Asia Bio-Chem Group Corp.

Update
(ABC-T: C$1.26)
April 19, 2011
Richard A. Kelertas / (514) 396-0320
rkelertas@dundeesecurities.com
BUY, High Risk* Joshua Bridges / (514) 396-0332
12-month target price: C$2.75 jbridges@dundeesecurities.com

Unlikely to be Affected by Recent Reports of Corn Restrictions to

Processors: Maintain Buy Recommendation
Risk* High
Exchanges TSX Event: China Seeks to Curb Corn Demand from Processors
Fiscal Year End 31-Dec
52-Week Range $1.01 - $1.64
Recently there have been reports of China's decision to restrict corn destined
Shares Outstanding (MM) 85.13 for industrial processing in favor of supplying livestock farmers for feed. The
Market Capitalization ($MM) $108 idea would be to curb demand from pharmaceutical supplies and sweeteners
Current Dividend $0.00 in beverages which have outpaced growth in consumption of livestock feed.
Current Yield 0%
This has put pressure on ABC's share price out of fear the company will not be
Book Value 1.08
Price to Book (adj) 1.2x
able to procure enough corn for its two processing plants. Specifically, reports
Net debt/total capital 35.8% suggest:
Earnings 2010A 2011E 2012E
Revenue ($000) 193,102 286,350 307,212
 Processors will be limited from buying more corn than their consumption
EBITDA ($000) 21,120 38,815 52,747 level in 2009.
EPS 0.14 0.28 0.40
P/E Ratio 8.85 4.50 3.14  Financial institutions will stop providing loans for corn purchases until the
Valuation end of June.
Target 2011 EV/EBITDA 6.6x
Target 2011 P/E 9.8x  Local authorities were purportedly ordered to root out processors with
Target Price (12 months out) $2.75 small or inefficient operations.
NAV Valuation $ 2.79
Discount (premium) to NAV 1% Management Sheds Some Light - ABC Not Affected by
Source: See Note 1
Restrictions
We spoke with management to get a sense of the extent of the restrictions:
 There has been a restriction on corn processing in effect for more than a
ABC: Price/Volume Chart year. While it is true that new licenses are not being granted, ABC already
has the licenses for its full 900,000 of corn processing capacity and its
upcoming downstream expansion.
 Recently, the government issued restrictions to large corn processors
(mostly state owned) such as COFCO, Global Starch, China BBCA Group
(BBCA), and China Starch. Smaller processors such as Xiwang Sugar,
China Sun, and Asia Bio-Chem have not been affected by these
restrictions.
 Mr. Zhiping Wang, CEO, does "not see a near term hard impact" on his
Source: Thomson ONE business and points to the contract signed in March for over 200,000
tonnes of starch as indication business is progressing.
 The company does not have any lines of credit that are earmarked solely
for the purchase of corn and would not be affected by the loan restriction.
Company Description  Any focus on "rooting out" the small and/or inefficient processors would be
Asia Bio-Chem Group Co. Ltd. is a TSX listed a net positive for ABC as it would further speed up the rationalization of
company with corn starch processing operations
in China. The company is a leading
the industry and strengthen the company's pricing power down the line.
manufacturer of corn starch and related by-  Finally, the restrictions are also likely to be contained within areas of
products corn germ, gluten, and fibre. Asia Bio-
Chem sells its 900,000 tonne of corn processing minimal impact to the farmer, further south of ABC's operating areas
capacity directly to domestic Chinese (where there is far more demand for corn from many different processors
intermediaries primarily producing sweeteners. and feed companies).

Please see Disclosures and Disclaimers on the last two pages of this report.
Asia Bio-Chem Group Corp. April 19, 2011

Impact - Neutral
While we are comforted by management's comments, we still believe there may be a
slight impact to ABC's operations if grain traders are forced to be more selective in
distributing corn. ABC does however have an advantage: Due to the general location
of its operations, there is much less competition for corn and ABC's facilities are
important to the local markets for employment and the local farmer's revenues.
Therefore, we believe the government would be less likely to pursue the same type of
proposed restrictions in northern provinces as they would in the south and central
provinces.

Valuation
We are not changing our estimates at this time and are maintaining our BUY
recommendation and 12-month target price of C$2.75/share.

