Le Gaga Holdings (NASDAQ:GAGA)

HONG KONG, May 22, 2013 (GLOBE NEWSWIRE) -- Le Gaga Holdings Limited (Nasdaq:GAGA) ("Le Gaga" or the "Company"), a leading greenhouse vegetable producer in China, announced today that its board of directors has received a non-binding proposal letter dated May 21, 2013 from Ms. Na Lai Chiu, the chairman of the Company's board of directors, Mr. Shing Yung Ma, a director and the chief executive officer of the Company, and SC China Holding Limited, a company indirectly wholly owned by Mr. Neil Nanpeng Shen, a director of the Company, on behalf of funds managed and/or advised by it (together with its and their affiliates, Ms. Na Lai Chiu and Mr. Shing Yung Ma, the "Consortium") to acquire all of the outstanding shares of the Company not currently owned by the Consortium in a "going private" transaction (the "Transaction") at a price of US$4.01 in cash per American Depositary Share of the Company ("ADS," each ADS representing 50 ordinary shares of the Company), or US$0.0802 in cash per ordinary share of the Company, as the case may be.

According to the proposal letter, the Consortium intends to form an acquisition company to implement the Transaction, and has held discussions with certain financial institutions that have expressed interest in financing the Transaction. A copy of the proposal letter is attached hereto as Exhibit A.

The Company's board of directors has formed a special committee consisting of three independent directors (the "Special Committee") to consider this proposal. The Company expects that the Special Committee will retain a financial advisor and legal counsel to assist it in its work. The Company cautions its shareholders and others considering trading in its securities that the Company has just received the non-binding proposal and has not made any decisions with respect to the Company's response to the proposal. There can be no assurance that any definitive offer will be made, that any agreement will be executed or that this or any other transaction will be approved or consummated.

Weil, Gotshal & Manges LLP is acting as U.S. counsel to the Consortium. Latham & Watkins is acting as the Company's U.S. counsel.

Quarter Ended December 31, 2012

• Revenue decreased by 31.9%, to RMB102.7 million (US$16.5 million) for Q2 FY2013, compared to RMB150.8 million a year ago.
   
• Profit for the period decreased by 1.6%, to RMB65.7 million (US$10.5 million) for Q2 FY2013, compared to RMB66.8 million a year ago.
   
• Adjusted profit for the period² (non-IFRS measure) decreased by 49.1% to RMB32.8 million (US$5.3 million) for Q2 FY2013, compared to RMB64.5 million a year ago. A reconciliation of the adjusted profit for the period to profit for the period determined in accordance with IFRS is set forth in Appendix V.
   
• Adjusted EBITDA³ (non-IFRS measure) decreased by 36.0% to RMB54.5 million (US$8.7 million) for Q2 FY2013, compared to RMB85.1 million a year ago. A reconciliation of the adjusted EBITDA to profit for the period determined in accordance with IFRS is set forth in Appendix VI.
   
• Basic and diluted earnings per share was RMB2.89 cents (0.46 US cents) and RMB2.88 cents (0.46 US cents), respectively, for Q2 FY2013. Basic and diluted earnings per ADS⁴ was RMB144.5 cents (23.19 US cents) and RMB144.0 cents (23.11 US cents), respectively, for Q2 FY2013.

Mr. Shing Yung Ma, the CEO of Le Gaga, commented, "In October we completed the planting of solanaceous products in our farm bases. Harvesting of solanaceous products commenced from the end of November. Market prices rose steadily in November and December. Volumes and quality of products in our greenhouses were in line with our expectations. However, we postponed part of our harvest originally scheduled for December until January in anticipation of a further increase in market prices leading up to the Chinese New Year holiday, which fell in the second week of February. In contrast, during the previous winter season we accelerated our harvest activities towards the end of the December quarter as prices rose rapidly in the month of December in anticipation of the Chinese New Year holiday, which fell in the third week of January last year. A stronger focus on off-season solanaceous production also means that we have reduced the area of short-cycle leafy and cruciferous vegetables, planted and harvested during the period. This reduces leafy and cruciferous revenue in the second quarter but increases expected revenue from solanaceous vegetables during the entire winter season.

We are spending much effort to further develop our greenhouse production system. This includes upgrading existing greenhouses, constructing additional nursery greenhouses and trials with soil-less production techniques for peppers and tomatoes. Favorable weather allowed us to make good progress on our greenhouse construction projects, as we added over 600 mu of greenhouses during the quarter. We have also added a substantial area of new arable land during the quarter in line with our land expansion plans."

