Le Gaga IPO Filing: Chinese Vegetable Producer (GAGA, WMT)

Le Gaga Holdings Ltd. has filed with the SEC to sell up to $100 million in ADR shares via an initial public offering.  The company is a Chinese vegetable producer.  The company plans to list on NASDAQ under the ticker “GAGA.”  Le Gaga a large greenhouse vegetable producer in China and it sells over 100 vegetable varieties to wholesalers and to supermarket chains and other institutions in China and in Hong Kong.  The company has 16 farms, 14 of which are located in the target market areas in China.

The lead underwriters are BofA Merrill Lynch and UBS, with co-managers listed as Oppenheimer and as Piper Jaffray.  In an unusual move, the company has requested that up to 8% of the ADSs should be reserved for officers and directors as well as other employees and associates.  The use of funds will be to expand with construction and improvement of agricultural facilities and for other general corporate purposes.

It lists key customers as being Wal-Mart Stores (NYSE: WMT) and the top three Hong Kong supermarket chains, Wellcome, ParknShop and Vanguard.  Chairman and CEO Mr. Shing Yung Ma founded a broccoli farming business in March 2004. In April 2004, Mr. Ma began to corporatize the business by injecting it into Land V. Limited (Hong Kong) and by the end of July 2004 it had established three wholly owned PRC subsidiaries to take over the operation of Mr. Ma’s broccoli farming business.

Here is the financial data: “In the fiscal years ended March 31, 2008, 2009 and 2010, our revenue was RMB153.6 million, RMB199.0 million and RMB280.5 million ($41.4 million), respectively, representing a compound annual growth rate, or CAGR, of 35.1%. Our profit for the year increased from RMB38.4 million in the fiscal year ended March 31, 2008 to RMB60.4 million in the fiscal year ended March 31, 2009 and to RMB110.2 million ($16.3 million) in the fiscal year ended March 31, 2010, representing a CAGR of 69.4%. For the three months ended June 30, 2010, our revenue was RMB83.3 million ($12.3 million) and our profit was RMB23.5 million ($3.5 million), compared to revenue of RMB53.8 million and profit of RMB28.3 million for the three months ended June 30, 2009.”

Lady Gaga was not mentioned once throughout the prospectus filing.

JON C. OGG