Boston, MA 05/14/2014 (wallstreetpr) – Origin Agritech Ltd (NASDAQ:SEED) is surging in early morning trading session after the crop seed company confirmed it had received a preliminary nonbinding letter from Hunan Xindaxin. The latter proposes to acquire Origin Agritech for $2.50 in cash per ordinary share. Xindaxin is the majority shareholder at Yuan Longping Hi Tech Agriculture Co. Ltd listed on the Shenzhen stock Exchange.
Origin Agritech’s board of directors is currently reviewing and evaluating the proposal with a view of trying to get the best of value for its shareholders in terms of the way forward. The offer comes as the company is rated as a “Sell” in the market by TheStreet research firm. Weaknesses in the company can be seen in its deteriorating net income with a high debt management risk, as well as a disappointing return on equity.
Origin Agritech Net income Down by 55.8%
Origin Agritech Ltd (NASDAQ:SEED) has underperformed poorly in the industry in terms of its net income which has depreciated by 55.8% falling from a high of $7 million to a low of $4.49 on a year over year basis. The company’s net income currently lags that of the S&P 500 index as well as the industry average. Origin Agritech’s debt to equity ratio of 1.77 is quite high when compared to that of the industry average highlighting that a lot needs be done to control the company’s debt levels.
Origin Agritech maintains a quick ratio of 0.08 highlighting the company’s weaknesses to meet short term cash needs clearly demonstrating a possibility of a highly depreciating cash balance. The company’s return on equity ratio has greatly reduced for the current quarter when compared to the same quarter a year ago. This clearly demonstrates the company’s weakness when compared to other players.
Origin Agritech Ltd (NASDAQ:SEED)’s second quarter revenue dropped from a high of RMB27.5 million for the first quarter of 2013 to RMB4.7 million. The company has cited that a drop in revenue for the quarter was attributed to the fact that this year revenue came from Scrap sales compared to last year’s corn seed toll production business. Poor sale in the quarter saw the company plummet to a gross loss of RMB2.4 million compared to a gross profit of RMB6.7 million as of last year same period.