Mr. Auke Cnossen, the CFO of Le Gaga, added, "Annual revenue per mu and profit continue to be our key performance indicators. This means continued specialization in off-season production of greenhouse vegetables such as peppers and tomatoes. While production during the summer months would result in higher volumes but lower prices, production during the winter months results in lower volumes but significantly higher prices. Four of our major expenses, including labor, fertilizer, packing and transportation, are all directly correlated to production volume. Utilizing our production capacity for off-season (winter months) production, would maximize both revenue and profit margins.

A large positive net impact of biological assets fair value adjustment was recorded for the period. The large net impact was due to an increase in area planted with high value solanaceous crops in our greenhouses at the end of December as compared to the end of September. Despite lower revenue, our operating cash flow was strong as a result of a lower receivables balance on December 31 as compared to September 30. Although market prices were lower in December 2012, as compared to December 2011, our average selling prices improved due to a more favorable product mix and better quality. The use of better packing materials further increased average selling prices."

Highlights of the Quarter Ended September 30, 2012

• Revenue decreased by 15.8%, to RMB86.8 million (US$13.8 million) for Q1 FY2013, compared to RMB103.1 million a year ago.
   
• Profit for the period increased by 16.1%, to RMB101.4 million (US$16.1 million) for Q1 FY2013, compared to RMB87.3 million a year ago.
   
• Adjusted profit for the period² (non-IFRS measure) decreased by 64.1% to RMB11.7 million (US$1.9 million) for Q1 FY2013, compared to RMB32.6 million a year ago. A reconciliation of the adjusted profit for the period to profit for the period determined in accordance with IFRS is set forth in Appendix V.
   
• Adjusted EBITDA³ (non-IFRS measure) decreased by 24.3% to RMB34.8 million (US$5.5 million) for Q1 FY2013, compared to RMB45.9 million a year ago. A reconciliation of the adjusted EBITDA to profit for the period determined in accordance with IFRS is set forth in Appendix VI.
   
• Basic and diluted earnings per share were RMB4.44 cents (0.71 US cents) for Q1 FY2013. Basic and diluted earnings per ADS⁴ were RMB222.0 cents (35.32 US cents) for Q1 FY2013.

Mr. Shing Yung Ma, the CEO of Le Gaga, commented, "During the first fiscal quarter we have spent substantial efforts preparing for the upcoming solanaceous season. Planting of solanaceous products commenced at the end of August in Fujian and in September in Guangdong. We are also spending much effort to further develop our greenhouse production system. This includes upgrading existing greenhouses, constructing additional nursery greenhouses and trials for new production techniques for peppers and tomatoes.

Unlike the first half of calendar year 2012, the weather across China was relatively mild between July and September. Normally, July through September is the typhoon season in Southern China. However, we have not experienced any typhoons in Fujian and Guangdong province this year. Despite the mild weather, which resulted in ample vegetable supply to the market, thus lacking the driver for higher overall market prices, our average selling price improved due to more favorable product mix. Favorable weather allowed us to make good progress on our greenhouse construction projects, as we added over 1,000 mu of greenhouses during the quarter and are on track for our targeted greenhouse area for the winter season."

Mr. Auke Cnossen, the CFO of Le Gaga, added, "Continued specialization in off-season production of greenhouse vegetables such as peppers and tomatoes and increasing greenhouse coverage, resulted in lower revenue in the first fiscal quarter as we are planting such products from August through October, with harvest typically commencing in November. A stronger focus on off-season production also means that we concentrate the necessary land resting and sanitation during the low season (July through September), which further reduces our ability to generate revenue during the first fiscal quarter.

Maximizing our annual revenue per mu and profit continues to be our key performance indicator. While production during the summer months would result in higher volumes but lower prices, production during the winter months results in lower volumes but significantly higher prices. As our labor, packing and transportation expenses are all strongly correlated to production volume, utilizing our production capacity for off-season (winter months) production, would maximize both revenue and profit margins.

A large positive net impact of biological assets fair value adjustment resulted in a strong increase in net profit for the period. The large net impact was due to the switch from low value leafy crops grown during the summer months to higher value solanaceous crops grown during the winter months. Our operating cash flow declined compared to last year as a result of lower revenue, higher inventory and plantation costs as we started the solanaceous production season and higher receivables."

