Sino Grandness

Sino Grandness: Wellcome, one of Hong Kong’s largest super market chains with over 200 retail points across the country, has emerged as a new distributor to market Sino Grandness’s garden fresh juices over in Hong Kong. Going forward, Sino Grandness aims to roll out its Garden Fresh products to other leading convenience stores, such as 7-Eleven, in order to increase the brand awareness of Garden Fresh in Hong Kong before targeting other distribution channels. The group adds that its distribution network for Garden Fresh juices in China now covers more than 20 provinces, and its plans to build on this momentum within China as well as in the overseas markets. For 1H14, the group’s beverage segment continued to record strong growth with sales surging 49.6% y/y to Rmb869.3m. We highlight that share price has languished by ~15% over the past week, dragged by the recent market sell-down, despite the group recently disclosing that bondholders representing 80.5% of the principal amount of the first tranche of convertible bonds intend to extend the maturity date from 19 Oct ’14 to 30 Jun ’15. This eases the market’s concern over liquidity risks arising from bond redemptions. With the settlement of the first tranche and recently-raised funds of $52m from the share placement to Thai investors, Sino Grandness’s next liquidity risk “due date” has been pushed to end Jun 2015. Going forward the group’s biggest catalyst remains the IPO of its beverage brand Garden Fresh. If this is not completed before Jul’15, a much bigger liquidity risk will arise in nine months’ time, when it needs to fork out Rmb700m to redeem its CBs: 80.5% of the first tranche and second tranche CBs plus penalties for failure to list Garden Fresh