Sino Grandness

Kim Eng on 9 Oct 2014

• Maintain HOLD & SGD0.73 TP (average of two scenarios).
• 80.5% of first CBs extended to end-Jun 2015. Balance redeemed. Eases short-term liquidity pressure.
• But biggest test lies ahead. Has until end-Jun 2015 to list Garden Fresh. Otherwise, has to fork out CNY700m for bonds and penalties.

What’s New
Sino Grandness has announced that bondholders, holding 80.5% of the principal amount of its first tranche of convertible bonds (CNY100m in principal) issued to Sun Hung Kai Investments, intend to exercise their rights to extend the CBs’ maturity date from 19 Oct 2014 to 30 Jun 2015. Sino Grandness has redeemed the remaining 19.5%. Their principal and interest, totalling CNY37.9m,was paid on 6 Oct 2014. The redeemed CBs will be cancelled, reducing the outstanding principal from CNY100m to CNY80.5m.

What’s Our View
This is only a minor victory for Sino Grandness, in our view. It eases the market's concern over liquidity risks arising from bond  redemptions. With the settlement of the first tranche and recently-raised funds of SGD52m from a share placement to Thai investors, its next liquidity risk “due date” has been pushed to end-Jun 2015.

However, its biggest catalyst remains Garden Fresh’s IPO. If this cannot be completed before Jul 2015, a much bigger liquidity risk will arise in nine months’ time. This is when Sino will need to fork out CNY700m to redeem its CBs: 80.5% of the first + 100% of second tranches and penalties for not listing Garden Fresh. Maintain HOLD. No change to our EPS or TP of SGD0.73, based on average of the two scenarios, with and without IPO.