IT LOOKS LIKE a regular notice for an EGM and it's heavy with legalese -- but the story goes deeper and the market has recognised it by sending the share price of Sino Grandness up 11.8% this morning (from 34 cents to 38 cents) on heavy volume.
Sino Grandness last night called for an EGM on 23 Feb to seek shareholders' approval for a dilution of 20% or more of its shareholding interest "in the ListCo resulting from the issue by the ListCo of the new ListCo Shares in connection with the Proposed Listing."
The listco referred to is its 100%-owned beverage division called Garden Fresh, which commanded about 86% of the market for loquat juice in China in 2014, according to a Euromonitor study.
Calling for the EGM to seek shareholders' approval is a necessary step for the IPO of Garden Fresh. Such a step typically takes place not too long before the submission of IPO documents to the target stock exchange.
Thus the EGM is a concrete sign that the IPO is just a couple of months away.
The EGM notice says that Garden Fresh is seeking a listing on a stock exchange "including but not limited to the HK Stock Exchange".
While it's well known that Garden Fresh has been working on its IPO since end 2013, this is the first time that, officially, the HK Stock Exchange has been named.
Again, likely, the IPO work is coming to completion, hence the stock exchange can be named.
The "20% or more dilution" referred to by Sino Grandness likely relates to the issue of new Garden Fresh shares for:
1) Redeeming partially or completely the convertible bonds that helped fund Garden Fresh's stunning growth in recent years.
2) The public tranche of the IPO.
Aside from those new shares, it is possible that Sino Grandness would sell some of its vendor shares to pay a special dividend to its own shareholders and to fund its future growth.
|♦ Unlocking value of Garden Fresh
As we understood it all along, the long work duration was mainly due to the due diligence/verification/interview involving Garden Fresh’s customers.