Towards Financial Freedom

Sino Grandness - Spinoff Plans On Track

kiasutrader
Publish date: Fri, 28 Feb 2014, 03:09 PM
SFGI's  4Q13  PATAMI  fell  8.3%  y-o-y  to  CNY59.4m,  although  revenue grew  36.3%  y-o-y.  The  latter  was  boosted  by  its  increased  production capacity and a wider customer base. SFGI's outlook remains positive as the trend for juice consumption in China is rising.  The company  plans to  continue  securing  new  customers  and  raising  awareness  of  its  inhouse brands. Maintain BUY, with a SOP-based SGD0.88 TP.
  • PATAMI  was  lower  y-o-y.  This  was  mainly  due  to  increased administrative  expenses  arising  from  the  depreciation  of  its  new production facility in Hubei,  China,  as well as  professional fees  incurred for the proposed spinoff of  Sino Grandness (SFGI)'s beverage segment.Even  with  the  additional  expenses  incurred  alongside  the  company's efforts to  grow its revenue,  profit margins  are still  likely  to  improve.  The q-o-q decline was due  to  seasonality,  as fewer consumers turn  to juices when the weather is colder.
  • Management positive on prospects.  Management said the potential in China's  beverage  segment,  ie  the  juices  market,  is  huge.  This  is supported  by  rising  disposable  income  levels  and  growing  demand  for healthy beverages. On top of this,  the  former  will  also boost demand for canned  fruits  and  vegetables.  Against  this  backdrop,  SFGI  remains optimistic on its prospects going forward.
  • Focus  on  key  growth  drivers.  Apart  from  developing  new  products,and increasing advertising and promotional  activities to  enhance brand awareness, SFGI  also  aims to  expand its distribution network further  by participating  in  trade  shows.  It  currently  distributes  its  Garden  Fresh juices in more than 20 provinces in China.
  • Plans remain on track.  Maintain BUY.  SFGI's  plans for an IPO of its beverage  segment  are  on  track.  The  company  has  appointed  the relevant  professionals  to  commence  work  related  to  this  corporate exercise.



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Company Profile
Sino Grandness is a China-based food and beverage company listed on the SGX in 2009. It started out exporting canned vegetables (mushrooms, long beans and asparagus) to discount stores in Europe before venturing into  canned fruits for the domestic Chinese market,  as  well  as  beverages.  Within  three  years,  the  beverage  division  under  Garden  Fresh  overtook  the  canned  food  business, contributing 53% of revenue in 2012. The company intends to spin off  Garden Fresh in a Hong  Kong IPO by Oct 2014, before the first tranche of its convertible bonds expires.

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