Next Investors logo grey

ROO continues global expansion with China deal


Published 05-FEB-2018 10:11 A.M.


2 minute read

Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.

In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.

The below articles were written under our previous business model. We have kept these articles online here for your reference.

Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.

Click Here to View Latest Articles

Roots Sustainable Agricultural Technologies Limited (ASX:ROO) has signed an exclusive distribution agreement for the Chinese market with leading international ag-tech integrator Dagan Agricultural Automation.

The deal allows Dagan to exclusively sell Roots’ patented root zone temperature optimisation (RZTO) technology and associated products for an initial three years throughout China that can be extended for two additional years.

The agreement can also be expanded to include other patented technology of ROO such as Irrigation by Condensation (IBC) as well as extending this exclusivity to other geographic markets.

To remain exclusive, the distribution agreement requires achieving minimum sales over a five-year period of US$19 million for ROO technologies. The sales targets are broken down as $US3 million to ROO over the first three years; $US6 million in year-four; and $US10 million in sales in the fifth year.

At the same time, it’s worth noting that this is an early stage play and investors should seek professional financial advice if considering this company for their portfolio.

This is a major deal for ROO as China now accounts for 53 per cent of total global vegetable production, or nearly 550 million tonnes. As explained by ROO CEO and Co-founder, Dr Sharon Devir, “While China is a powerful agricultural producing country, it faces many challenges. It must feed nearly three times the number of people per area unit of land as the rest of the world. There is growing middle class demand for more protein in the diets, and local land and water resource constraints make production increases a challenge.

The agreement follows the initial sale to Dagan in China of US$257,000 (A$323,000) announced previously for the installation and use of Roots’ proprietary RZTO technology to heat and cool the roots of eight crops such as vegetables, herbs and flowers.

It also builds on ROO’s global expansion plans which include the recent distribution announcement for Australia as well as similar current agreements in Southern European and the Middle Eastern markets.

Dr Devir said, “This distribution agreement means that Roots can expect to significantly expand its presence in China, the world’s largest agricultural market. We expect to establish a long term commercial relationship with Dagan to serve our global expansion plans. This distribution agreement with Dagan is a professional endorsement of Roots’ technology and its ability to help address some of the critical agricultural production and pollution challenges this market faces. We have conservative sales targets over the five-year period, allowing for modest sales in the first three years so we can focus on establishing sales networks and showcasing capability, with resulting sales activity increasing in years four and five.”

General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

Publication Notice and Disclaimer

The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.