A reassuring conference call yesterday. In the light of the recent shortseller’s attack on China Minzhong, Sino Grandness’ management has been very responsive and open in dealing with investors’ concerns and readily agreed to hold a conference call with our clients yesterday despite the extremely short notice given to them. In all, the concall was organised within 90 minutes and 20 clients participated. We think the information shared by management was helpful and informative, and should go a long way to calming investor concerns. We maintain our BUY call and target price of SGD1.89 on Sino Grandness.

Sino Grandness does not use distributors extensively. Channel visibility of its products is a lot higher with Sino Grandness and customer demand cannot be manipulated as it sells its products directly to the end-customer.

Although both are involved in the vegetable export business, China Minzhong uses many local distributors to deal with the end-customers either overseas and domestic, while Sino Grandness sells directly to customers such as Cole Supermarkets in Australia or Tesco in the UK. With customers where it has to use distributors, such as with the chain of 7-11 convenience stores in China, the distributors function more as logistics and fulfilment agents as there are just too many stores for Sino Grandness to make sure each store is fully stocked. However, the orders still come directly from the end-customer and not from the distributor.

Solid progress has been made with Garden Fresh IPO in Hong Kong. Sino Grandness is currently working on the Garden Fresh IPO in Hong Kong and things are definitely on track for a favourable conclusion. SGX’s approval for Sino Grandness to execute on the planned spinoff was the main hurdle and that was received on 1 July. The next few stages will be more within the company’s control. Three big international investment banks have already been shortlisted and the final selection will be made soon.

Source: Maybank Kim Eng Research - 28 Aug 2013