Contents

Company Business Background...................................................................................................................3

Financial Summaries....................................................................................................................................6

Moving Forward..........................................................................................................................................9

Ten Year Chart...........................................................................................................................................10

Figure 1: 2006 AR Dividend and Bonus Share Trend...................................................................................6Figure 2: 2004 AR 5 Years EPS Trend...........................................................................................................7Figure 3: 2009 AR 5 Years EPS Trend...........................................................................................................7Figure 4 Source: 2009 AR Shareholdings.....................................................................................................7Figure 5: Source: 2009 AR Forward Commentary........................................................................................8Figure 6 Source: FY 2010 1st Half Financial Summary 14th Aug 2010.........................................................9Figure 7: FY 2010 1st Half Commentary Extracts..........................................................................................9Figure 8: 2000 – 2010 Ten Year Chart........................................................................................................10Figure 9: Fibo Retracement from the last peak.........................................................................................11

Zagro Asia

Company Business Background

Zagro provides a wholesome range of nutrition and protection products for animals and crops.

In addition, Zagro also offers lab services to ensure the quality of its products and to customers

worldwide.

Zagro products are categorized into four different groups: Animal Nutrition, Animal Protection,

Crop Nutrition and Crop Protection.

Animal Nutrition

As a premix manufacturer, Zagro caters specifically to animals’ needs with customized

formulations developed by it own team of dedicated veterinarians and nutritionists. Zagro’s

series of probiotics and enzymes have gained popularity all over the world. Zagro’s nutrition

products for aquatic animals are specially formulated to improve the defense systems of fish

and shrimps against stressful conditions thereby improving productivity.

Animal nutrition products include:

Amilyte Zagromin range Ana range Zagrosol range Anavite range Zagrovit range Anasol Zymeyeast 100

Animal protection

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Zagro markets a complete range of protection products, covering a wide range of

animals’ diseases. Key products like ectoparasiticides, Neocidol® and Steladone®, are well-

sought after by farmers all over the world. Zagro’s range of biosecurity products ensures a clean

and healthy environment for the animals. To complete that, Zagro’s assortment of water

treatment products, helps maintain a delicate balance of beneficial bacteria in the water, thus

improving the overall well-being of aquatic animals. Their professional veterinarians in all

worldwide offices can be easily reached to provide technical support to the farmers.

Key products:

Haltox Steladone® Ioguard Sutrimix Plus Neocidol® Tiazin Pond Bact Ultraxide

Feed Additive/Water Soluble Powder Disinfectant Ectoparasiticide Aquaculture products

Calboron Seapoint Gold Star ZagroCel range Mango Flower Inducer ZagroStar range Mastermix Zagrostim

Fertilizer Plant Growth Regulator Trace Element

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Zagro Asia

Crop nutrition

Crop nutrition products are crucial for the improvement of farm yield. Zagro’s quality

array includes soil conditioner, fertilizers, plant growth regulators, plant extracts and

biofertilizers. Zagro has fertilizers in a variety of formulations and combinations for plants

grown in different soil conditions and climates, promoting maximum productivity. Our special

formulations incorporate chelated trace minerals, which boost nutrient absorption and

translocation in the plant.

Key products:

Insecticide Herbicide Mollusicide Fungicide Rodenticide

Crop Protection

Farmers all over the world are plagued by pests, diseases, weeds and infections during

seeding to harvesting. Zagro has products for all major problems. Zagro’s comprehensive

toolbox of solutions includes fungicides, herbicides, insecticides and biopesticides in different

formulations and concentrations. Their technical specialists provide trainings to ensure

products are used correctly, to prevent poisoning and damage to the environment.

Pacific lab services

Popular tests rendered by Pacific Lab Services include:

Amino acid tests Melamine testing API testing Mycotoxin tests Enzyme testing Nutrient analyses Heavy metal detection

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Zagro Asia

All products manufactured by Zagro are subjected to stringent quality testing by Pacific Lab

Services. Led by a veteran leader, chemists with diverse backgrounds and scientific expertise

continually seek to improve and optimize our services in the pursuit of total customer

satisfaction. Pacific Lab Services serves customers across a wide range of industries all over the

world as a trusted global partner.

Financial Summaries

Year 2008/9 are the years of disaster. In the mist of the financial tsunamic caused by

the global credit crunch, Zagro manage to achieve a relatively high profit. This give some

indications of its resilient business nature.

Figure 1: 2006 AR Dividend and Bonus Share Trend

Zagro has never failed to distribute dividends since the 1996 IPO. This equal or better

many of SGX large caps. It is not unreasonable to expect dividends from this counter on a yearly

basis.

