sino grandness - undervalued stock

Doesn't this signal a positive picture?
Only 11,000 short sale of Sino Grandness today. No one really dare to naked short this stock. It's going to continue to go up (after a brief correction)?

www.sgx.com/wps/wcm/connect/sgx_en/home/...hortSell20130522.txt

Sino Grandness fell by 6.5 cents yesterday. Volume traded was 2,880,000 shares. ONLY 42,000 shares were short sales yesterday. www.sgx.com/wps/wcm/connect/sgx_en/home/...hortSell20130523.txt


Interpretation:

1. The stock fell on profit taking. Investors who sold wanted to lock in their profits after the strong price run-up in the past few months.

2. The buyers are ..... value investors. If you consider the earnings growth and the low PE, you will appreciate that there is a lot of upside to the stock.

Just sharing virgin posting by MrMsus @ Valuebuddies.com


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!

when Garden Fresh started, it didn't have a real winner. The juices were fruit + veges. Did the company issue the convertible bonds at that stage to Goldman Sachs? Or did it happen after the loquat juice took off? If Garden Fresh didn't have loquat juice, the company would be in real trouble now as the earnings from fruit + vege juice would pale in comparison to loquat.

Just want to ask something. I read before that if a company changes CFO too often, one might want to be more cautious. In that regard, I'm very pleased to see the company's recent promotion of the Financial Controller to Chief Financial Officer (see here: www.cfoinnovation.com/content/sino-grand...s-goh-cze-khiang-cfo ), although it could just be me, as I think that having Mr Goh still around since pre-IPO is a very positive sign.

He joined in FEBRUARY 2008 -- ie, more than 5 years ago -- before the company got listed. If the company's accounts are funny, no CFO will want to stick around for the skeletons to be uncovered. Anyway, what's your take on this?

It has been a swift run-up. It will need to consolidate. The short-term profit-takers have to be taken care of. After that, the way is cleared for a march towards S$2. A catalyst could be an announcement that SGX has approved bonus issue.
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