Recent Developments

The Company reviews the productivity and efficiency of the utilization of its resources for each of its existing farms on a regular basis. We have decided to dispose of farms with a total land area of 2,242 mu during the three-month period ended September 30, 2011. Up to September 30, 2012, we have transferred/returned a total land area of 1,543 mu. We are currently in the process of returning the remaining 699 mu of farm land to the landlords.

Business Outlook for the Fiscal Year Ending June 30, 2013

The Company re-affirms its previous revenue guidance and estimates that its revenue for the fiscal year ending June 30, 2013 will be between RM600 million and RMB630 million, representing a year over year growth rate for the 12 months ending June 30, 2013 compared to the 12 months ended June 30, 2012 of approximately 15.5% to 21.3%. This forecast reflects the Company's current and preliminary view, which is subject to change.

Highlights of the Three Months Ended June 30, 2012

• Revenue remained stable from RMB123.3 million for the three months ended June 30, 2011 compared to RMB123.2 million (US$19.4 million) for the three months ended June 30, 2012.
• Profit for the period was RMB12.6 million for the three months ended June 30, 2011, as compared to a loss for the period of RMB8.5 million (US$1.3 million) for the three months ended June 30, 2012.
• Basic and diluted loss per share was RMB0.37 cents (0.06 US cents) for the three months ended June 30, 2012. Basic and diluted loss per ADS⁴ was RMB18.5 cents (2.91 US cents) for the three months ended June 30, 2012.

Mr. Shing Yung Ma, the Chairman and CEO of Le Gaga, commented, "During the three months ended June 30, 2012 we have completed the annual cycle of solanaceous plantation. As a result of the poor weather conditions from January through May, selling prices were very strong during the months of April and May but sales volume significantly down. As a result of continued poor weather conditions in April and May, the greenhouse construction experienced delay and the area of land in operation during the period and thus our revenue was lower than expected. Very low prices during the month of June further contributed to lower than expected revenue for the period.

As of June 30, 2012 we still had a large area of land under construction and land improvement and greenhouse construction on these lands are on-going. In preparation for the next annual cycle of solanaceous plantation, we are spending much effort to further develop our greenhouse production system. This includes adding additional ventilation capabilities to existing greenhouses, upgrading and construction of additional nursery greenhouses and initiating trials for new production techniques for peppers and tomatoes. Due to our increased focus on off-season solanaceous vegetables, we will see a further increase in seasonality of our revenue. We are concentrating our land resting and sanitation in the summer months and more planting of solanaceous products in August and September will further reduce our ability to generate revenues during those months. As a result, the winter months will account for an even higher percentage of our annual revenue."

Mr. Auke Cnossen, the CFO of Le Gaga, added, "Our loss for the three months ended June 30, 2012 resulted from a negative net impact of biological assets fair value adjustment. The negative net impact was due to the switch from high value crops on our field during the winter months to lower value crops grown during the summer, more pronounced seasonality, and improvements in planting methods and schedules which resulted in a larger gain recognized in prior periods. The low vegetable market prices at the end of June further reduced the value of crops on land at the end of the period and thus increased the fair value change. Although our total revenue did not increase due to a decrease in average operating land and lower prices in June, revenue per mu, a key performance indicator for our company, increased slightly compared to last year due to product mix improvement. Despite the increased size of our operations compared to a year ago, which increased our fixed cost, our Adjusted Cost of Inventories Sold decreased as a percentage of revenue and our Adjusted EBITDA margin remained stable."

Fourth Quarter 2012 Results

• Revenue increased by 17.3% from RMB121.2 million for Q4 FY2011 to RMB142.2 million (US$22.6 million) for Q4 FY2012.
• Basic and diluted loss per share was RMB0.17 cents (0.03 US cents) for Q4 FY2012.  Basic and diluted loss per ADS⁴ was RMB8.5 cents (1.35 US cents) for Q4 FY2012 vs earnings of $0.06 in Q4 2011

Mr. Shing Yung Ma, the Chairman and CEO of Le Gaga, commented, "We are pleased with our performance in the fourth fiscal quarter and full fiscal year 2012. The fourth quarter was characterized by poor weather conditions, with a large number of rainy days. With our greenhouses, not only could we mitigate the adverse weather effects as opposed to open field farming, we were also able to take advantage of the higher market prices as compared to last year because market supply decreased. As a result, our revenue per mu increased from RMB5,942 to RMB7,205. Continued product mix upgrades further contributed to higher revenue per mu. Although we benefitted in terms of pricing, our greenhouse construction experienced a delay as a result of the large number of rainy days during the quarter.

