Sino Grandness

Sino Grandness: UOB Kay Hian maintains Buy and Upgrades TP to $0.91. House expect forward earnings growth in 2013 to propel share price further. The canned food segment is expected to register a 15.7% growth in revenue for 2013 by securing new customers and introducing new products with higher margins, while the rev of its beverage segment under Garden Fresh (GF) is set to jump 60% to Rmb1.4b with its new enlarged capacity. The group can also enjoy the earnings expansion of its new distribution networks such as the 600 7-Eleven convenience stalls in Guangdong province secured in 2012. Valuations are undemanding, with grp trading at 3.7x 2012F PE, a fraction of the average valuations of 30.8x 2012F PE commanded by its HK-listed fast-moving consumer goods (FMCG) peers. As grp is also looking to do a separate listing for GF in 2014, this would be a positive rerating catalyst for the group. House note the potential upside of S$1.28/share if the listing comes through, assuming a holding company discount of 20% to SGF’s GF stake and a 4.5x 2014F PE valuation for its remaining business.