Why you should be buying Sino Grandness stock right now

Strong growth outlook for the firm.

Sino Grandness stock has significantly dropped from its all-time high price, which represents a buying opportunity for investors, according to Maybank Kim Eng. The company has a strong growth outlook, supported by new Garden Fresh products that have proven to be well-received among consumers, spurring on the possibiltiy of a Garden Fresh spinoff.

Here's more from Maybank:

Buy on share price weakness. Sino Grandness share price dropped from an all-time high of SGD1.60 to current SGD1.355 (down 15%). However we see the recent share price weakness as a buying opportunity. Our channel check suggests that the new products Garden Fresh launched in 2Q13 have been well received by consumers. The biggest catalyst, the potential Garden Fresh spinoff, also seems to be on track. If everything carried on as smoothly as management expected, we will very likely hear some positive news within the next six months. At the current valuation of only 5.1x FY13 PER, we are not too concerned about any downside risk. Reiterate BUY with TP SGD1.60.

New products, more channels. Garden Fresh launched a series of new products at the Chengdu F&B trade show this March. Our channel check suggests that some of the new products such as loquat-mango juice have been quite successful. In addition, Garden Fresh also secured some new distributors and penetrated new supermarkets in Sichuan recently. These initiatives were launched right before the summer season, which is the operating peak season for juice companies. It will build a solid foundation for Garden Fresh to achieve its full year profit target.

Potential spinoff in the making. Management hopes to receive a preclearance from SGX by the end of this year. Although there have been no further official updates on the matter, we believe that the application to SGX has been submitted and other preparations have been progressing. In good case scenario, we should be able to hear some positive news within the next 6 months. However as we pointed out before, even if the IPO is delayed, we believe that the company has alternative ways to settle the CBs. Recent M&A deals in the beverage sector such as Mengniu’s acquisition of Yashili, show that it is never difficult for good quality F&B assets to attract buyers.

Reiterate BUY. We still like Sino Grandness’s for its growth prospects and potential spinoff of Garden Fresh. The stock is trading at 5.1x FY13 PER and the current valuation does not pose much downside risk. Reiterate our BUY call and maintain our TP at SGD1.60 as we wait for the next milestone of a successful Garden Fresh IPO.