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Asia Bio-Chem Group Corp.(ABC-T: C$1.26)

Update

April 19, 2011

BUY, High Risk*12-month target price: C$2.75

Richard A. Kelertas / (514) 396-0320rkelertas@dundeesecurities.com

Joshua Bridges / (514) 396-0332jbridges@dundeesecurities.com

Unlikely to be Affected by Recent Reports of Corn Restrictions toProcessors: Maintain Buy Recommendation

Risk* High

Exchanges TSX

Fiscal Year End 31-Dec

52-Week Range $1.01 - $1.64

Shares Outstanding (MM) 85.13

Market Capitalization ($MM) $108

Current Dividend $0.00

Current Yield 0%

Book Value 1.08

Price to Book (adj) 1.2xNet debt/total capital 35.8%

Earnings 2010A 2011E 2012E

Revenue ($000) 193,102 286,350 307,212

EBITDA ($000) 21,120 38,815 52,747

EPS 0.14 0.28 0.40

P/E Ratio 8.85 4.50 3.14

Valuation

6.6x

9.8x

$2.75

$ 2.79

1%Discount (premium) to NAV

Target 2011 EV/EBITDA

Target 2011 P/E

Target Price (12 months out)

NAV Valuation

Source: See Note 1

ABC: Price/Volume Chart

Source: Thomson ONE

Company DescriptionAsia Bio-Chem Group Co. Ltd. is a TSX listedcompany with corn starch processing operationsin China. The company is a leadingmanufacturer of corn starch and related by-products corn germ, gluten, and fibre. Asia Bio-Chem sells its 900,000 tonne of corn processingcapacity directly to domestic Chineseintermediaries primarily producing sweeteners.

Event: China Seeks to Curb Corn Demand from Processors

Recently there have been reports of China's decision to restrict corn destinedfor industrial processing in favor of supplying livestock farmers for feed. Theidea would be to curb demand from pharmaceutical supplies and sweetenersin beverages which have outpaced growth in consumption of livestock feed.This has put pressure on ABC's share price out of fear the company will not beable to procure enough corn for its two processing plants. Specifically, reports

suggest:

Processors will be limited from buying more corn than their consumptionlevel in 2009.

Financial institutions will stop providing loans for corn purchases until theend of June.

Local authorities were purportedly ordered to root out processors withsmall or inefficient operations.

Management Sheds Some Light - ABC Not Affected byRestrictions

We spoke with management to get a sense of the extent of the restrictions: There has been a restriction on corn processing in effect for more than a

year. While it is true that new licenses are not being granted, ABC alreadyhas the licenses for its full 900,000 of corn processing capacity and itsupcoming downstream expansion.

Recently, the government issued restrictions to large corn processors(mostly state owned) such as COFCO, Global Starch, China BBCA Group(BBCA), and China Starch. Smaller processors such as Xiwang Sugar,China Sun, and Asia Bio-Chem have not been affected by theserestrictions.

Mr. Zhiping Wang, CEO, does "not see a near term hard impact" on hisbusiness and points to the contract signed in March for over 200,000tonnes of starch as indication business is progressing.

The company does not have any lines of credit that are earmarked solely

for the purchase of corn and would not be affected by the loan restriction.

Any focus on "rooting out" the small and/or inefficient processors would bea net positive for ABC as it would further speed up the rationalization ofthe industry and strengthen the company's pricing power down the line.

Finally, the restrictions are also likely to be contained within areas ofminimal impact to the farmer, further south of ABC's operating areas(where there is far more demand for corn from many different processorsand feed companies).

mailto:rkelertas@dundeesecurities.commailto:jbridges@dundeesecurities.commailto:jbridges@dundeesecurities.commailto:rkelertas@dundeesecurities.com

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Impact - Neutral

While we are comforted by management's comments, we still believe there may be aslight impact to ABC's operations if grain traders are forced to be more selective indistributing corn. ABC does however have an advantage: Due to the general locationof its operations, there is much less competition for corn and ABC's facilities areimportant to the local markets for employment and the local farmer's revenues.

Therefore, we believe the government would be less likely to pursue the same type ofproposed restrictions in northern provinces as they would in the south and centralprovinces.

Valuation

We are not changing our estimates at this time and are maintaining our BUYrecommendation and 12-month target price of C$2.75/share.

Recommendation

We continue to rate Asia Bio-Chem Group Corp. a BUY with a 12-month targetprice of C$2.75/share.

ABC currently trades at 4.3x EV/EBITDA (2012E) compared with 6.9x for its peergroup. On average, ABC is trading at a 41% discount to its peers (Exhibit 1) onEV/EBITDA, P/E, P/CF, and P/B based on 2012 Dundee estimates.

We believe that ABC's superior growth profile and rising demand for corn starch inChina to feed a rapidly expanding food & beverage industry will drive thisundervalued stock higher in the next 12-months.

Out target price of C$2.75 is derived by taking the simple average of our ValuationMatrix and NAV, which yields a price of C$2.79/share which we round to C$2.75.Based on the last price of C$1.25 (intraday), our expected return is 120%.

A summary of our financial model is provided in Exhibit 3.

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Disclosures & DisclaimersDundee Securities Limited is an affiliate of Dundee Corporation.Research Analyst Certification: Each Research Analyst involved in the preparation of this Research Report hereby certifiesthat: (1) the views and recommendations expressed herein accurately reflect his/her personal views about any and all ofthe securities or issuers that are the subject matter of this Research Report; and (2) his/her compensation is not and willnot be directly or indirectly related to the specific recommendations or views expressed by the Research Analyst in thisResearch Report.

