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China's pig shortage and high pork prices are expected to persist till 2Q08. However, CIMB-GK believe Synear's focus on branding and strategy of having multiple product series will serve to mitigate the impact of higher raw material costs.
Taking into account the spike in pork prices, CIMB-GK have reduced their FY07-08 earnings estimates by 3-5% and their tp to $2.60 from $2.70, still based on 30x CY08 PER. Synear remains undervalued to other market leaders in the F&B space, which are trading at more than 30x CY08 PER.
30x PER may not be unusual for China listed stocks, but I think those listed here command a lower valuation.
another good call JackJames....
....u better then some ANAL-yst....
keep it up....
| Date of change of Deemed Interest | 30-08-2007 |
| 2. | The change in the percentage level | From 7.03 % To 8.05 % |
JF Asset bought 14,050 lots of Synear , that would be about 22 million sing dollars !!!!!!
worth to take a look.. will buy more when price is below 1.5
still holding???? tomorrow shld be a good day
good luck.....
Synear closed high today @ $2.06...next target will be $2.4
a lot of brokerage houses initating buy call on this stock.. + the power of JACKIE CHAN!!..
graphs lookin positive..
From CLSA this morning!!!!!!!!!!
Gold medalist
Synear Food is China?s leading quick freeze food producer, with strength in savoury and sweet dumplings. With the last three year?s net profit CAGR growing at 82%, Synear has been one of S-Chip?s leading success story. We expect 2006-11 five year EPS CAGR expected to grow at 20%, through new product initiatives and expansion into 2nd tier cities, riding on the growing per capita consumption of frozen processed food in China. We initiate coverage with a BUY, with 27% upside to our 25x 08PE target price of S$2.42.
Beijing Olympic play
Synear is the official dumpling supplier to the Beijing Olympics. The company has capitalized on this by successfully incorporating the Olympic logo on its packaging and adding premium products to boost its ASP, supporting margins from higher raw material costs. Recent promotional efforts include the signing of actor Jackie Chan as a spokesperson for the brand, an example of the company?s continuous effort to build the brand.
In pole position
We expect Synear?s sales to grow at 30% CAGR from 2007-09, driven by expansion into 2nd tier cities and new product initiatives. The company will launch region specific products, such as dim sum from the Guangzhou plant. As the per capita consumption of frozen processed food in China is at a low of 1.2kg, there is higher growth potential for the frozen food industry as China urbanizes. The capacity expansion pipeline will grow at 20% CAGR from 360,000mt in 2006 to 900,000 mt in FY11. We also are assuming a 85% utilization rate based on the capacity achieved on 10-hour work days, which may have potential for upside compared to historical utilization rate of >90%.
Key risks
Raw materials constitute 90% of cost of goods, so any price pressure on key ingredients will affect profitability. For example, 1% increase in total COGS will lower net profit by 2.8%, ceteris paribus. With recent health scares in China, the company will have to maintain quality control to protect its brand.
Valuation
Synear is one of the higher quality S-Chip companies with a strong brand and market leader position in a high growth industry. The company deserves to trade at similar levels to its Hong Kong-listed peer. We value the company with a target price of S$2.42 based on 25x 08PE, which equals to 1x PEG 07-09 CAGR. We initiate with a BUY, with 27% upside to our target price.
Synear is at 2.02 now. A close above 2.00 will be very bullish. Thank you, Jackie! I hope we didn't have to pay too much for him. Maybe we offered free frozen dumplings for life. This kind of reminds me of George Foreman in the US who started endorsing a grill product. Once it became the George Foreman Grill and marketed on TV sales when through the roof. Whoever heard of it before then? Don't underestimate the effect of big name sponsors...
Nomura said STRONG BUY today!!!!!!!!Targets $2.68!!!!
Our view
China?s new consumers suffer the same ?cash-rich, time-poor? problems as
consumers the world over ? and Synear?s doubling of frozen food capacity is
aimed at tapping these new customers. We forecast fast-growing earnings at a
reasonable multiple, and initiate with a STRONG BUY on fair value of S$2.68.
Anchor themes
We believe that China?s consumers have begun a great leap upwards ? to higher
disposable incomes and once-in-a-generation spending growth: some 60mn people
have already made the leap to income of US$3,000 pa and we believe another
350mn are right behind. Broadly, all consumer stocks should benefit.
With rising incomes changing lifestyles, convenience will be the main trend for the
food industry in future, leading to higher demand for easy-preparation meals
Hi Bro,
Is Synear got problem in selling dumpling? Do their dumplings not popular anymore?
CIMB targets $2.6!!!!!!!!!!! This is the report.
Synear Food Holdings (S$1.94) - Initiating coverage ? Feeding China's voracious appetite
Ramping capacity to extend market leadership. Synear is the market leader for quick freeze food in China, with a 15-20% market share. Supported by its vast sales and marketing network of 546 distributors servicing over 20 Chinese provinces, the company plans to extend its market leadership by establishing manufacturing facilities in Shenyang, Chengdu, Guangzhou and Huzhou. Synear is expected to raise production capacity by 83% to 660,000mt p.a. by end-FY08.
Focus on enhancing the ?Synear? brand name. In addition to capitalising on the strong ?Synear? brand name and the tremendous market potential in China, the company is focusing on strengthening its brand equity. A more reputable brand would allow the company to sustain its strong growth momentum as repeat customers increase and customers are more willing to try Synear?s new products.
Able to raise ASP and expand margins. The strong ?Synear? brand name has allowed the company to increase its ASP to offset the impact of rising costs. It also managed to shift its sales mix towards premium products such as its ?Shoudatianxia? dumplings, the most expensive in China (almost double the price of the regular dumplings). This is paving the way for higher product prices and sustainable margin expansion.
Initiating coverage with Outperform and target price of S$2.60. Our target price is based on 30x CY08 earnings, in line with peer average. We see the current discount as unjustified given Synear?s market leadership position and strong growth potential, supported by rosy industry prospects and a clear expansion strategy. With a potential upside of 34%, we initiate coverage on Synear with an Outperform recommendation.