Recommendation
We continue to rate Asia Bio-Chem Group Corp. a BUY with a 12-month target
price of C$2.75/share.

ABC currently trades at 4.3x EV/EBITDA (2012E) compared with 6.9x for its peer
group. On average, ABC is trading at a 41% discount to its peers (Exhibit 1) on
EV/EBITDA, P/E, P/CF, and P/B based on 2012 Dundee estimates.

We believe that ABC's superior growth profile and rising demand for corn starch in
China to feed a rapidly expanding food & beverage industry will drive this
undervalued stock higher in the next 12-months.

Out target price of C$2.75 is derived by taking the simple average of our Valuation
Matrix and NAV, which yields a price of C$2.79/share which we round to C$2.75.
Based on the last price of C$1.25 (intraday), our expected return is 120%.
A summary of our financial model is provided in Exhibit 3.

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Asia Bio-Chem Group Corp. April 19, 2011

Exhibit 1: Asia Bio-Chem Group - Processing Comparables

Fiscal Share Target Shares Market
Year Price Price O/S Cap. EV/EBITDA (x) P/E (x) P/CF P/B ROE % ROE % Tot debt/ Dividend
Ticker Rating End $ 15-Apr-11 (12m) (MM) (C$ MM) TTM FY1 FY2 TTM FY1 FY2 TTM FY1 FY2 TTM FY1 FY2 (TTM) 3 Yr Avg Tot cap. Yield
North America
ARCHER-DANIELS-MIDLAND CO ADM US NR 06/2010 USD 34.83 42 637 22,197 10.2 8.7 8.2 11.5 10.3 9.9 9.9 9.6 7.9 1.4 1.4 1.3 13.7 13.6 34.0% 1.8%
BUNGE LTD BG US NR 12/2010 USD 72.07 75 147 10,583 11.4 8.4 8.0 4.5 12.2 11.0 nmf 10.6 8.4 0.9 0.9 0.8 23.5 14.6 28.0% 1.3%
CORN PRODUCTS INTL INC CPO US NR 12/2010 USD 52.29 57.13 76 3,984 10.6 6.9 6.5 23.3 12.9 11.8 13.2 7.2 na 2.0 1.8 1.6 9.2 9.9 46.9% 1.1%
VITERRA INC VT CN NR 10/2010 CAD 11.12 13.54 372 4,133 8.6 7.8 7.8 17.7 13.5 13.7 8.5 8.4 7.3 1.1 1.0 1.0 4.0 7.9 21.3% 0.9%
ASIA BIO-CHEM GROUP CORP ABC CN BUY Dec-11 CAD 1.26 2.75 85 107 7.8 7.8 4.3 8.8 8.8 4.5 6.7 6.6 5.8 1.2 1.1 0.9 3.4 23.0 41.2% 0.0%
Canada Average 9.7 7.9 7.0 13.2 11.5 10.2 9.6 8.5 7.3 1.3 1.2 1.1 10.8 13.8 0.3 0.0
CHINA & HONG KONG
CHINA AGRI-INDUSTRIES HLDGS 606 HK NR Dec-11 HKD 9.14 10.24 4038 4,556 nmf 11.8 9.8 20.9 12.1 10.3 na 8.3 13.4 1.9 1.7 1.5 9.7 15.0 55.0% 1.1%
CHINA STARCH HOLDINGS LTD 3838 HK NR Dec-11 HKD 0.54 na 5780 385 8.7 na na 19.0 na na na na na 2.2 na na 13.4 13.0 2.5% 1.2%
GLOBAL BIO-CHEM TECHNOLOGY 809 HK NR Dec-11 HKD 1.73 1.61 3246 693 9.5 6.0 5.4 14.8 8.8 7.8 na nmf nmf 0.6 0.5 0.5 4.1 4.3 46.4% 0.6%
XIWANG SUGAR HOLDINGS CO LTD 2088 HK NR Dec-11 HKD 2.44 2.72 1006 303 7.9 5.7 5.2 59.7 48.8 41.8 na 10.8 5.6 1.2 1.1 1.0 12.2 8.0 44.3% 0.0%
CHINA CORN OIL CO LTD 1006 HK NR Dec-11 HKD 5.19 6.54 526 337 9.1 6.6 5.3 nmf nmf 52.4 na na na 2.3 2.0 1.7 13.0 23.4 4.0% 1.3%
GLOBAL SWEETENERS HLDGS LTD 3889 HK NR Dec-11 HKD 1.88 1.70 1149 267 9.5 9.0 6.9 23.8 13.0 10.0 na 17.1 9.9 1.1 1.0 0.9 5.0 7.2 31.3% 0.0%
China & Hong Kong Average 8.9 7.8 6.5 27.7 20.7 24.5 na 12.1 9.6 1.6 1.3 1.1 9.6 11.8 30.6% 0.7%
Europe
SUEDZUCKER AG SZU GR NR Feb-11 EUR 20.48 21.10 189 5,370 7.9 7.9 7.6 17.1 16.3 15.0 8.6 7.4 6.9 1.6 1.3 1.2 9.3 6.1 46.5% 2.2%
TATE & LYLE PLC TATE LN NR Mar-11 GBp 607.00 602.93 468 4,446 18.5 8.2 7.8 nmf nmf nmf 14.9 nmf nmf nmf nmf nmf 1.7 9.6 60.5% 4.2%
Europe Average 13.2 8.0 7.7 17.1 16.3 15.0 11.7 7.4 6.9 1.6 1.3 1.2 5.5 7.8 53.5% 3.2%
Global Median 9.3 7.8 7.2 17.7 12.5 11.0 9.2 8.4 7.6 1.3 1.1 1.0 9.3 9.9 41.2% 1.1%
Global Average 10.0 7.9 6.9 20.1 15.7 17.1 10.3 9.6 8.2 1.5 1.3 1.1 9.4 12.0 35.5% 1.2%
ASIA BIO-CHEM GROUP CORP ABC CN BUY Dec-11 CAD 1.26 2.75 85.13 107 7.8 7.8 4.3 8.8 8.8 4.5 6.7 6.6 5.8 1.2 1.1 0.9 3.4 23.0 41.2% 0.0
Asia Bio Chem discount to global average -22% -1% -38% -56% -44% -74% -35% -31% -29% -21% -12% -22%
* Data for Asia Bio-Chem. Is from Dundee Securities, all peer data is sourced from Bloomberg

