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Sino Grandness
26-05-2013, 04:32 PM.
Post: #1
Sino Grandness

I wonder why there hasn't been a thread covering this company. If there is already, please direct me there via a link as I couldn't find it. If not, I'll get the ball rolling.

This company has caught my attention months ago (in November 2012). I did a simple stock screen using CIMB iTrade, and a list of companies came up. This one stood out from the rest for it was trading at a fairly low multiple at the time (i.e. 4x) for a rather high ROE and ROA of 41% and 27% respectively. I dug further, and found out that its share price as since risen almost twofold, and the catalyst was the reported growth in revenue and earnings for 3Q12.

Since then, I've been monitoring the company and its stock price. For both FY2012 and 1Q13, the company's results were positive, although they were largely in line with market's expectations. Price has since shot up by another twofold, but it still looks cheap with its P/E currently trading at around 7x.

Personally I like the company for its business model and fundamentals. I like the fact that CEO Huang himself holds about 44% of shares in Sino Grandness and that he appears to be a hardworking, ambitious man. Initially I thought that all Sino Grandness did was sell fruit juice and canned products, the former in China and latter overseas. It was only after attending the AGM that I learned that the fruit juice that has been selling so well up till now is made of loquat, which is what we know of as "pipa". Apparently, no one has been selling loquat drinks in China, so it seems Sino Grandness has a first-mover advantage. It might not seem like a big deal, but it's common for the Chinese to believe that consuming "pipa" would have a soothing/ healing effect on one's lungs and throats. And Huang says that the company's marketing and advertising strategy is playing on this fact, aided by the heavy air pollution in China.

If you were to check out the company's annual report, you might find the company rather dubious. To be frank, its annual report sucks- it lacks transparency and all the information essential to a value investor who cares more about a company's business model than anything else aren't available. I went to their website, hoping to find something, but it's even worse. Before the AGM this year there wasn't even an IR tab on their website (now they do, but the links are broken- shareholders and potential investors will have to settle for their filings through SGX at the moment). Frustrated, I asked Huang and his IR officer, Ng, what their rationale was. What they told me, I find, was rather logical and rational- enough to convince me that they would work towards greater transparency when the time is right (apparently, they wanted to maintain a low profile so as to keep competitors away for now, as it could be detrimental to their performance if competitors start popping up now).

If anyone was concerned about fraudulent activities within the company, CEO Huang also did a good job in convincing his shareholders that there is no such thing in his company, as they would have to undergo stringent inspections and checks each time they issue bonds (they just did last year) and potentially file for a separate listing (i.e. next year in HK).

Of course, it's in a very competitive industry. The barrier to entry for such a beverage business isn't very high, but I do believe that Huang is taking all the necessary steps to ensure that his company would continue to dominate market share even if competitors do spring up. This company is still in its early growth phase, so it's understandable that they have to consistently pump money into R&D (to develop better tasting and taste for pipa) and advertising. It has built strong presence over the past two years in the first tier regions of China, so going forward, it will be expanding its operations and marketing its products in the 2nd and 3rd tier regions.

My key concern with the company lies primarily with the competitive nature of its business, but like I said, I am banking on it potentially becoming a big regional player in the "pipa" beverage business, just as wang wang and wang lao ji did in theirs. Also, those who are currently vested seem to be extremely bullish on the company's future earnings, so its share price could be adversely affected if the company fails to meet those high expectations. I currently hold very small stakes in this company, but I am considering accumulating, as I think there is still room for further upside even though the price has already risen a lot in recent months.

Anyway, I just like to hear from you guys! Your take on this company, and how this company is likely to do going forward!

P.S. this is my first post on VB! I hope to contribute more to this wonderful community in the weeks and months to come!


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26-05-2013, 05:27 PM. (This post was last modified: 26-05-2013, 05:34 PM by Wildreamz.)
Post: #2
RE: Sino Grandness
It's earnings growth potential more than justify its current valuation. That alone justify a buy from me. But short-term volatility is unavoidable due to its recent rise in price.

As for its business, the CEO has been smart in not competing in the more competitive market like orange juice and focus in a more niche market of loquat juice. Its first mover advantage in this sector I feel is quite significant. But yes, may not be permanent (not a deep moat). Actually it depends on how much of a market share it could carve out for itself before the big boys take notice.

There is also a mid term catalyst in its HK listing.

There are abundant resources out there on Sino Grandness since its monumental rise in the beginning of the year. This high level of exposure and interest in its business should minimize risks regarding fraudulent activities.

The more recent one being this: http://www.nextinsight.net/index.php/sto...n-shenzhen
There are more information regarding Sino Grandness on TheNextInsight.

I think investors aversion to S-Chips in general has given many opportunities for value investors looking for a bargain.

