26-05-2013, 04:32 PM
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!