Chinese anti-counterfeiting company set for backdoor listing

Source: Australian Financial Review; Published: Monday, 2nd June 2014

AUV Enterprises Limited is set for a backdoor listing through the shell company Australis Mining Corporation, a former sapphire miner that failed and was de-registered in April 2010. AUV Enterprises will act as the Australian parent of Hong Kong-based, China-focused anti-counterfeiting company YPB Systems.

YPB is an acronym for “You Pin Bao”, which means “Excellent Brand Protection”. The company, founded by Australian entrepreneur John Houston in 2000, sells security tracers and scanner software to business and government agency clients in China wanting to protect their brand against counterfeiting.

Mr Houston said YPB’s patented fluorescence technology gives it an edge as counterfeiters become better at copying holograms and anti-tamper seals. The YPB anti-counterfeit system can be added to products or packaging at a cost of less than one-tenth of US1¢ per item. Near-term growth plans centre on the planned roll-out of consumer Apple and Android smartphone apps in the second half of 2014.

“The apps will be marketed to Chinese consumers who want to protect themselves from lower-quality counterfeit product,” Mr Houston said.

YPB is one of 75 companies licensed to provide anti-counterfeiting solutions in China. Since inception, the company has operated at a loss. Its most valuable assets are the patented technology it purchased from a Chinese university research unit.

The company has no plans to distribute dividends in the foreseeable future as it focuses on reinvesting any available cash in growth.

As an ASX-listed company operating in China, reported earnings will be subject to fluctuations in the exchange rate between the Australian dollar and China’s renminbi.

Robert Whitten of accounting firm William Buck was appointed independent chairman of the company formerly known as Australis Mining Corporation about 18 months ago after it came out of a deed-of-company arrangement and brokered the deal with YPB to form AUV.

Mr Houston will assume the role of AUV Enterprises executive chairman post-listing and control between 53 per cent and 62 per cent of the stock.

The initial public offering to raise a minimum of $3 million to a maximum of $6 million through an issue of up to 30 million shares priced at 20¢ each is scheduled for July 11. The offer is due to open on June 5 and close on June 30.

If the full subscription is reached, the company will have a market capitalisation of $22.6 million when it debuts, with net assets of $16.6 million, net liabilities of $1.4 million and $13.2 million in equity. Boutique Sydney-based firm KS Capital is acting as corporate adviser on the deal.