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Invigor surges 25% as Sun Asia delivers
3 minute read
Invigor Group Ltd (ASX:IVO) through its recently acquired Sun Asia Group, has secured a A$25 million per annum sale agreement for the supply of Australian produce into Asia, resulting in its shares opening 25% higher on Wednesday.
This is the first material contract since Sun Asia was acquired by Invigor on May 29, 2019, an event that resulted in the company’s shares doubling.
Subsequently, news that it has been able to quickly deliver on the anticipated benefits of the acquisition should be equally well received.
The annual sales agreement has been negotiated at healthy margins, and payment for the product will occur before shipment.
In terms of the agreement, the first $A2 million of Australian produce is contracted for delivery in the coming months.
Prominent Indian agricultural group
The customer is Mayuresh Protenz one of India’s largest agriculture companies and it is a division of Indian conglomerate Mayuresh Group.
Mayuresh Protenz has supply agreements with a broad range of Asian customers and Sun Asia will supply products to these customers directly from Australia utilising the Smart Farm solution, comprising products including chick peas, table grapes, stone fruit and citrus.
In what would be an outstanding commercial arrangement, Mayuresh Protenz is considering making Sun Asia its exclusive Australian supplier.
The sourcing of supply of Australian produce is a critical element of the Smart Farm division together with the establishment of distribution systems.
Not only is this extremely significant in terms of generating revenues, the agreement with Mayuresh Protenz is also a show of faith in Sun Asia, demonstrating to Australian producers that the group is able to deliver strong and reliable Asian customers.
Client examines Sun Asia’s ability to upscale
Understandably, given its position as a high profile agricultural group, Mayuresh Protenz thoroughly examined Sun Asia’s supply channels, quality control and relationships with farmers in order to determine its ability to provide seamless delivery of product during and beyond this initial contract.
From a broader perspective, Invigor is making excellent progress in developing distribution channels and systems with Winning Group and their EasyGo Smart Retail division and the potential to utilise WeChat as a marketing channel.
Highlighting the added benefits of Invigor’s technological expertise, chief executive Gary Cohen said, “This Sales Agreement is a pleasing start to Sun Asia Group’s Farm-to-Plate growth strategy and Mayuresh Protenz is an excellent partner that gives us wide distribution channels into multiple Asian markets.
“What attracted them to Sun Asia Group was the excellent relationship that Sun Asia has with Australian producers and the potential that Invigor’s technology can bring to this potential partnership.
“They are a sophisticated food supplier that sees value in our back-end capabilities and payment channels, especially WeChat Pay which is a growing and accepted payment channel for many of their end customers.”
On a standalone basis, this is an extremely promising development for Invigor that could provide further share price momentum, particularly given the prospect of ongoing distribution agreements.