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Zagro Asia

Figure 2: 2004 AR 5 Years EPS Trend

Figure 3: 2009 AR 5 Years EPS Trend

The above table exhibits a sustainable growth trend. Despite having to deal with the economic

downturn in the year 2008, FY 2009 EPS managed to stay above 2 cents.

Figure 4 Source: 2009 AR Shareholdings

It is very small company with a market capitalization of barely 60 million dollars base on

23 cents a share. Despite being a 60 million dollars company, it delivers 27 and 39 million

dollars to the pocket of the shareholders in the last 5 years and 10 years respectively. A long

term investment in this company makes absolute sense.

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Small market float also means ill-liquidity. Bonus shares issue usually happen in the year

of exceptional profitability to boost liquidity. If year 2010 is an exceptional year, bonus shares

or stock splits are likely barring a widely anticipated double-dip economy. It is interesting to

note that we just need to hold > 850 000 shares to have our name listed in top twenty

substantial shareholders listing. This will only cost us $195.5 K.

Figure 5: Source: 2009 AR Forward Commentary

Despite the ongoing financial temor, the company has expressed confidence in

achieving a better result in the following year 2010. In my opinion, the company must have

something within their control in order to materialize such claim. I have every reason to expect

a spectecular result in the following year.

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Zagro Asia

Moving Forward

FY 2010 1st Half Result Announcement

Figure 6 Source: FY 2010 1st Half Financial Summary 14th Aug 2010

Given the fact that the company is already earning 1.88 cents for one half of the year,

logically we can expect a earning of 3.76 cents (1.88x2) for the full year. However, this may not

be true. Empirical data reveals that the 1st half and 2nd half earnings can differ by as much as 50

%. On the safe side, I am eyeing for at least 2.6 cents for the full year. An extreme upper bound

will be 4.7 cents.

Commentary on the 1st half 2010 results

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Figure 7: FY 2010 1st Half Commentary Extracts.

It is important to note the following statement:

“Prices and Margins begin to move to more sustainable levels.”

This statement has propelled my further interest and research in this company.

Ten Year Chart

Figure 8: 2000 – 2010 Ten Year Chart

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Figure 9: Fibo Retracement from the last peak

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Establishment of Zagro Vietam Pte Ltd in 25 Aug 2010. ZV manufacture and distribute Zagro

products.

RISK MANAGEMENT

The main business risks that the Group faces when operating in the global market arise from unpredictable climate conditions and outbreak of diseases, changes in environmental laws, and intense competitions.

Climate conditions and diseases

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Zagro Asia

The sales of the Group’s veterinary and agro-chemical products are indirectly affected by outbreak of diseases and adverse climatic conditions which have significant impact on the businesses of our customers - the feed mills, livestock breeders, husbandry, aquaculture farmers, and cash-crops farmers.

Corporate Governance

The Group mitigates these risks with three strategies. Firstly, the Group has a wide customer base, with customers who engage in the breeding of different kinds of livestock and the cultivation of different crop products. The probability of a disease outbreak that attacks more than one kind of or all of livestock is low. Secondly, the Group’s customers are located in different countries. Such geographical diversification confines the threats of these risks to only portions of the Group’s business. Thirdly, the governments and regulatory agencies of the countries of the Group’s customers are generally prompt in taking actions to contain diseases outbreaks and to help their farmers weather tough climatic conditions.

Environmental laws

The Group is vulnerable to changes in environmental laws in the countries in which it operates. Reacting to new findings on products or raw materials, the regulatory authorities may introduce laws or guidelines to prohibit or discourage the use of certain products. The Group follows closely the changes in environmental laws globally and has intimate knowledge of its products. The Group is therefore able to anticipate potential changes in legislation and will be in the position to replace banned products in a short period of time. New products could be brought in quickly when opportunity arises.

Competition

The Group faces competition from multi-national companies and smaller local manufacturers and distributors. The Group aims to achieve its competitive edge over its competitors through the following strengths:

1. Experienced and committed Management team;2. Track record and reputation;3. Comprehensive product range;4. Wide distribution network;5. Registration and know-hows;6. In-house capabilities; and7. Quality.

The Company has also implemented a Crisis Management plan. The plan is managed by the Crisis Management Team headed by the CEO. The plan includes recovery strategies for production, sales, finance, IT, regulatory and all other critical operations, as well as a maintenance programme for all these processes. In addition, the plan specifies a back up command cum backup centre at an alternative site.

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