Our performance in fiscal year 2012 demonstrates the competitive advantage of our greenhouse business model as we achieved a significant increase in average selling prices. Our greenhouses provide the environment for improved quality of our products, allow us to upgrade our product mix as we are able to grow more solanaceous vegetables, and allow us to grow more off-season products (primarily solanaceous). Our greenhouses allowed us to capture the high prices during the off-season, as we can supply when open field farmers cannot. Going forward, we intend to continue our focus on high quality off-season products and further upgrade our product mix, in particular in the solanaceous product category by further expanding production of high-end and specialty tomato and pepper varieties. As a result we may see a further increase in seasonality of our revenues, with the winter months accounting for an even higher percentage of our total revenue for the year."

Business Outlook for the fiscal quarter ending June 30, 2012

The Company estimates that its revenue for the first fiscal quarter ending June 30, 2012 will be between RMB135 million and RMB140 million, representing a year over year growth rate of approximately 9.5% to 13.5%. This forecast reflects the Company's current and preliminary view, which is subject to change.

Mr. Auke Cnossen, the CFO of Le Gaga, added, "Our loss in the fourth quarter resulted from a negative net impact of biological assets fair value adjustment. The negative net impact was due to the switch from high value crops on our field during the winter months to lower value crops grown during the summer, more pronounced seasonality and improvements in planting methods and schedules which resulted in a larger gain recognized in prior periods of the fiscal year. More greenhouses resulted in strong improvement in key performance indicators, i.e., revenue per mu, adjusted profit and operating cash flow. Although our increased seasonality resulted in lower margins (before the net impact of biological assets fair value adjustment) in the second quarter, which is our low season, we achieved higher margins in the third and fourth quarter. Our margins and profitability for the fourth quarter improved significantly compared to last year, as we enjoyed high increase in ASP with a relatively stable production volume, resulting in lower material and labor costs as a percentage of revenue. Furthermore, we have generated continued strong operating cash flow, as a result of the significant volume of sales in December for which cash was collected in the fourth quarter."

Third Quarter Results

• Revenue increased by 41.0%, from RMB106.9 million for Q3 FY2011 to RMB150.8 million (US$24.0 million) for Q3 FY2012.
• Profit for the period increased by 48.5%, from RMB45.0 million for Q3 FY2011 to RMB66.8 million (US$10.6 million) for Q3 FY2012.
• Adjusted profit for the period² (non-IFRS measure) increased by 54.4%, from RMB41.8 million for Q3 FY2011 to RMB64.5 million (US$10.2 million) for Q3 FY2012.
• Basic and diluted earnings per share was RMB2.92 cents (0.46 US cents) and RMB2.91 cents (0.46 US cents), respectively, for Q3 FY2012. Basic and diluted earnings per ADS⁴ was RMB146.0 cents (23.20 US cents) and RMB145.5 cents (23.12 US cents), respectively, for Q3 FY2012.

Mr. Shing Yung Ma, the Chairman and CEO of Le Gaga, commented, "We are pleased with our performance in the third fiscal quarter. The third quarter demonstrates the competitive advantage of our greenhouse business model as we achieved a significant increase in average selling prices. Our greenhouses lead to improved quality of our products and allow us to upgrade our product mix as we are able to grow more solanaceous vegetables, including more specialty varieties. Average selling prices further benefitted from enhanced cultivation know-how leading to better quality and market inflation. Our greenhouses allowed us to capture the high prices at the end of the quarter, which were a result of the cold weather in South China, as our crops are better protected compared to open field farming. Another factor contributing to higher selling prices is our focus on packaging for developing a brand name in the wholesale markets and among our institutional customers. Going forward, we will continue to focus on high quality off-season products and further upgrade our product mix, in particular in the solanaceous product category, in which we plan to further expand production of high-end and specialty tomato and pepper varieties."

