peterlancashirePeter Graham Lancashire (left), a shareholder of Sino Grandness, lives in Switzerland from where he regularly visits . An Oxford-educated lawyer, he also holds a MBA from Insead. Retired from a career in pharmaceuticals, he owns a number of Singapore-listed stocks in his portfolio.

SINO GRANDNESS is not a stock for "widows and orphans" but does have, in my book, a significant chance for upside, but with no dividends yet.

If they do come up with a dividend in 2015, this would increase their attractiveness to institutional investors.

A food company operating mainly in China (now up to 60%) with exports to Europe, it has moved beyond canned products into beverages, including "loquat" juice.

So far, the latter has been a great success, and now Sino Grandness is also into snacks (dried versions of fruits, not snacks like popcorn), where the jury is still out.  

loquat_softpackLoquat juice in softpacks. Photo: CompanyAs the company is  an "S-Chip", its share price has been excessively punished, in my view.

S-Chips as an asset class is out of favour in Singapore, as several S-Chips have had "shenanigans" with their accounting numbers. Similar cases have emerged with ADRs in the U.S.A.

Specifically, a direct peer, China Minzhong, suffered heavily at the hands of a U.S. short seller (Glaucus Research) which caused its share price to drop by half in a day!

The allegations by Muddy Waters were never adequately substantiated and China Minzhong's share price recovered following a (successful) takeover bid by Indofood.

But the damage was done and the asset class as a whole suffered.

This is why Sino Grandness currently sells at a ridiculously low PE of about 4, despite high ROA and ROE numbers, and a strong growth outlook.

I like its entry into higher margin (branded) beverages, its accreditation with Aldi and Walmart in Europe, and a rising share of the domestic business.  

This year, Sino Grandness plans to launch an IPO of subsidiary "Garden Fresh" in Hong Kong, before October.

If its manages to get it up and away before the market turns, this could well be a major catalyst for Sino Grandness' stock price.

If not , it would be a set-back (worst case, my guess,share price drop to .50 sgd. cents).

However the underlying business of "Garden Fresh" looks good , irrespective of whether an IPO is launched or not.

The company is owner driven, with the owner (Huang Yupeng) holding 40%. Fidelity and Goldman are in there, since 2013, which raises the comfort level.

As presumably Fidelity and Goldman have done their due diligence, I  have no reason to question their numbers, or those of Garden Fresh.

My target price is 1.00 Sgd, which is not quite as high as the analyst of AM Capital in Hong Kong, (see link).

chart2.14After a steep run-up from Dec 2013, Sino Grandness stock has traded between 60 cents and 80 cents between mid-April 2013 and recently. At yesterday's stock price of 72.5 cents, the company had a market cap of S$423 milliion. Chart: Bloomberg

Excerpts from HK analyst's report....

Paul Kalogirou,
Research Director
AM Capital

Juicy returns. We initiate research coverage on Sino Grandness (SG) with a bullish BUY and SG$1.51 target price.

Recent results showed strong performance in all areas with high margins of 32%-52% exceeding expectations.

SG’s  canned export business saw improving orders from Germany, whilst the  domestic fruit business sold higher margin products.

The beverage division is key, as a spin off in Hong Kong in 2014 could attract multiples of 15x, valuing the division higher than the current SGX listco. BUY, 110% upside.  

A Hong Kong beverage spin off will unlock value.  Guidance for the beverage division earnings for 2013 is approx SG$50m  (RMB245m) - we believe profits will be RMB267 for 2013 with growth of  25% in 2014.

Listing the division in Hong Kong before Q314 at a conservatively assumed multiple of 15x (comparable Huiyuan—1886.HK  trades at 30x), values the division at approx SG$1bn.

When compared to  SG’s current market cap we cannot justify the stock to trade at 4x 2014 with such a valuable business segment under its operations. 

For full report, click link.

Previous story: Peter Graham Lancashire: "Why my favourite stock is STRACO"

You may also be interested in:

You have no rights to post comments

Counter NameLastChange
AEM Holdings3.280-0.020
Avi-Tech Electronics0.250-0.005
Best World1.680-
Broadway Ind0.0920.002
China Sunsine0.3950.005
Delfi Limited1.1300.010
Food Empire1.090-
Fortress Minerals0.3100.010
Geo Energy Res0.280-
GSS Energy0.028-
Hong Leong Finance2.4800.010
Hongkong Land (USD)3.190-
ISDN Holdings0.330-0.005
IX Biopharma0.043-
Jiutian Chemical0.0260.001
KSH Holdings0.290-
Leader Env0.0530.003
Medtecs Intl0.1400.004
Nordic Group0.400-
Oxley Holdings0.100-
REX International0.166-0.002
Sinostar PEC0.135-
Southern Alliance Mining0.670-0.005
Straco Corp.0.470-0.015
Sunpower Group0.240-
The Trendlines0.0910.001
Totm Technologies0.038-
Uni-Asia Group0.905-0.030
Wilmar Intl3.6200.010
Yangzijiang Shipbldg1.4900.040

We have 439 guests and no members online

rss_2 NextInsight - Latest News