Sino Grandness to suffer huge penalty if Garden Fresh listing fails in HK

But upside is substantial too.

According to Maybank Kim Eng, Sino Grandness is eyeing a separate listing of its beverage business under Garden Fresh HK on the Hong Kong Stock Exchange in 2014.

HEre's more from Maybank Kim Eng:

Our recent visit to the company in China indicated that it is on track to achieve its target profit following several initiatives by management, including the setting up of a new production base, opening of new distribution channels and several rounds of fund-raising.

There is much value in its beverage business waiting to be unlocked. A back-of-the-envelope calculation suggests that Sino Grandness’s holding in Garden Fresh could be  worth SGD383m if Garden Fresh were successfully listed in Hong Kong vs only Sino Grandness’s current market cap of SGD126m.

Huge penalty if listing fails to take off. In 2011 and 2012, Sino Grandness issued convertible bonds totaling CNY370m to Sun Hung Kai Investment and Goldman Sachs. The bondholders are allowed to convert the CBs into shares of Garden Fresh based on a predetermined PE multiple.

The main risk for Sino Grandness is that it could bear a substantial penalty if Garden Fresh fails to get listed in Hong Kong.