Mr. Auke Cnossen, the CFO of Le Gaga, added, "In the third quarter we see that more greenhouses resulted in strong improvement in key performance indicators, i.e. revenue per mu and adjusted profit. Although our increased seasonality resulted in lower margins in the second quarter, which is our low season, we achieved much higher margins in the third quarter. We have generated continued strong operating cash flow, particularly in light of a significant volume of sales in December for which collection of cash were not fully reflected in the third quarter operating cashflow. We have added additional farmland during the third quarter and have started land improvement and greenhouse construction on these farmlands. Our new farm in Putian, Fujian Province, is fully in production and is already showing a productivity level comparable to our other farms, which is a testimony to our effective training and development of farm managers and workers."

Business Outlook for the fiscal quarter ending March 31, 2012

The Company estimates that its revenue for the fourth fiscal quarter ending March 31, 2012 will be between RMB140 million and RMB150 million (representing a full year revenue of RMB 517 million to RMB 527 million for fiscal year ending March 31, 2012), representing a year over year growth rate of approximately 15% to 24% (representing a full year growth rate of approximately 27 to 30% for the fiscal year ending March 31, 2012). This forecast reflects the Company's current and preliminary view, which is subject to change.

Second Quarter 2012 Results

• Revenue increased by RMB7.8 million, or 8.2%, from RMB95.3 million for Q2 FY2011 to RMB103.1 million (US$16.2 million) for Q2 FY2012.
• Basic and diluted earnings per share was RMB3.81 cents (0.60 US cents) and RMB3.71 cents (0.58 US cents), respectively, for Q2 FY2012. Basic and diluted earnings per ADS was RMB190.5 cents (29.87 US cents) and RMB185.5 cents (29.08 US cents), respectively, for Q2 FY2012.

Mr. Shing Yung Ma, the Chairman and CEO of Le Gaga, commented, "We are pleased with our performance in the second fiscal quarter, which was characterized by nice weather.  Normally, the second fiscal quarter is the typhoon season in Southern China. However, we have not experienced any typhoons in Fujian and Guangdong provinces this year during the months of July through September. The weather has, therefore, been particularly favorable for greenhouse construction and we have thus made good progress of completing construction of additional greenhouses. At the same time however, our pricing has remained relatively flat compared to the second quarter last year. Despite improvements in our product quality and product mix, the good weather resulted in larger supply to the market, thus lacking the driver for higher overall market prices."

Mr. Auke Cnossen, the CFO of Le Gaga, added, "In the second quarter we have again seen strong operating cash flow. Over the first six months of financial year 2012 we have generated RMB135 million in operating cash flow. Strong operating cash flow directly resulted from our investment in greenhouses. We are seeing increased seasonality due to a higher proportion of greenhouses, resulting in more off-season production of solanaceous vegetables in the winter months. In the summer months, greenhouses provide less yield advantage and prices are lower and as such, we concentrate the necessary land resting and sanitation during the low season (July through September). The large land area dedicated to solanaceous products, which are planted mostly during the month of September, further reduces the revenue in the second fiscal quarter. As a result, our operating margin is lower during the second fiscal quarter due to less competitive advantage from greenhouses, given that the depreciation and amortization charged does not fully reflect the economic benefit of farmland infrastructure on it."

Business Outlook for the fiscal quarter ending December 31, 2011

The Company estimates that its revenue for the third fiscal quarter ending December 31, 2011 will be between RMB140 million and RMB150 million, representing a year over year growth rate of approximately 31% to 40%.  This forecast reflects the Company's current and preliminary view, which is subject to change.

First Quarter 2012 Results

• Revenue increased by RMB40.0 million, or 48.0%, from RMB83.3 million for the three months ended June 30, 2010 to RMB123.3 million (US$19.1 million) for the three months ended June 30, 2011.
• Basic and diluted earnings per share was RMB0.55 cents (0.09 US cents) and RMB0.53 cents (0.08 US cents), respectively, for the three months ended June 30, 2011. Basic and diluted earnings per ADS⁴ was RMB27.5 cents (4.25 US cents) and RMB26.5 cents (4.10 US cents), respectively, for the three months ended June 30, 2011 vs (10.0 US cents) in First quarter 2011.

Mr. Shing Yung Ma, the Chairman and Chief Executive Officer of Le Gaga, commented, "We are very pleased with our performance in the first fiscal quarter. Our farm base development is on track with various construction projects at different farm bases. Most of the construction activity in our new Xianyou and Putian farm bases is approaching completion and the farm bases will be ready for solanaceous production during the off-season winter months. We are also working on a number of initiatives to further improve our greenhouse vegetable production model. Training and development of our farm managers remain priorities for us. Furthermore, we have recently added a new independent director to our board of directors and established a corporate governance and nominating committee."

Mr. Auke Cnossen, the Chief Financial Officer of Le Gaga, added, "As a result of our increasing greenhouse coverage, solanaceous products accounted for a larger percentage of total production in the first fiscal quarter and revenue per mu has increased further.  Solanaceous vegetables typically have higher ASP compared to lower value leafy vegetables and are particularly well suited for greenhouse production. More solanaceous production increases the seasonality of our revenues but also increases our annual productivity, with higher production during the winter months.  More land preparation for solanaceous planting activities during August and September may result in the second fiscal quarter accounting for a lower percentage of annual sales compared to other quarters.  Furthermore, we continue to see land rental rates for new land increase at a rapid pace. This trend further validates our focus on increasing productivity, as measured in revenue per mu, through our greenhouse business model."

Business Outlook for the fiscal quarter ending September 30, 2011

The Company estimates that its revenue for the second fiscal quarter ending September 30, 2011 will be between RMB100 million and RMB110 million, representing a year over year growth rate of approximately 5% to 15%.  

• Revenue increased by RMB33.8 million, or 38.7%, from RMB87.4 million for the three months ended March 31, 2010 to RMB121.2 million (US$18.5 million) for the three months ended March 31, 2011. Revenue increased by RMB126.3 million, or 45.0%, from RMB280.5 million in FY2010 to RMB406.8 million (US$62.1 million) in FY2011.
 
• Results from operating activities increased by RMB19.5 million, from RMB1.5 million for the three months ended March 31, 2010 to RMB21.0 million (US$3.2 million) for the three months ended March 31, 2011. Results from operating activities increased by RMB23.5 million, or 21.1%, from RMB111.7 million in FY2010 to RMB135.2 million (US$20.7 million) in FY2011.
 
• Profit for the period increased by RMB17.6 million, from RMB0.7 million for the three months ended March 31, 2010 to RMB18.3 million (US$2.8 million) for the three months ended March 31, 2011. Profit for the year increased by RMB23.2 million, or 21.0%, from RMB110.2 million in FY2010 to RMB133.4 million (US$20.4 million) in FY2011.
 
• Adjusted profit for the period (Non-IFRS measure, defined as profit for the period before the net impact of biological assets fair value adjustments and excluding the effects of non-cash share-based compensation and the initial public offering expenses charged to the income statement) increased by RMB14.1 million, or 50.9%, from RMB27.7 million for the three months ended March 31, 2010 to RMB41.8 million (US$6.4 million) for the three months ended March 31, 2011. Adjusted profit for the year increased by RMB52.9 million, or 53.4%, from RMB98.9 million in FY2010 to RMB151.8 million (US$23.2 million) in FY2011. A reconciliation of the adjusted profit for the period/year to profit for the period/year determined in accordance with IFRS was set forth in Appendix V.
 
• Adjusted EBITDA (Non-IFRS measure, defined as EBITDA (earnings before net finance income (costs), income tax expense, depreciation and amortization), as further adjusted to exclude the effects of non-cash share-based compensation, the net impact of biological assets fair value adjustment and the initial public offering expenses charged to the income statement) increased by RMB19.2 million, or 49.8%, from RMB38.6 million for the three months ended March 31, 2010 to RMB57.8 million (US$8.8 million) for the three months ended March 31, 2011. Adjusted EBITDA increased by RMB65.6 million, or 48.4%, from RMB135.6 million in FY2010 to RMB201.2 million (US$30.7 million) in FY2011.  A reconciliation of the adjusted EBITDA to profit for the period/year determined in accordance with IFRS was set forth in Appendix VI.
 
• Basic and diluted earnings per share was RMB0.80 cents (0.12 US cents) and RMB0.77 cents (0.12 US cents), respectively, for the three months ended March 31, 2011. Basic and diluted earnings per ADS2 was RMB40.0 cents (6.11 US cents) and RMB38.5 cents (5.88 US cents), respectively, for the three months ended March 31, 2011. 
 
• Basic and diluted earnings per share was RMB6.68 cents (1.02 US cents) and RMB6.46 cents (0.99 US cents) in FY2011, respectively, representing an increase of 2.5% and 0.5%, respectively, from those in FY2010. Basic and diluted earnings per ADS was RMB334.0 cents (51.01 US cents) and RMB323.0 cents (49.33 US cents) in FY2011, respectively, representing an increase of 2.5% and 0.5%, respectively, from those in FY2010.

