Sino Grandness

[Curiousparty]

http://www.gurufocus.com/term/pettm/PEP/...8ttm%2529/

Pepsi P/E - 22.5

Does Sino deserve such a P/E valuation? I don't think so...

taking a more conservative approach, current share price of Sino is only 53% discount relative to RNAV.

Given all the inherent risks as discussed by many forumers in this thread, one might seriously want to consider whether to take this risk or now.

On what basis did you get a P/e of 10 when F&B companies in Hong Kong are getting between 18 - 25 ?

[leeeta]

http://www.gurufocus.com/term/pettm/PEP/...8ttm%2529/

Pepsi P/E - 22.5

Does Sino deserve such a P/E valuation? I don't think so...

taking a more conservative approach, current share price of Sino is only 53% discount relative to RNAV.

Given all the inherent risks as discussed by many forumers in this thread, one might seriously want to consider whether to take this risk or now.

On what basis did you get a P/e of 10 when F&B companies in Hong Kong are getting between 18 - 25 ?

According to you Garden Fresh has a higher PE of 10 and canned product lower PE of 5.

If Garden fresh profit is Rmb 308m and NP margin is 16.5%, it means canned products NP margin is 17%..this cannot be the case. Becoz most of the canned products are for export and fetch a lower margin.

Please take a look at the valuation of the companies below.. we are talking about F&B companies listed in Hong Kong.

http://www.bloomberg.com/quote/322:HK - Ting yi
http://www.bloomberg.com/quote/220:HK - Uni President
http://www.bloomberg.com/quote/151:HK - want want
While Garden Fresh is no where near them in terms of sales and size, I dont think Garden Fresh deserves a 10x. Do also consider their growth opportunities in the domestic and SEA markets.

[Curiousparty]

http://pages.stern.nyu.edu/~adamodar/New...edata.html

Ave P/E of established beverage companies around the world = ~ 21.

Does the amended valuation make everyone happier?

[leeeta]

http://pages.stern.nyu.edu/~adamodar/New...edata.html

Ave P/E of established beverage companies around the world = ~ 21.

Does the amended valuation make everyone happier?

You have reduced value of canned products from SGD$140m to SGD$90m. This means SGD$50m or RMB 230m.

Since you have set PE of canned products to be 5, it means RMB 46m profit has disappeared. I wonder you know what you are doing.

by the way, your link is not working.

[Curiousparty]

grateful if u cld kindly show the correct answer pls?

many tks.

http://pages.stern.nyu.edu/~adamodar/New...edata.html

Ave P/E of established beverage companies around the world = ~ 21.

Does the amended valuation make everyone happier?

You have reduced value of canned products from SGD$140m to SGD$90m. This means SGD$50m or RMB 230m.

Since you have set PE of canned products to be 5, it means RMB 46m profit has disappeared. I wonder you know what you are doing.

by the way, your link is not working.

[hannyhanny]

But why leave it so late? They have had so much time, why leave it until now to get things started? Wouldn't it have been much better to have everything prepared and then you can launch the IPO when the market is favourable?

Now they are running the risk of running out of time should something take longer than expected or the IPO window closes for whatever reaaon...

I just cant see any good reason why theres even a question as to whether theyre prepared for the IPO? This should have been locked in.

Blame the HK ipo process and policy changes in late 2013. Guess, a lot of ipo managers have to readjust their strategies/plans in light of the new policies. The new policy requires that everything must be completed before companies can submit the forms. Stringent checks are also required to be performed and for Sino Grandness, 60-70% of their 200+ distributors have to be interviewed. All that takes time.

Hi, I have previously checked and understand the requirement for the interviews on 60 to 70% of distributors (or 40 to 50% and not top 10 customers as quoted by management in one of nextinsight articles) is not a requirement by HK stock exchange.

Making due diligence enquiry of an applicant is the responsibility of the sponsor under Practice Note 21 of the Listing Rules. Sponsors must be satisfied that the level enquiries is sufficient is a specific case. Hong Kong exchange does not comment on what level of enquiry is appropriate in any given case.

Disclosure of information about major customer is set in paragraph 28(1) (b) of Appendix 1a to the Main Board Listing Rules.

Link to Main Board Listing Rules at: http://www.hkex.com.hk/eng/rulesreg/list...trules.htm

[leeeta]

grateful if u cld kindly show the correct answer pls?

many tks.

http://pages.stern.nyu.edu/~adamodar/New...edata.html

Ave P/E of established beverage companies around the world = ~ 21.

Does the amended valuation make everyone happier?

You have reduced value of canned products from SGD$140m to SGD$90m. This means SGD$50m or RMB 230m.

Since you have set PE of canned products to be 5, it means RMB 46m profit has disappeared. I wonder you know what you are doing.

by the way, your link is not working.

The flaw in your first table is that you lowered profit of Garden Fresh. This led to higher profit of canned products.

When this was pointed out, you redid the table and reduce profit for canned products by RMB 43m. Unfortunately you forgot to add RMB 43m back to Garden Fresh.

Sino Grandness's profit is the sum of Garden Fresh profit and canned products profit. In your revised table, when you reduce canned products profit by RMB 43m, Garden Fresh profit should increase by the same amount.