Source: Bloomberg, Dundee Securities Ltd.

Exhibit 2: Asia Bio-Chem Group - Starch/Corn Spread

1,400
Starch/corn spread has increased 15% since the start of 2010
Starch/corn spread has increased 183% since the start of 2009
1,200

1,000
RMB/tonne

800

600
2009 - Q1 2011
CAGR Starch Price: 32%
400
CAGR Corn Price: 20%

200 Current Spread: RMB 1,030/tonne

Average Spread: RMB 829/tonne
0
May-09

May-10
Mar-09

Apr-09

Aug-09

Nov-09

Mar-10

Apr-10

Aug-10

Nov-10

Mar-11

Apr-11
Jan-09

Feb-09

Jun-09

Jul-09

Sep-09

Oct-09

Dec-09

Jan-10

Feb-10

Jun-10

Jul-10

Sep-10

Oct-10

Dec-10

Jan-11

Feb-11
Source: Asia Bio-Chem, www.jcce.cn, Dundee Securities Ltd.

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Asia Bio-Chem Group Corp. April 19, 2011

Exhibit 3: Asia Bio-Chem Group - Summary Financial Model

ASIA BIO-CHEM GROUP CORP.

Summary Sheet
(C$ thousands unless otherwise noted)

EPS and CFPS 12/07 12/08 12/09A 12/10A 12/11E 12/12E Norm TTM Market data
EPS Adj($) - Fully diluted 0.41 0.12 0.02 0.14 0.28 0.40 0.08 0.14 Share price (C$) 15-Apr-11 1.26 Shares O/S - Basic (mm) 85,134
CFPS ($) - Fully diluted 0.27 0.20 (0.38) 0.19 0.22 0.44 (0.09) 0.19 52-wk high (C$) 1.64 Shares O/S - F.D. (mm) 85,806
FCFPS ($) - Fully diluted 0.61 (0.13) (1.03) (0.07) 0.01 0.37 (0.55) (0.13) 52-wk low (C$) 1.01
Target price (C$) - 12 months 2.75 Dividend ($) 0.00
Income statement summary 12/07 12/08 12/09A 12/10A 12/11E 12/12E Norm TTM Recommendation: BUY Yield (%) 0.00
Revenue 75,898 84,448 88,731 193,102 286,350 307,212 140,916 193,102
EBITDA 16,650 11,885 4,108 21,120 38,815 52,747 12,614 21,128 NAV/share (C$) 2.79 Target EV/EBITDA (TTM) 12.9
EBIT 18,855 10,819 3,822 15,570 32,276 45,721 9,696 15,570 Current Price (Discount)/Premium to NAV -55% Target EV/EBITDA (2011) 6.6
EBT 18,854 10,619 3,049 11,104 26,543 39,988 7,076 11,104 Target Price (Discount)/Premium to NAV -1% Target EV/EBITDA (11) 6.6
Net income 18,227 8,723 2,109 11,135 24,287 36,589 6,622 11,135 Major shareholders:
Wang, Zhiping - CEO 14.1% Target P/E (TTM) 19.3
Balance sheet summary 12/07 12/08 12/09A 12/10A 12/11E 12/12E Norm TTM Asia Bio-Chem Group Co. Ltd. 14.0% Target P/E (2011) 9.8
Cash & short-term deposits 6,655 10,489 14,119 5,642 11,524 28,431 7,299 5,642 Target P/E (11) 9.8
Other current assets 15,398 12,902 31,144 47,173 64,075 63,995 51,246 47,173 Market capitalization 107.3
Net fixed assets 8,439 74,577 82,852 96,485 113,894 118,892 82,349 96,485 + Net debt & preferreds 53.5
Other assets 3,319 15,176 14,168 119,677 128,183 133,181 14,037 23,192 Total capitalization (EV) 160.7 C$/RMB (current) 6.5604
Total assets 33,811 113,144 142,282 268,978 317,675 344,499 154,930 172,493
Debt (current + LT) - 9,186 34,563 41,887 31,887 21,887 39,648 41,887 Assumptions 12/08 12/09A 12/10A 12/11E 12/12E Norm
Other current liabilities 17,819 18,236 7,481 19,880 21,475 18,401 8,132 19,880 Operating Rates
Shareholder equity 15,992 82,947 76,386 88,780 124,487 163,397 84,875 88,780 Chang-Tu/ Daquin 93% 90% 64% 80% 85% 78%
Liabilities + Equity 33,811 110,370 118,431 150,546 177,848 203,685 132,655 150,546 Cost per tonne
Corn (RMB/tonne) 1246 1316 1437 1660 1651 1471
BVPS 0.43 1.08 0.99 1.14 1.44 1.88 1.07 1.13 Corn (CAD/tonne) 191 220 220 253 254 231
Net Debt/Total Capital (%) -42% -1% 18% 28% 22% 2% 23% 0% Selling Prices (est.)
Starch (CAD/tonne) 315 287 420 450 438 385
Cash flow summary 12/07 12/08 12/09A 12/10A 12/11E 12/12E Norm TTM Gluten (CAD/tonne) 684 626 540 608 655 591
Net income 18,227 8,723 2,109 11,135 24,287 36,589 6,622 11,135 Germ (CAD/tonne) 453 409 403 425 441 412
+ Deprec'n & amortiz'n 643 872 1,141 5,545 6,515 1,371 3,343 5,545 Fiber (CAD/tonne) 154 139 139 151 160 143
+ Stock-based compensation - 2,670 3,380 1,962 2,164 2,322 2,671 1,962 Exchange Rate
+/- Other adjustments (2,132) 696 172 129 1,200 1,200 150 129 CADRMB 6.5528 5.9894 6.5311 6.5614 6.5000 6.3606
Operating cash flow 16,738 12,962 6,801 18,771 34,165 41,482 12,786 18,771
Change in non-cash WC (6,443) 2,702 (35,899) (3,935) (15,307) (2,994) (19,917) (3,935) Multiples 12/08 12/09A 12/10A 12/11E 12/12E Norm
Capital expenditures 2,149 (41,180) (20,566) (19,931) (18,000) (12,000) (20,249) (19,931) P/E 5.6x 61.7x 8.8x 4.5x 3.1x 6.7x
Free cash flow 12,444 (25,517) (49,664) (5,095) 859 26,488 (27,379) (5,095) P/CFPS 3.2x NM 6.6x 5.8x 2.8x 6.2x
P/FCF 0.6x 1.2x 1.1x 0.9x 0.7x 1.0x
Profile P/BV
EV/Revenue 0.6x 1.3x 0.8x 0.6x 0.5x 0.7x
EV/EBITDA 4.1x 27.8x 7.7x 4.2x 3.1x 5.9x
Asia Bio Chem (ABC) manufactures corn starch and related products ( corn germ, gluten and fibre). Corn represents 85 - 87% of cost of EV/EBIT 4.6x 37.4x 14.6x 6.1x 4.0x 10.3x
goods sold. The company's Changtu facility in the Liaoning province of China has a capacity of approximately 300,000 metric tonnes per
annum of cornstarch and by-products. In Semptember 2008, ABC acquired Daqing Biochemical Company in Heilongjiang province. The
newly acquired facility started production in Q1 2010, with a production capacity to produce corn starch, gluten, germ and fiber, of 600,000.

Customer Breakdown (2010) Capacity Breakbown (2010) in tonnes Relative share price performance

Fiber 0.4
Trading and 14% S&P/TSX Fert & Ag Chem Index
Other
14% 0.2
Asia Bio-Chem
Pulp and Germ
Paper 8%
3% 0
Food
Pharma. products
Gluten -0.2
14% 44%
6%

-0.4

-0.6

Animal
Starch
Feed -0.8
72%
25% J Jul- Au Se No De J Fe Ma A Ma J Jul- Au Se O No De J Fe Ma A Ma Jul- Au Se O No De J Fe
un- 08 g- p- v- c- an- b- r- pr- y- un- 09 g- p- ct- v- c- an- b- r- pr- y- 10 g- p- ct- v- c- an- b-
08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 11 11

Source: Bloomberg, Dundee Securities Ltd.

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Asia Bio-Chem Group Corp. April 19, 2011

Disclosures & Disclaimers

Dundee Securities Limited is an affiliate of Dundee Corporation.
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Note 1: All historical data including financial and operating data on the issuer(s) mentioned in this report come from publicly
available documents including statutory filings of these issuer(s). Data may also be sourced from Bloomberg, Baseline,
Thomson ONE.
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A Research Analyst/Associate involved in the preparation of this report has visited certain material operations of the
following issuer(s): Asia Bio-Chem Group Corp. Details are discussed in Asia Bio-Chem Group's initiation report.
Dundee Securities Limited has provided investment banking services to Asia Bio-Chem Group Corp. in the past 12
months.

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Asia Bio-Chem Group Corp. April 19, 2011

Explanation of Recommendations and Risk Ratings

Valuation methodologies used in determining the 12-month target price(s) for the issuer(s) mentioned in this report are contained
in current and/or prior research. Target Price N/A: a target price is not available if the analyst deems there are limited
financial metrics upon which to base a reasonable valuation.
BUY: total returns expected to be materially better than the overall market with higher return expectations needed for
more risky securities. NEUTRAL: total returns expected to be in line with the overall market. SELL: total returns
expected to be materially lower than the overall market. TENDER: the analyst recommends tendering shares to a
formal tender offer.
*Risk Ratings: risk assessment is defined as Medium, High, Speculative or Venture. Medium: securities with reasonable
liquidity and volatility similar to the market. High: securities with poor liquidity or high volatility. Speculative: where the
company's business and/or financial risk is high and is difficult to value. Venture: an early stage company where the
business or financial risk is high, and there are limited financial metrics upon which to base a reasonable valuation.
SECURITY ABBREVIATIONS: NVS (non-voting shares); RVS (restricted voting shares); RS (restricted shares); SVS
(subordinate voting shares).
Ideas of Interest
Dundee Securities Limited from time to time publishes reports on securities for which it does not and may not choose to
provide continuous research coverage. Such reports are published as Ideas of Interest.
Dundee Securities Equity Research Ratings
82%
88% % of companies covered by Dundee Securities
77% Corporation in each rating category

66%

55% % of companies within each rating category for

47% which Dundee Securities Corporation or its
44% 40% affiliates have provided investment banking
services for a fee in the past 12 months.
33%

22% 17%

11%
2%
0%
0%
Buy Neutral Sell

March 31, 2011

Source: Dundee Securities Ltd.

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