We believe that our current levels of cash and cash flows from operations and bank borrowings, combined with the net proceeds from this offering, will be sufficient to meet our anticipated cash needs for at least the next 24 months.

We may also need additional cash resources in the future if we find and wish to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions

Third Quarter Results:

• Revenue increased by RMB 33.5 million, or 45.6%, from RMB 73.4 million for the three months ended December 31, 2009 to RMB 106.9 million (US $16.2 million) for the three months ended December 31, 2010.
• Profit for the period increased by RMB 26.1 million, or 138.1%, from RMB 18.9 million for the three months ended December 31, 2009 to RMB 45.0 million (US $6.8 million) for the three months ended December 31, 2010.
• Basic and diluted earnings per ADSwas RMB 104.5 ($15.83 US ) and 100.5 cents ($15.23 US ), respectively, for the three months ended December 31, 2010, representing an increase of 85.0% and 81.1%, respectively, from those in the three months ended December 31, 2009.

Mr. Shing Yung Ma, chairman and chief executive officer of Le Gaga, commented, "We are very pleased with our performance in the third fiscal quarter as we achieved record total revenue, adjusted profit and revenue-per-mu. Our greenhouse vegetable cultivation business model and cultivation know-how continue to deliver strong results. Since our IPO, we have continued to focus on our greenhouse and arable land expansion. We will continue to invest in research and development to enhance our cultivation know-how as well as in the development of our sales, marketing and distribution network. Furthermore, training and development of our farm managers remains an investment priority for us."

• The Company estimates that its revenue for the fourth fiscal quarter ending March 31, 2011 will be between RMB 105 million and RMB 115 million (representing a full year revenue of RMB 390 million to RMB 400 million for fiscal year ending March 31, 2011), representing a year over year growth rate of approximately 20.1% to 31.5% (representing a full year growth rate of approximately 39.2% to 42.8% for fiscal year ending March 31, 2011).  

Highlights of the Quarter Ended September 30, 2010

• Revenue increased by RMB 29.5 million, or 44.8%, from RMB 65.8 million for the three months ended September 30, 2009 to RMB 95.3 million (US$14.2 million) for the three months ended September 30, 2010.

• Results from operating activities decreased by RMB 17.0 million, or 27.1%, from RMB 62.7 million for the three months ended September 30, 2009 to RMB 45.7 million (US$6.8 million) for the three months ended September 30, 2010.

• Profit for the period decreased by RMB 15.8 million, or 25.3%, from RMB 62.4 million for the three months ended September 30, 2009 to RMB 46.6 million (US$7.0 million) for the three months ended September 30, 2010. 

• Adjusted profit for the period (Non-IFRS measure, defined as profit for the period before the net impact of biological assets fair value adjustments and excluding the effects of non-cash share-based compensation and the initial public offering expenses charged to the income statement) increased by RMB 12.1 million, or 45.3%, from RMB 26.7 million for the three months ended September 30, 2009 to RMB 38.8 million (US$5.8 million) for the three months ended September 30, 2010. A reconciliation of the adjusted profit for the period to profit for the period determined in accordance with IFRS was set forth in Appendix V.

• Adjusted EBITDA (Non-IFRS measure, defined as EBITDA (earnings before net finance income (expense), income tax expense (benefit), depreciation and amortization), as further adjusted to exclude the effects of non-cash share-based compensation, the net impact of biological assets fair value adjustments and the initial public offering expenses charged to the income statement) increased by RMB 14.0 million, or 39.8%, from RMB 35.0 million for the three months ended September 30, 2009 to RMB 49.0 million (US$7.3 million) for the three months ended September 30, 2010. A reconciliation of the adjusted EBITDA to profit for the period determined in accordance with IFRS was set forth in Appendix VI.

• Basic and diluted earnings per share was RMB 2.59 and 2.56 cents, respectively, for the three months ended September 30, 2010, representing a decrease of 30.4%, in each case, from the three months ended September 30, 2009.

• Basic and diluted earnings per ADS^[2] was RMB 129.5 and 128.0 cents, respectively, for the three months ended September 30, 2010, representing a decrease of 30.4%, in each case, from the three months ended September 30, 2009.

