Sino Grandness

Sino Grandness: positive response at key Chengdu trade fair reinforces profit target commitment. Sino Grandness’ beverage subsidiary, Garden Fresh, has received indicative orders worth more than Rmb 290m (+45% yoy) at last month’s F&B trade fair in Chengdu. The trade fair is the largest in China and attracts more than 300k visitors from all over the country each year. More importantly, it contributes about 20-25% of Sino Grandness’ total beverage sales. This represents a big step towards helping Garden Fresh meet its profit target of Rmb 250m this year. To recap, based on the convertible bonds subscription agreement, if Garden Fresh achieves a net profit of Rmb 250m, it will qualify for the highest conversion P/E of 6x. Positive takeup from new distributors, new beverage product launches (incl loquat-mango juice, soft-pack loquat juice and tin-can juice), and the potential spinoff of Garden Fresh will underpin Sino Grandess’ growth prospects. While share price has surged 28% over the past wk, Maybank KE reiterates Buy with TP $1.60, pegged to 6x FY13e P/E.