11.1 | 13.1 | 12.3 | 15.8 |
Kweichow Moutai | 600519 CH | 24.4 | 27.3 | 28.5 | 30.7 |
Tsingtao Brewery | 168 HK | 3.3 | 3.3 | 3.1 | 3.8 |
ROA (%) |
|
|
|
|
|
China Foods | 506 HK | 4.3 | 3.1 | 4.9 | 5 |
Changyu | 200869 CH | 7.8 | 9.4 | 13.3 | 16.3 |
Dynasty | 828 HK | 15.9 | 20.7 | 11.2 | 6.9 |
Wuliangye | 000858 CH | 8.5 | 9.4 | 8.2 | 11.3 |
Kweichow Moutai | 600519 CH | 11.8 | 12.9 | 13.9 | 16 |
Tsingtao Brewery | 168 HK | 2.7 | 2.9 | 3.2 | 4.7 |
ROAE (%) |
|
|
|
|
|
China Foods | 506 HK | 10.8 | 6.8 | na | 10.6 |
Changyu | 200869 CH | 10.1 | 12.3 | 17.4 | 23 |
Dynasty | 828 HK | 26.5 | 36.3 | 20.7 | 8.5 |
Wuliangye | 000858 CH | 11.8 | 13.2 | 10.7 | 15 |
Kweichow Moutai | 600519 CH | 18.7 | 21.6 | 24.2 | 27.4 |
Tsingtao Brewery | 168 HK | 6.4 | 6.2 | 6.3 | 8.8 |
11
12
Discounted Cash Flow (DCF) Valuation | ||||
Assumptions | ||||
Sales Revenue, Year 1 | $596,589 | Industry Peer Group Averages | ||
Average Total Debt | $375,000 | Revenue Growth (%) | 20.9% | |
Average Interest Rate | 12.0% | Operating Profit Margin (%) | 22.7% | |
Tax Rate | 33.0% | American Wine % Distillers Beta | ||
Depreciation | ||||
PP&A | $600,000 | Discount Rate (WACC) Worksheet | ||
Life Span (years) | 15 | E/(D+E) @ Public Mkt Value | 80.00% | |
Capital Expenditures | D/(D+E) @ Public Mkt Value | 20.00% | ||
Amount | $400,000 | |||
Year | 2012 | Avg. Pretax Int.Exp. (Annual.) | 12.00% | |
Franchisee | Marginal Tax Rate | 33.0% | ||
Growth Multiplier | 5.0 | |||
Year | 2010 | Cost of Equity= rf+ß(Rm-Rf) | 10.94% | |
Terminal Value | Risk-Free Rate: Rf | 3.63% | ||
Long-Term Sales Growth | 7.0% | ß | 1.014 | |
Market Return: Rm | 10.8% | |||
First Year Capital Budget | ||||
Manufacturing | WACC=E/(D+E)* Re+ D/(D+E)*Rd(1-T) | 10.36% | ||
Property, Plant and Equipment | $600,000 | |||
Production Salary & Wages | $60,000 | |||
Utilities | $100,000 | |||
Distribution | ||||
Corporate-Owned Store Start-Up Costs (x2) | $30,000 | |||
Sales & Marketing | $20,000 | |||
Inventory Tie-Up | $300,000 | |||
General | ||||
Additional Working Capital | $150,000 | |||
Other | $240,000 | |||
13
Enterprise Value Valuation Method | ||
Equity Asset | 1,500,000.00 | |
Synergy Value with Nine Dragons | ||
Value of Liquor License Right (15 yr) | $600,000.00 | |
Value of Property Usage Right (15 yr) | $900,000.00 | |
Subtotal of Synergy Value with Nine Dragons | 1,500,000.00 | |
Synergy Value with Crown Star | ||
Production Support | $100,000.00 | |
Crown Star Distribution Channels | $300,000.00 | |
Crown Star Product Expertise | $100,000.00 | |
Subtotal of Synergy Value with Crown Star | 500,000.00 | |
Total Equity Asset | 3,500,000.00 | |
Added Leverage Value of Corporate Loan | 1,050,000.00 | |
Income Tax Savings from Loan Interest | 42,000.00 | |
Total Equity Value (Merchants + Distribution) | 4,592,000.00 |
P/E Multiples Valuation Method (Comparable companies are listed in the Appendix) | |
Projected Net Income of Fiscal Year 2009 | $167,509 |
