Sino Grandness

Sino Grandness: OSK DMG raises TP to $1.74 from $1.18 and maintains Buy call. House hosted SinoGrandness for a non-deal roadshow in HK last week. The 22 client meetings held over two days received positive response. House raise our 2013 earnings projections for Garden Fresh from RMB 220m to RMB 250m and change valuation method from P/E to sum-of-parts. This entails a 6x conversion for the CBs issued which will dilute Sino’s stake in GF from 100% to 75%. House assume a 20% new share issuance which will further dilute the stake to 62.5%. Assuming a 12x P/E for GF’s IPO (vs HK peers >20x), we value Sino’s stake in GF at $377m or $1.28 p/share. For its canned food business, ascribe a 5x P/E to our projected earnings of $27m to derive a valuation of $136m or $0.46 p/share. New TP translates into an undemanding FY13F P/E of 7x.