Sino Grandness: UOB Kay Hian says Buy BUY Sino Grandness Food for its expected strong earnings for FY11. Grp reports earnings this Thursday, and house expects a boost in top-line rev, improvement in gross margins and 50% yoy growth in net profit. TP of $0.70 translates into 4.0x 2012F PE, pegged at a 65% discount to Singapore-listed peers’ average. SGF is trading at 4.9x 2010 PE and 3.5x 2011F PE vs consensus earnings CAGR of 34.2% between FY10-12E (PEG of 0.10).
Going forward, house believe grp will ride on the beverage sales momentum to drive earnings in 2012. Grp has secured a new supplier to produce its own Garden Fresh bottled juices in China and this would double its capacity from 70,000 tonnes to 140,000 tonnes per year. To increase brand awareness for its beverage products, grp has been advertising aggressively through commercials on China’s national CCTV channels since Oct11. The new production facilities in Sichuan and Hubei provinces will also alleviate any supply pressure.
Technically, stock appears to be resisted at $0.47 and support could be at $0.43. A break above $0.47 points to a target of $0.52. The stock is still hovering above its 20 & 50 days EMA which is on the uptrend currently.
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