Sino Grandness results review

3QFY10 Results

Revenue rose 50% from RMB128M in 3QFY09 to RMB192M in 3QFY10. NPAT surged 54% from RMB25M in 3QFY09 to RMB39M in 3QFY10. EPS rose 54% from 9.5 RMB cents in 3QFY09 to 14.6 RMB cents in 3QFY10.

Table 1: Analysts’ target prices for Sino Grandness

	Amfraser	DMG	Poems	UOB Kayhian	Sino Grandness	Sino Grandness
	26-Oct-10	16-Aug-10	07-Oct-10	02-Mar-10	9MFY10	1HFY10
Rev (RMB m)	602.3	644.6	607.4	568.3	435.7	243.8
Net Profit (RMB m)	96.3	101.1	97.2	80.1	79.6	40.9
EPS (SGD cts)	7.4	8.4	8.1	5.9	5.8	3.0
Valuation methodology	7.5x FY10E earnings	6x FY10E earnings	7x FY10E earnings	9.1x FY10E earnings

Source: Ernest, analyst reports (as of 1 Nov 10). I have manually adjusted UOB Kayhian EPS downwards post the 20M share placement announced last month.

Possibility of analysts hiking their target price because

a) From Sino Grandness 9M FY10 results, it is likely that Sino Grandness can reach around RMB635M and net profit of at least RMB101M. Thus, other research houses which project lower revenue and earnings are likely to increase their projections for this year[1];

b) With such strong growth, analysts are also likely to raise their topline and bottomline estimates for FY11.

c) With good earnings visibility in FY10 and perhaps in FY11 or perhaps due to improvement in macro environment, analysts may raise the PE valuation for Sino Grandness to 8-9x

d) Even without doing pts a) and b), the target price can also be raised as analysts roll their valuation methodology to FY11 earnings which naturally would be stronger than FY10 for a growing company. (Even if analysts don’t do so now, they will do so soon as 2010 is coming to a close.)

Thus, Sino Grandness should open higher today. Strong resistance seen at $0.43 / 0.45 / 0.485.

[1] Clients should note that analysts are using PE multiple valuation methodology on Sino Grandness. I.e. if either the PE valuation or earnings increase, target price will naturally increase.

*This writeup is an amended version of the original writeup which was sent to clients today before mkt opens.

Disclaimer
The information contained herein is the writer’s personal opinion and is provided to you for information only and is not intended to or nor will it create/induce the creation of any binding legal relations. The information or opinions provided herein do not constitute an investment advice, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise. You may wish to seek advice from an independent financial adviser before making a commitment to purchase or invest in the investment product(s) mentioned herein. In the event that you choose not to do so, you should consider whether the investment product(s) mentioned herein are suitable for you. The writer will not, in any event, be liable to you for any direct/indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials appended herein. The information and/or materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials