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It jumped as investors speculated that the firm could post strong third-quarter earnings.
"There are some expectations that there will be a re-rating on earnings improvement in the third quarter," said a trader with a regional broker.
He said investor sentiment about Want Want was buoyed by the recent strong debuts of China-linked food stocks such as Synear Food. Synear jumped 60% when it started trade on Aug. 18.
Want Want has risen by three quarters in value in the year-to-date, making it the best-performing stock on the STI, which has risen 13.3% over the same period.
CIMB-GK said volatile sugar prices have minimal impact on its raw materials cost. Sugar cost for Want Want jumped 55% yoy in 1H06 but this resulted insugar accounting for a mere 7% of total COGS for the same period. CIMB-GK estimate that a 10% movement in all raw material prices could swing Want want's gross profit by as much as 15%. However, the group has a track record of fine-tuning its pricing strategy and product mix to meet competition and any slowdown in demand.
CIMB-GK has upgraded its rating to "outperform" from "neutral" and its target price to US$1.90 from US$1.45 on the back of better earnings projections for 2007 and 2008.
"We kept our 2006 forecast intact and boosted 2007-2008 forecast by 12% and 11% to factor in the recovery of margins and higher sales assumptions," CIMB-GK said in a client note. "We see positive sales momentum in coming quarters outpacing cost pressures and also anticipate maiden contribution from its non-food and beverage segment in late 2007 arising from sales of property related projects, " it added.
The brokerage expects Want Want's net profit to grow to US$124.3m this year from US$113.8m last year, and further to US$159.9m next year, and to US$182.7m in 2008.
want want has undergone a positive rerating after results, new support at $1.21
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