17 November 2013

Sino Grandness, Almost There - November 2013 (Latest Update 24 Dec 2013)

Sino Grandness just released its latest quarterly report this month. Summary of the 9M13 report shown as below:

Revenue RMB 1,718.1 M, Up 39.2%
Gross Profit RMB 657.9 M, Up 40.5%
Gross Profit Margin 38.3%, Up 0.4%
Net Profit RMB 341.7 M, Up 52.4%
Net Profit Margin  19.9%

Beverage % Of Total Revenue = 59.5%
Oversea Canned Products % Of Total Revenue = 32.2%
Domestic Canned Products% Of Total Revenue  = 8.3%

From here, we can conclude that about 60% of the revenue is from Beverage division, which I think is quite in line with group's strategy to focus in domestic beverage market and get it listed in Hong Kong Exchange. If the group can manage to have at least RMB 300 M more revenue from beverage division for 4Q2013, I believe it can hit RMB 250M Net Profit target and has higher chance to get Garden Fresh listed in Hong Kong Exchange by October next year.

Beverage Revenue Trend From 1Q11 to 3Q13

EPS 9M13 stood at 12.2 Sing cents, which translated to annualized EPS 16.3 Sing cents, or 4.69 PE.

With Sino Grandness latest plan to increase CAPEX to double up current capacity (about RMB 600 M), I believe the future revenue growing speed should be at least in tandem of the speed of CAPEX plan. What worried me was the Free Cash Flow. Now with company to aggressively promoting its beverages to distributors, a big chunk of operating cash flows is used to support the credit sales.

Nonetheless, I am still quite impressed with the result Sino Grandness achieved so far, and with the hope the beverages division can be listed successfully next year. So let's see what market can re-value the market value next year if Garden Fresh can be listed successfully, and how management can push the non-beverage division for domestic market next year. I hope that the Cash Conversion Cycle can be reduced with diversified distributor network and strengthened relationship.

Last Updated: 18 November 2013

I got the reply from Sino Grandness IR department, that Sino Grandness intended to use the spin off proceed of Garden Fresh to partly support its huge CAPEX plan next year. It seems that Sino Grandness is quite confident in getting Garden Fresh listed IPO by next year. With Big 4 to audit the report before listed next year, I believe the IPO can attract many investors (provided it is granted permission to be listed by Oct 2014). 

With no any customers contributed to more than 5% of total revenue, the company is confident that they are well control in bad debt. 

So now I have little more confidence in this company. Although I will not be putting any fresh money in this counter at current price, but will just wait for any sudden drop again (like China Minzhong short selling issue earlier this year) to take up the opportunity again.

Again, I prefer ambitious company with careful corporate finance planning. I hope Mr. Goh can further assist 黄总 in achieving their goals in building a successful story. 

Last Updated: December 2013

Below is the screen shot which I compiled from company's annual report (audited) and quarterly report (un-audited). Please note that quarterly report figure may differ from audited annual report later. However, I hope that the changes are not major. 

Below is a link I found from internet (written in English). In summary, it mentioned that Garden Fresh had grown up to "luxury" fruit drinks brand in China Mainland, with so many efforts made in sales exhibition, advertising & promotion campaigns. It is now the number 1 loquat juice brand in China. You may come to the link here to take a look. 

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