U.S. Residents: Dundee Securities Inc. is a U.S. registered broker-dealer and an affiliate of Dundee Securities Limited.Dundee Securities Inc. accepts responsibility for the contents of this Research Report, subject to the terms and limitations asset out above. U.S. residents seeking to effect a transaction in any security discussed herein should contact DundeeSecurities Inc. directly.This Research Report is not an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Theinformation contained in this Research Report is prepared from sources believed to be reliable but Dundee SecuritiesLimited makes no representations or warranties with respect to the accuracy, correctness or completeness of suchinformation. Dundee Securities Limited accepts no liability whatsoever for any loss arising from any use or reliance on thisResearch Report or the information contained herein. Any reproduction in whole or in part of this Research Report withoutpermission is prohibited.Dundee Securities Research is distributed by email, website or hard copy. Dissemination of initial reports and anysubsequent reports is made simultaneously to a pre-determined list of Dundee Securities' Institutional Sales andTrading representative clients and Retail Private Client offices. The policy of Dundee Securities with respect toResearch reports is available on the Internet at www.dundeewealth.com.

The compensation of each Research Analyst/Associate involved in the preparation of this Research Report is basedupon, among other things, the overall profitability of Dundee Securities Limited, which includes the overall profitability ofthe Investment Banking Department.

Dundee Securities LimitedNote 1: All historical data including financial and operating data on the issuer(s) mentioned in this report come from publiclyavailable documents including statutory filings of these issuer(s). Data may also be sourced from Bloomberg, Baseline,Thomson ONE.Informal Comments are analysts informal comments that are posted on the Dundee website. They generally pertain tonewsflow and do not contain any change in analysts' opinion, estimates, rating or target price. Please refer to formalpublished research reports for valuation methodologies used in determining target prices for companies under coverage.Please refer to formal published research reports for company specific disclosures and analyst specific disclosures forcompanies under coverage.Mineral Exploration Watchlist: Dundee Securities Limited has not initiated formal continuing coverage of Mineral ExplorationWatchlist companies. The companies will have recommendations and risk ratings as per our regular rating system, see

Explanation of Recommendations and Risk Ratings for details. Risk ratings will be either Speculative or Venture. SpeculativeRisk rated companies are those companies that have published National Instrument 43-101 or JORC compliant resources orreliable historic resources and/or economic evaluations (scoping, pre-feasibility or feasibility studies) that could reasonablyform the basis of a discounted cash flow analysis. Venture Risk rated companies are those companies that are generally atan earlier stage of exploration and/or development, where no material resource estimate, historic or compliant, exists. Noprice targets will be set for Mineral Exploration Watchlist companies as there are limited financial metrics upon which to basea reasonable valuation. Valuation methodologies and models will not be provided for Mineral Exploration Watchlistcompanies. Dundee clients should consult their investment advisor as to the appropriateness of an investment in thesecurities mentioned.Base Metals & Iron Ore Weekly Dashboard is a compilation of market statistics and media reports that is posted on theDundee website. The Dashboard does not contain any change in the analysts opinion, estimates, ratings or target prices.Please refer to formal published research reports for valuation methodologies used in determining target prices for companiesunder coverage. Please refer to formal published research reports for company specific disclosures and analyst specificdisclosures for companies under coverage.

Presentations do not include disclosures that are specific to analysts and specific to companies under coverage. Please referto formal published research reports for company specific disclosures and analyst specific disclosures for companies undercoverage. Please refer to formal published research reports for valuation methodologies used in determining target prices forcompanies under coverage.Disclosures required under Rule 3400 for sector research reports covering six or more issuers can be found on theDundeeWealth website in Capital Markets, Investments, Dundee Securities Research, see Research Disclosures section.A Research Analyst/Associate involved in the preparation of this report has visited certain material operations of thefollowing issuer(s): Asia Bio-Chem Group Corp. Details are discussed in Asia Bio-Chem Group's initiation report.Dundee Securities Limited has provided investment banking services to Asia Bio-Chem Group Corp. in the past 12months.

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Explanation of Recommendations and Risk RatingsValuation methodologies used in determining the 12-month target price(s) for the issuer(s) mentioned in this report are containedin current and/or prior research. Target Price N/A: a target price is not available if the analyst deems there are limitedfinancial metrics upon which to base a reasonable valuation.BUY: total returns expected to be materially better than the overall market with higher return expectations needed formore risky securities. NEUTRAL: total returns expected to be in line with the overall market. SELL: total returnsexpected to be materially lower than the overall market. TENDER: the analyst recommends tendering shares to a

formal tender offer.*Risk Ratings: risk assessment is defined as Medium, High, Speculative or Venture. Medium: securities with reasonableliquidity and volatility similar to the market. High: securities with poor liquidity or high volatility. Speculative: where thecompany's business and/or financial risk is high and is difficult to value. Venture: an early stage company where thebusiness or financial risk is high, and there are limited financial metrics upon which to base a reasonable valuation.SECURITY ABBREVIATIONS: NVS (non-voting shares); RVS (restricted voting shares); RS (restricted shares); SVS(subordinate voting shares).Ideas of InterestDundee Securities Limited from time to time publishes reports on securities for which it does not and may not choose toprovide continuous research coverage. Such reports are published as Ideas of Interest.Dundee Securities Equity Research Ratings

40%

0%

82%

2%

17%

47%

0%

11%

22%

33%

44%

55%

66%

77%

88%

Buy Neutral Sell

% of companies covered by Dundee SecuritiesCorporation in each rating category

% of companies within each rating category forwhich Dundee Securities Corporation or itsaffiliates have provided investment bankingservices for a fee in the past 12 months.

March 31, 2011

Source: Dundee Securities Ltd.