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Broker's take: Entry of new partner strengthens SATS' joint venture in China

AFTER its April 17 announcement on the proposed joint investment with Charoen Pokphand Group (CP) in Jilin Zhong Xin Cheng Food (Jilin JVCo), SATS Limited announced in early June that Singbridge will also join in the investment in Jilin JVCo through a joint venture agreement with SATS.

Established in 2010, Jilin JVCo develops and operates a large scale integrated pig farm with abbatoir and feed production facilities in the Jilin province of China.

Based on the April announcement, CP and SATS will own 65 per cent and 35 per cent stakes in Jilin JVCo, respectively. But with the latest update, SATS and Singbridge will participate through the 35 per cent stake of their joint venture SGIPF.

SATS and Singbridge will hold 60 per cent and 40 per cent of SGIPF, respectively.

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OCBC Investment Research said having two strong strategic partners on board is certainly positive over the longer term as the three partners will be able to tap on each other's expertise to provide safe food.

That said, given that this JV is still in the early stage, OCBC Investment Research maintains its hold rating with an unchanged fair value of S$5.12 and will look to re-engage closer to S$4.70 or lower.