Sino Grandness post AGM NDR. We hosted a NDR for Sino Grandness last week. During the meetings, management discussed in details the growth outlook and strategy, the underlining reason for Garden Fresh’s early stage success as well as the Garden Fresh HK listing. We listed a few interesting questions below:

• In answering what is the main reason for Garden Fresh’s tremendous growth in its early ages, management mentioned that the key driver for the growth is the adoption of its market differentiation strategy. It always tries to find market gap and develops unique products for consumers. For example, Garden Fresh’s loquat juice, which accounts for around 60% of total beverage sales, is what differentiates Garden Fresh from other beverage companies.
• In terms of growth strategy going forward, management indicated that they would continue to adopt the market differentiation strategy. In addition, it will continue to expand its loquat product range to strengthen its market leader position in this niche market. Management is not worried about potential newcomers into the loquat juice market in the future because Garden Fresh would be seen as the symbol of loquat juice by the time new competitors come in and they would have to follow the standard which Garden Fresh has set for the industry.
• Some investors asked about Sichuan earthquake. Management said the impact would be minimal because Sichuan plant is little affected by the quake and the major market for Garden Fresh currently is still coastal areas in eastern China.
• Most of the questions were still about the Garden Fresh HK listing. Company shared with us that it has not officially submitted the application to SGX yet but it is consulting its lawyers and will submit application in the next few months. Company also assured investors that even in the worst case scenario where Garden Fresh IPO does not go through, it would not be the end of the company and there could be other exit options for them. Thus we think that the market might have overestimated the potential damage that the failure of IPO would bring to the company.

We maintain our earnings forecast and our target price of SGD1.60 (Buy). We recommend investors to keep invested and wait for more value to be unlocked from Garden Fresh IPO.

Source: Maybank Kim Eng Research - 29 Apr 2013