• Cash generated from operating activities increased by RMB 2.9 million, or 7.9%, from RMB 37.5 million for the three months ended September 30, 2009 to RMB 40.4 million (US$6.0 million) for the three months ended September 30, 2010.

Mr. Shing Yung Ma, chairman and chief executive officer of Le Gaga, commented, "We are very pleased with our performance in the second fiscal quarter as we achieved record total revenue, adjusted profit, revenue per mu and adjusted profit per mu. Our strong revenue growth and operational performance in the second fiscal quarter demonstrates the strength of our greenhouse vegetable cultivation business model and strong cultivation know-how."

Mr. Ma further commented, "Our revenue growth was a direct result of our expanding greenhouse area, improving cultivation know-how, and ability to leverage our comprehensive information database. Following our successful IPO on the NASDAQ, we have continued to strengthen our brand and recognition among our customers and provide more high quality and safe vegetables to an increasing number of consumers. Going forward, we will continue to focus on expanding our greenhouse coverage and arable land area, invest in research and development to enhance our cultivation know-how, expand our sales, marketing and distribution network, strengthen our brand awareness across all of our sales channels and invest in the development of our farm managers."

Mr. Auke Cnossen, chief financial officer of Le Gaga, added, "As demonstrated by our solid financial performance this quarter, we are excited about the large growth opportunities ahead of us. With our solid cash on hand and strong operating cash flows, we are confident that we have enough capital to execute our expansion plans. We will continue to expand our greenhouse area in Fujian and Guangdong Provinces while expanding our sales and distribution into the Yang Tze River Delta. We are on track to add the required greenhouse area and arable land to achieve our revenue and profit growth targets.

Business Outlook for the fiscal quarter ended December 31, 2010

The Company estimates that its revenue for the third fiscal quarter will be between RMB 98 million and RMB 108 million, representing a year over year growth rate of approximately 33.5% to 47.1%.

Le Gaga Holdings Limited plans for Initial Public Offering

Company Snapshot:

One of the largest greenhouse vegetable producers in China

Industry Snapshot:

• Agriculture is a very important industry in China, contributing 18.1% of China’s GDP in 2009. According to Frost & Sullivan, farming is the largest component of the agriculture industry, contributing 47.7% of the sector outpu
• The farming industry in China includes the farming of vegetables, grain, fruit, tea, cotton and other crops. The following graph sets forth the total output of farming compared to the total output of other agriculture industry sectors for the periods indicated.

• China is the largest producer of vegetables by volume globally. In 2009, China vegetable production reached RMB875.8 billion and this amount is expected to increase to RMB1,286.5 billion in 2014. The chart below sets forth the total vegetable production volume in China for the periods indicated:

Use Of proceeds:

We estimate that the net proceeds to us from the sale of 9,200,000 ADSs we are offering will be approximately $68.8 million. We intend to use the net proceeds we receive from this offering for the following purposes:

• approximately $62.0 million to fund the construction and improvement of our greenhouses and other agricultural facilities
• the balance to fund the enhancement of our research and development capability, including the development of our information system.

Underwriter(s):

• BofA Merrill Lynch
• UBS Investment Bank
• Piper Jaffray
• Oppenheimer & Co.

Proposed offering price: $7.50 to $9.50

Post IPO Share Calculation: (Using a 50 to 1 Ordinary to ADS conversion ratio).

•  35,598,484: Pre IPO fully diluted share count used in EPS calculation.  
•    9,200,000: Newly issued ADS shares (Plus 1,671,599 from selling shareholders)

GeoTeam® best effort calculation of total post IPO ADS count to be used in EPS calculations, assuming full conversions and a Ordinary to ADS conversion ratio of 50 to 1: 48,798,484

Financial Snapshot:

• Our revenue increased from RMB153.6 million in the fiscal year ended March 31, 2008 to RMB199.0 million in the fiscal year ended March 31, 2009 and to RMB280.5 million ($41.4 million) in the fiscal year ended March 31, 2010.

• Our revenue increased from RMB53.8 million in the three months ended June 30, 2009 to RMB83.3 million ($12.3 million) for the same period in 2010.

• Adjuststed net income for fiscal year ended March 31, 2010 increased to RMB93.1 million ($13.7 million) from RMB61.7 million. 

• Adjuststed net income for three months ended June 30,, 2010 increased to RMB25.4 million ($3.8 million) from RMB15.8 million.