Chinese orange grower Asian Citrus increased supply and margins last year and the future looks bright after the Government gave it permission to double tree numbers.

The company has secured an agreement to create a new plantation in Hunan province, adding to its existing farms in Hepu and Xinfeng. The new £35m plantation – for which £18m was raised in a 240p placing in March, with the rest coming from internal funds – will be completed in 2010, with a first harvest a year or two after. This will double the number of trees the group owns to 4.4m.

The harvest in the year to June swelled 5.6%, contributing to an 18.6% increase in group revenues to £31.3m as prices rose and the proportion of higher margin sales to supermarkets increased from 10.9% to 23%. Pre-tax profits grew 21% to £24.5m and earnings by 17.1% to 31.8p, leading to a proposed 10% increase in the dividend to 4.4p.

The current year will see a first commercial harvest from Xinfeng plantation and possible further increases in margins if, as finance director Eric Sung says, the company builds on a recent supply contract with a Shanghai supermarket chain to expand its supply to supermarkets on a national level.

Other plans include becoming a wholesale distributor, moving into value-added products such as orange juice and even a project at the Hong Kong University of Science and Technology to investigate the health benefits of orange peel.

Recommended by GCI at 202.5p a year ago, the shares have yielded a 29% profit. The usual plantation risks apply, but there’s plenty to come here, with sales forecast to double in the next two years, lifting earnings between 80% and 100%. Add.

Asian Citrus	AIM	£126.41m	170.00p	0.00p
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