(vested)

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26-05-2013, 05:47 PM. (This post was last modified: 26-05-2013, 05:56 PM by felixleong.)
Post: #3
RE: Sino Grandness
for value investors its hard to value sino grandness as they have this Zero Coupon Convertible Bonds Due 2015 To Goldman Sachs

I had a lot of difficulties calculating this CB impact on the company, therefore I would advise less sophisticated investors to avoid this counter if they are unable to fully comprehend too ^^


for more details maybe you would wanna read more from the following report by Kim Eng

http://www.remisiers.org/cms_images/rese...804131.pdf


Against the original funds obtained of RMB330m, Sino
Grandness would have to pay the CB holders between RMB492m and
RMB723m, depending on the conditions that were not met, which
include
- Non-completion of the IPO, which would bring the heaviest penalty,
- IPO process is started but fails du
e to regulatory restrictions, and
- Garden Fresh is listed but at less than the exit PER of 9x hoped for
by the CB holders.


Because of this risk, the market is pricing sino grandness at a lower PE.

http://stockbrokerplayspoker.blogspot.sg/
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27-05-2013, 12:07 AM.
Post: #4
RE: Sino Grandness
Written by Leong Chan Teik
Sunday, 05 May 2013 12:00


Time & date: 10 am, 23 April 2013.
Venue: Pan Pacific Singapore.


TO MANY investors, Sino Grandness is vaguely a beverage manufacturer. The key thing, as I discovered at the AGM (rather belatedly), is that Sino Grandness is, to a large extent, about loquat juice.

Loquats, juice or fruit, are not entirely a familiar thing to many people but therein lies the heart of why Sino Grandness has been able to grow its beverage business from nothing to sizzling within 4 years -- and why its stock price is up 100% so far this year.


A farmer with fresh loquats to sell at a farm bazaar, in Shexian County, east China's Anhui Province. Photo: Xinhua/Shi Guangde
To the Chinese people in China and perhaps the older generation of Chinese in Hong Kong, Malaysia and Singapore, loquat has efficacy in alleviating certain ailments of the throat and lung.

As I learnt only recently, loquat paste can be purchased from TCM stores and a drink made out of it by adding hot water. (See Wikipedia for more information on loquat).

I have never tasted loquat drink made in that manner nor the fruit itself -- but an article on the Internet said that depending on its variety, the taste of loquat can vary from subtle to honey-rich.

In Jan 2011, Sino Grandness created a niche in the market for itself by introducing loquat juice, making it as conveniently available in supermarkets as orange or apple juice.

"When we launched our loquat drink, there was no direct competitor. Even today, if you go to first- and second-tier cities in China, there is no loquat drink except from Garden Fresh," said Parry Ng, VP for investor relations, at the AGM.

Garden Fresh is the company's beverage division which is expected to apply for a listing on the Hong Kong stock exchange by October 2014. (But before that, Sino Grandness has to obtain the Singapore Exchange's blessings for Garden Fresh to list in Hong Kong.)

Loquat competitors there are, including Singapore-listed China Minzhong, but they have not broken into the markets in top-tier cities in China.
Based on its results announcement, China Minzhong sold less than RMB 44.8m in loquat juice in the six months ended Dec 2012.

Aside from the loquat juice and other beverages, Sino Grandness gets significant revenue from 2 other business segments. * Includes canned vegetables such as asparagus, long beans, mushrooms and sweet corn **Includes canned fruits such as peaches, pineapples, pears, mixed-fruits and mandarin oranges.
Given its first-move advantage, Sino Grandness' beverage sales in 2012 totalled RMB 873m, of which 60% were loquat juices, 25% hawthorn juice and the remainder 15%, mixed fruit/veggie juices.

With loquat as its core beverage, Sino Grandness' spending on A&P is on a different scale compared to competitors for whom loquat juice is one of many product offerings, said Parry.

Its niche offering has enabled Garden Fresh to be welcomed into the stores of Wal-Mart, Carrefour, Tesco and 7-11 in a number of provinces in China. The entire country is by no means conquered yet.

Garden Fresh as the next Wang Lao Ji (renamed Jiaduobao since last year)?

Sino Grandness is envisioning that its loquat juice offering -- which comes with variants with flaovurs added such as mango -- could even become a big winner in the mould of the herbal drink of Wang Lao Ji, which created a niche back some 10 years ago.

Wang Lao Ji (renamed Jiaduobao since last year) commands 70% of the herbal drink market that it created. Photo: China Daily.
Sales in 2002 were RMB180 million. In 2003, sales surged to RMB600m and in 2011, sales reached RMB16 billion, exceeding sales of Coca Cola in China..

"We were on a roadshow in Hong Kong a few days ago and the fund managers asked my chairman, 'Are you happy with your success so far?' He replied: 'Although our sales grew more than 100% last year, we did RMB800+m while Wang Lao Ji achieved RMB16 billion (in 2011). So do you think I'm very satisfied?' "

Parry Ng added: "For the foreseeable future, we will be focusing on loquat drinks. We will have mixed juices with loquat as the main platform. We want to continue to be No.1 in the loquat drink market, just like Wang Lao Ji is No.1 in herbal drinks with a market share of 70%."

Sino Grandness is solidifying its stranglehold by establishing, in 1Q2012, a strategic research centre with China National Research Institute of Food & Fermentation Industries (CNIF), the largest and oldest F&B research institution in China.

The research centre will seek to establish national standards and specifications for loquat juices.

Asked about the supply of loquats, Sino Grandness chairman and CEO, Jack Huang, said he has decades of experience managing upstream supplies of agricultural products. Sino Grandness has developed a scientific system of managing the quality of the agriculture and factory processing of the loquats. "In the next three years, we will have more than sufficient loquat supply for our business needs."

With the stock price up strongly and the future of the company looking good, a shareholder stood up to say: "I congratulate the management for the excellent results. I have invested in other S-chips and they have sunk into the deep blue sea. I'm grateful for Sino Grandness' results."

Taken from http://www.nextinsight.net/index.php/sto...ice-market

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27-05-2013, 12:16 AM.
Post: #5
RE: Sino Grandness
One drink can make such a big difference....? Elixir or what

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27-05-2013, 12:17 AM. (This post was last modified: 27-05-2013, 12:22 AM by MrMsus.)
Post: #6
RE: Sino Grandness
(26-05-2013, 05:47 PM)felixleong Wrote: for value investors its hard to value sino grandness as they have this Zero Coupon Convertible Bonds Due 2015 To Goldman Sachs

I had a lot of difficulties calculating this CB impact on the company, therefore I would advise less sophisticated investors to avoid this counter if they are unable to fully comprehend too ^^


for more details maybe you would wanna read more from the following report by Kim Eng

http://www.remisiers.org/cms_images/rese...804131.pdf


Against the original funds obtained of RMB330m, Sino
Grandness would have to pay the CB holders between RMB492m and
RMB723m, depending on the conditions that were not met, which
include
- Non-completion of the IPO, which would bring the heaviest penalty,
- IPO process is started but fails du
e to regulatory restrictions, and
- Garden Fresh is listed but at less than the exit PER of 9x hoped for
by the CB holders.


Because of this risk, the market is pricing sino grandness at a lower PE.

The management did address the bond issuance issue when it was raised during the AGM earlier this year. I've yet to fully comprehend the bond issuance myself, but this is what I think: if the IPO fails in HK, the bond would remain as liabilities on the balance sheet. This portion of debt would then be due in 2015. If they succeed, they could potentially be converted to shares, but I'm not sure if this would have a dilutive effect on Sino grandness as the upcoming listing isn't sino grandness itself but a spin-off of the company (I.e. the fruit beverage segment in particular- grandness fresh).

Hope someone can enlighten.

(27-05-2013, 12:16 AM)BeDisciplined Wrote: One drink can make such a big difference....? Elixir or what

I don't know... Look at coca cola. Assuming that there's no fraud in play, I think the company's revenue growth kinda speaks for itself.

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27-05-2013, 12:22 AM.
Post: #7
RE: Sino Grandness
www.nextinsight.net is related to Financial PR, investor relation Co to Listed Co.

http://www.nextinsight.net/index.php/abo...topmenu-84



(27-05-2013, 12:07 AM)MrMsus Wrote: Written by Leong Chan Teik
Sunday, 05 May 2013 12:00


Time & date: 10 am, 23 April 2013.
Venue: Pan Pacific Singapore.


TO MANY investors, Sino Grandness is vaguely a beverage manufacturer. The key thing, as I discovered at the AGM (rather belatedly), is that Sino Grandness is, to a large extent, about loquat juice.

Loquats, juice or fruit, are not entirely a familiar thing to many people but therein lies the heart of why Sino Grandness has been able to grow its beverage business from nothing to sizzling within 4 years -- and why its stock price is up 100% so far this year.


A farmer with fresh loquats to sell at a farm bazaar, in Shexian County, east China's Anhui Province. Photo: Xinhua/Shi Guangde
To the Chinese people in China and perhaps the older generation of Chinese in Hong Kong, Malaysia and Singapore, loquat has efficacy in alleviating certain ailments of the throat and lung.

As I learnt only recently, loquat paste can be purchased from TCM stores and a drink made out of it by adding hot water. (See Wikipedia for more information on loquat).

I have never tasted loquat drink made in that manner nor the fruit itself -- but an article on the Internet said that depending on its variety, the taste of loquat can vary from subtle to honey-rich.

