Sino Grandness

Sino Grandness: UOB Kay Hian hosted co. at UOB Kay Hian’s Taiwan conference recently. House adjusts earnings marginally higher for 2013, to take into account the possibility of higher production capacity post the fund raising activity. Forecast that grp will report a yoy rev and net profit growth of 42.1% and 28.0% in 2013 to Rmb2.33b and Rmb370.1m respectively, driven by increased production capacity despite higher A&P expenses. Despite the strong price performance, valuations remain compelling at 3.9x 2013F earnings. House maintain BUY with a lower TP of $1.23 as house account for the additional new shares that were recently issued (11% of existing share capital). Still favour SGF for its undemanding valuation, explosive earnings growth for its beverage segment and the potential for this subsidiary spin-off and listing in an approved exchange. House TP assumes the listing of Garden Fresh to be successful in 2014 with a PE of 12x coupled with a holding company discount of 20% and a 4.0x 2014F P/E valuation for its remaining business. At the current share price of $0.955, it is trading at 3.9x 2013F PE, vs peers in HK which are trading at an average of 31.2x FY12 P/E. House believe 2014 estimate PE of 12x for the listing of its subsidiary to be conservative.