I do not know whether you have attended Sino Grandness's AGM. Management said that margin of export of canned products is lower than loquat juice because Sino Grandness is just an OEM for house-brand canned vegetables of European supermarket chains. Margin of Garden Fresh for loquat juice is higher because it is its own brand.

[portuser]

Hi buddies

Can anyone help oldman on the valuation of Garden fresh if its listed? Hope someone can enlighten me.
Thank you

Oldman9

Holders of 2011 and 2012 bonds expect a high subscription price of Garden Fresh IPO shares. As of now, they have a claim on a 23.4% stake of Garden Fresh.

Bondholders introduced interesting penalty features to spur Garden Fresh to get itself listed.

First, if an application for listing is not submitted, 2011 bondholders will receive a premium based on 25% compound interest. For 2012 bondholders, the premium is 20% compound interest.

Second, if the application is not approved by the exchange subsequently, the premium is reduced to 15% compound interest for both 2011 and 2012 bondholders.

Bondholders also protect themselves from ending up with low-price Garden Fresh shares -- if the IPO subscription price is lower than 9 times earnings, they can walk away and receive a premium of 10% compound interest.

When RMB 100m 2011 bonds matured in Oct 2014, holders of RMB 80.5m gave up their rights to receive RMB 157m (= 195% * RMB 80.5m). They likely thought that when Garden Fresh is listed, the value of their 5.37% stake will be much higher than RMB 157m.
(By the way, 195% is 1.25*1.25*1.25.)

It is obvious that their decision to forego the certainty of RMB 157m back in Oct 14 is not risk-free.

First, if Garden Fresh fails to get listed despite submission of listing application, say by Oct 2015, bondholders will receive RMB 141m (175% * RMB 80.5m), which is lower than the RMB 157m that could have been received a year ago.

Second, if Garden Fresh IPO share is priced lower than 9 times earnings, bondholders will receive only RMB 118m (146% * RMB 80.5m) if they walk away.

Given that a price earnings ratio lower than 9 is deemed to be unattractive, will it be reasonable to assume that the bondholders had expected a PER of at least 12 when they gave up RMB 157m back in Oct 2014?

If its 2014 profit turned out to be RMB 320m, Garden Fresh would be worth RMB 3,840 m for PER of 12. And holders' 5.37% stake in listed Garden Fresh will have a value of RMB 206m, which may not be enough to compensate the foregone RMB 157m and a one-year wait?

If PER is 15, the 5.37% Garden Fresh stake will be worth RMB 258m. Is this amount a sufficient reward?

[leeeta]

But why leave it so late? They have had so much time, why leave it until now to get things started? Wouldn't it have been much better to have everything prepared and then you can launch the IPO when the market is favourable?

Now they are running the risk of running out of time should something take longer than expected or the IPO window closes for whatever reaaon...

I just cant see any good reason why theres even a question as to whether theyre prepared for the IPO? This should have been locked in.

Blame the HK ipo process and policy changes in late 2013. Guess, a lot of ipo managers have to readjust their strategies/plans in light of the new policies. The new policy requires that everything must be completed before companies can submit the forms. Stringent checks are also required to be performed and for Sino Grandness, 60-70% of their 200+ distributors have to be interviewed. All that takes time.

Hi, I have previously checked and understand the requirement for the interviews on 60 to 70% of distributors (or 40 to 50% and not top 10 customers as quoted by management in one of nextinsight articles) is not a requirement by HK stock exchange.

Making due diligence enquiry of an applicant is the responsibility of the sponsor under Practice Note 21 of the Listing Rules. Sponsors must be satisfied that the level enquiries is sufficient is a specific case. Hong Kong exchange does not comment on what level of enquiry is appropriate in any given case.

Disclosure of information about major customer is set in paragraph 28(1) (b) of Appendix 1a to the Main Board Listing Rules.

Link to Main Board Listing Rules at: http://www.hkex.com.hk/eng/rulesreg/list...trules.htm

Thanks for the info– all this due diligence takes time as sponsors are made to be criminally accountable and responsible for the submission.

Portuser made an interesting point, that the 1st tranche bondholder is taking a risk and holding on for larger profits. If the IPO is delayed by one or two months will the rest of 1st and 2nd tranche bondholders extend as well? I believe they will, and according to the Edge magazine dated March 16, sources within the company say negotiations are underway with CB holders on a possible extension.

Anyway regardless how the IPO turns out, the company by being prudent has taken necessary steps to obtain loans in the event bondholder wants full redemption by June/July.

[Oldman9]

Hi ValueBuddies,

Thank you thank you for all your replies. Oldman can't thank you all enough especially Portuser , Cy09, Leeeta, Curious Party for attempting to answer my question to the best they can. Portuser's analysis opened my eyes and let me see from the bondholders view what they expect in return on their so called "gamble" on Garden fresh. Never thought analysis can be done this way.

So in my humble opinion the conservative PE will be around 12-15x and may rise to PE of 25+ (average PE for Juice companies listed in Hong Kong).

May I ask another question? IS there a industry standard for MOS?. CY09 quoted 20% and Curious Party gave a discount of 30%.?