ANALYSIS: Planet Green: Long Chestnuts and Spices has Shares up 100% YTD

After completing the purchase of Taishan Muren, net revenues of PLAG increased by 33.6 percent in 2018.

Steve Kanaval
    May 12, 2019 2:15 PM  PT
ANALYSIS: Planet Green: Long Chestnuts and Spices has Shares up 100% YTD
author: Steve Kanaval   

Since the start of 2019, Planet Green Holdings Corp. (NYSE American: PLAG) has been on a quiet run. The stock has trended upward 100 percent over that time, and the catalyst for this upward price action has been the acquisition of the spice and sauce maker, Taishan Muren.

Planet Green Holdings, formerly known as American Lorain Corp. (ALN), acquired Taishan Muren in late September 2018. According to company filings, "We grow 32 herbs and spices on farmland that we lease in Guangdong Province, China. We sell sauces and other products developed from these herbs and spices. Customers use these products for seasoning, refining of foods and odor elimination, among other uses.  We also offer a variety of food and beverage products, including packaged sauce, tea and brown rice syrup, to consumers and foodservice businesses." 

To be more specific, the company's spices list includes roselle, mint, curry, pandan leaves, lemon, citronella and others, and all of these products are sold domestically in China with top ten customers accounting for 61 percent total revenues in 2018. By the numbers, the company produced approximately 440 metric tons and 270 tons of spice from our own agricultural operations in 2018 and 2017, respectively.


In order to complete the purchase of Taishan Muren, the company and Shanghai Xunyang entered into a share exchange agreement with Taishan Muren and the sole shareholder of Taishan Muren, where Xunyang agreed to an acquisition of Taishan Muren by buying all outstanding equity interests of Taishan Muren in exchange for the company's issuance of 400,000 shares of its common stock - notable in the reverse stock split on that date - to Taishan Muren's sole shareholder. 

After completing the purchase of Taishan Muren, net revenues increased by $1.7 million, or approximately 33.6 percent, to $6.8 million in 2018 from $5.1 million in 2017.

Furthermore, Planet Green produces chestnuts. China has always been one of the most important chestnut exporters. The country owns 83.1 percent of the market share and production volume has increased since the mid-90s with over 2.26 million tons of the deciduous nuts hitting shores around the globe. In fact, lucky for Chinese exporters like PLAG, the price of chestnuts has staged a bit of a comeback over the last few years climbing to more than $2 per pound.

Much of the rally also revolves around complying with the NYSE listing requirements, and in late April it was clear the company was back in compliance which starts to clean up outlier events and makes shorts cover in this thin trader. This is one of the stocks emerging from a long-term downtrend as these listed ADRs find a bottom.  We have been highlighting these stocks as Chinese stocks remain the focus of many investors who see a global normalization in relations with the United States. The election cycle is around the corner, and any good news between the U.S. and China will continue to reflect the reversal of these overdone stocks, we see PLAG as one to watch, and it's hard not to pay attention it when it blinks +100 percent YTD.

(The opinions expressed by contributing analysts do not reflect the position of CapitalWatch or its journalists. The analyst has no positions in any stocks mentioned, no plans to initiate any positions within the next 72 hours, and no business relationship with any company whose stock is mentioned in this article. Information provided is for educational purposes only, may be incomplete or out of date, and does not constitute financial, legal, or investment advice.)