SunMoon

SunMoon: As expected, 3Q13 net profit surged to $13.0m, reversing sharply from the $1.9m loss a year ago, largely due to a $12.6m boost in one-off gains attributable to a write-back of accrued interest in relation to the settlement of the convertible loan. The group’s core operations also improved, as gross margins rose to 20.5% from 13.0% y/y, driven by improved product mix, and lifting gross profit by 58% to $1.6m. 3Q13 revenue was flat y/y at $7.8m, as the increase in sales of dehydrated products helped offset lower sales of fresh and processed fruits due to end of season limited supply from its China suppliers. Thanks to the loans restructuring that was completed during the quarter, the group’s equity turned from -$21.2m as at 4Q12, to $15.4m at end 3Q13, which translates to NAV of 0.05¢ per share. At the last close of 0.2¢, SunMoon trades at 38.6x annualized core 3Q13 P/E, 4x P/B. While valuations cannot be construed as cheap at this point in time, the market may still react positively to the good set of financials, which shows a markedly improved balance sheet. With the overhang from the legacy loan now resolved, management can now focus on growing the group’s operations without further administrative distractions.