Sino Grandness

Sino Grandness: 3Q14 net profit rose 29.8% y/y to Rmb218.3m bringing 9M14 net profit to Rmb447.8m. Meanwhile, 3Q14 revenue of Rmb1b (+37.3%) brought 9M14 revenue to Rmb2.3b (+35.3%) thanks to increased sales across all product segments, Notably, its beverage sales swelled 43% to RMb622.5m from increased production capacity and demand, and sales of its domestic canned products more than doubled to Rmb140.3m (+128%) from the expansion of distribution network in PRC. Gross profit margin improved 1.1ppt to 39.2%. Bottom line grew at a slower clip due to increased distribution and selling expenses. Sino Grandness has commenced production in its new juice facility in Hubei, China, which has a maximum production capacity of ~240k tpa. This is expected to gradually reduce the group's outsourcing costs, as well as to better manage its own production volume. No updates provided regarding the IPO of Garden Fresh. That said, Sino Grandness crossed its October liquidity hurdle as bondholders representing 80.5% of the principal amount of the first tranche of convertible bonds (CBs) intend to extend the maturity date from 19 Oct’14 to 30 Jun’15. That said, should the IPO not occur by Jun’15, a higher liquidity risk looms as Rmb 700m needs to be forked out to to redeem its CBs: 80.5% of the first tranche and second tranche CBs plus penalties for failure to list Garden Fresh. Sino Grandness is trading at annualized 9M14 P/E of 2.2x