In Jan 2011, Sino Grandness created a niche in the market for itself by introducing loquat juice, making it as conveniently available in supermarkets as orange or apple juice.

"When we launched our loquat drink, there was no direct competitor. Even today, if you go to first- and second-tier cities in China, there is no loquat drink except from Garden Fresh," said Parry Ng, VP for investor relations, at the AGM.

Garden Fresh is the company's beverage division which is expected to apply for a listing on the Hong Kong stock exchange by October 2014. (But before that, Sino Grandness has to obtain the Singapore Exchange's blessings for Garden Fresh to list in Hong Kong.)

Loquat competitors there are, including Singapore-listed China Minzhong, but they have not broken into the markets in top-tier cities in China.
Based on its results announcement, China Minzhong sold less than RMB 44.8m in loquat juice in the six months ended Dec 2012.

Aside from the loquat juice and other beverages, Sino Grandness gets significant revenue from 2 other business segments. * Includes canned vegetables such as asparagus, long beans, mushrooms and sweet corn **Includes canned fruits such as peaches, pineapples, pears, mixed-fruits and mandarin oranges.
Given its first-move advantage, Sino Grandness' beverage sales in 2012 totalled RMB 873m, of which 60% were loquat juices, 25% hawthorn juice and the remainder 15%, mixed fruit/veggie juices.

With loquat as its core beverage, Sino Grandness' spending on A&P is on a different scale compared to competitors for whom loquat juice is one of many product offerings, said Parry.

Its niche offering has enabled Garden Fresh to be welcomed into the stores of Wal-Mart, Carrefour, Tesco and 7-11 in a number of provinces in China. The entire country is by no means conquered yet.

Garden Fresh as the next Wang Lao Ji (renamed Jiaduobao since last year)?

Sino Grandness is envisioning that its loquat juice offering -- which comes with variants with flaovurs added such as mango -- could even become a big winner in the mould of the herbal drink of Wang Lao Ji, which created a niche back some 10 years ago.

Wang Lao Ji (renamed Jiaduobao since last year) commands 70% of the herbal drink market that it created. Photo: China Daily.
Sales in 2002 were RMB180 million. In 2003, sales surged to RMB600m and in 2011, sales reached RMB16 billion, exceeding sales of Coca Cola in China..

"We were on a roadshow in Hong Kong a few days ago and the fund managers asked my chairman, 'Are you happy with your success so far?' He replied: 'Although our sales grew more than 100% last year, we did RMB800+m while Wang Lao Ji achieved RMB16 billion (in 2011). So do you think I'm very satisfied?' "

Parry Ng added: "For the foreseeable future, we will be focusing on loquat drinks. We will have mixed juices with loquat as the main platform. We want to continue to be No.1 in the loquat drink market, just like Wang Lao Ji is No.1 in herbal drinks with a market share of 70%."

Sino Grandness is solidifying its stranglehold by establishing, in 1Q2012, a strategic research centre with China National Research Institute of Food & Fermentation Industries (CNIF), the largest and oldest F&B research institution in China.

The research centre will seek to establish national standards and specifications for loquat juices.

Asked about the supply of loquats, Sino Grandness chairman and CEO, Jack Huang, said he has decades of experience managing upstream supplies of agricultural products. Sino Grandness has developed a scientific system of managing the quality of the agriculture and factory processing of the loquats. "In the next three years, we will have more than sufficient loquat supply for our business needs."

With the stock price up strongly and the future of the company looking good, a shareholder stood up to say: "I congratulate the management for the excellent results. I have invested in other S-chips and they have sunk into the deep blue sea. I'm grateful for Sino Grandness' results."

Taken from http://www.nextinsight.net/index.php/sto...ice-market

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27-05-2013, 08:27 AM.
Post: #8
RE: Sino Grandness
management of sino grandess is pretty shady, if they had needed $$ for expansion they should had gone to the market for a simple bond issue, instead they got into such a complex CB

if you really go study the CB you will understand that its almost a sure win for goldman and very little to negative value for shareholders

http://stockbrokerplayspoker.blogspot.sg/
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27-05-2013, 08:58 AM.
Post: #9
RE: Sino Grandness
The following Nextinsight article contains some relevant info:
http://www.nextinsight.net/index.php/sto...n-shenzhen

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27-05-2013, 09:43 AM.
Post: #10
RE: Sino Grandness
what to expect? Smile
if I have made a few hundred 100% off this counter, I will run first Smile

(27-05-2013, 08:27 AM)felixleong Wrote: management of sino grandess is pretty shady, if they had needed $$ for expansion they should had gone to the market for a simple bond issue, instead they got into such a complex CB

if you really go study the CB you will understand that its almost a sure win for goldman and very little to negative value for shareholders

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