Average P/E Ratio | 66.88 |
Total Market Value | $11,202,994 |
14
Appendix I |
Chinese Winery Companies’ Stock P/E Ratio Table(As the date of April 5, 2008) |
Public Companies | %Change | Price | Dollar Change | Bid | P/E | Total Floating Share | Trading Volume | |
000929 | 9.39 | 9.2 | 0.79 | 9.2 | 203.05 | 13224.37 | 30207 | |
600559 | 2.76 | 13.4 | 0.36 | 13.39 | 172.55 | 6674.62 | 51902 | |
000596 | 2.7 | 13.29 | 0.35 | 13.29 | 135.51 | 3975 | 5513 | |
000752 | 4.73 | 6.86 | 0.31 | 6.86 | 82.65 | 13448.57 | 27414 | |
600059 | 4.25 | 27.99 | 1.14 | 28.01 | 72.95 | 13841.09 | 15858 | |
000799 | 5.01 | 14.67 | 0.7 | 14.67 | 71.18 | 12868.13 | 31612 | |
600543 | 7.63 | 14.38 | 1.02 | 14.31 | 69.62 | 10145.33 | 22528 | |
600702 | 2.23 | 8.26 | 0.18 | 8.24 | 67.37 | 23523.02 | 34579 | |
000568 | -1.03 | 56.5 | -0.59 | 56.5 | 63.66 | 44709.44 | 21104 | |
600132 | 6.85 | 26.53 | 1.7 | 26.51 | 62.01 | 20006.13 | 38178 | |
600519 | -2.5 | 178.01 | -4.57 | 177.99 | 59.35 | 40793.1 | 13419 | |
600779 | 6.4 | 24.28 | 1.46 | 24.29 | 58.94 | 29366.78 | 72419 | |
000858 | 6.07 | 22.7 | 1.3 | 22.69 | 58.66 | 144086.3 | 293343 | |
000869 | 3.42 | 68.31 | 2.26 | 68.31 | 56.67 | 8306.69 | 1076 | |
600573 | 4.26 | 8.08 | 0.33 | 8.08 | 45.85 | 11301.66 | 13924 | |
000729 | 4.42 | 16.29 | 0.69 | 16.28 | 43.75 | 48243.76 | 72941 | |
600199 | 3.8 | 6.55 | 0.24 | 6.54 | 38.99 | 18203.6 | 24204 | |
600090 | -0.12 | 8.39 | -0.01 | 8.38 | 38.43 | 21575.42 | 77008 | |
200869 | -3.75 | 46.2 | -1.8 | 46.2 | 35.3 | 17846.4 | 4289 | |
600197 | 1.8 | 8.5 | 0.15 | 8.51 | 35.06 | 20937.1 | 38876 | |
600600 | -0.7 | 24.17 | -0.17 | 24.17 | 34.1 | 23575.55 | 51936 | |
600809 | 4.54 | 17.97 | 0.78 | 17.99 | 23.68 | 15163.61 | 29528 | |
600735 | -1.7 | 8.67 | -0.15 | 8.66 | 8.99 | 8346.15 | 17497 | |
000995 | 4.52 | 6.25 | 0.27 | 6.25 | N/A | 8193.87 | 37729 | |
600365 | 0.14 | 7.18 | 0.01 | 7.17 | N/A | 11034.62 | 9612 | |
|
|
|
|
|
|
|
| |
Average | 3.0048 | 25.7052 | 0.27 | 25.6996 | 66.88348 | 23575.61 | 41467.84 | |
The References for the Market Potential Session: | ||||||||
http://www.wineinstitute.org/resources/statistics/article86 (716+624) x 4 / 1bn = 5.36bn 2 http://www.wineinstitute.org/resources/statistics/article86 0.5 / 2.39 x 4 3 http://en.wikipedia.org/wiki/Beijing#cite_note-urban_construction-17 4http://nutra-smart.net/redwine.htm;http://www.medicinenet.com/script/main/art.asp?articlekey=23592; http://www.sciencedirect.com/science/article/B6T1C-475FSC5-4/2/11536afd0dc132708024f4105cb42270 5 China winemakers — CLSA Nov. 2007 |
15
Appendix II | |
The Liquor Production and Distribution License Nine Dragons Winery Development Ltd. (Shunyi, Beijing, P.R. China) | |
The Liquor Production and Distribution License Nine Dragons Winery Production Ltd. (Shunyi, Beijing, P.R. China) | |
The Bird’s Eye View of a Section of the Industrial Property that Legacy will utilize Currently owned by Legacy’s Partner, Nine Dragons Winery Development Ltd. |
16