Want Want China 0151

[winston]

Not vested. Am not impressed with the management for setting up a hospital in China when the company was listed in SGX. They are now reborn and listed in HK. I think raw materials will hit them..

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Today's focus is on Want Want China (151), one of the mainland's leading food and beverage manufacturers. It has a 68.6 percent market share for rice crackers, 40.6 percent for flavored milk and 28.5 percent for soft candy.

Want Want also produces yogurt and carbonated drinks, ready-to-drink coffee, herbal tea and milk powder. Its range of snacks include popsicles and nuts.

CLSA said Want Want is the best value-to-quality play in the consumer-staples sector, with the widest EBIT margin and highest profit base relative to its peers. CLSA has a "buy" rating on Want Want, noting its Return on Equity of 31.3 percent.

CIMB-GK Research projects earnings-per-share growth of 25 percent for three years at Want Want, supported by sales compound annual growth rate of 27 percent as well as the highest gross margins in the sector. It also has the least exposure to rising raw material prices.

Nomura, after visiting the company's factories, maintained its "strong buy" rating and targeted a fair value of HK$4.50.

[winston]

Not vested. I still remember their foray into the hospital business many years ago when they were listed in SGX..

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Want Want China aims for second listing in Taiwan By Faith Hung

TAIPEI, Sept 9 (Reuters) - Want Want China Holdings (0151.HK: Quote, Profile, Research, Stock Buzz), one of China's biggest snack makers, said on Tuesday it plans to offer shares in Taiwan, responding to new government measures aimed at getting more Taiwan firms to list at home.

Want Want China, consisting of the China-based assets of Taiwan's Want Want Group, will use shares held by its major stakeholders to make the offering of Taiwan depositary receipts (TDRs), said Chief Financial Officer Everett Chu.

( Winston's comments: Why are they selling ? )

The company would continue to have its primary listing in Hong Kong.

Chu did not provide a timetable or amount for the Taiwan offering, which the Chinese-language Economic Daily said could be worth about $100 million.

"We are thinking of doing a TDR offering in Taiwan, and we'll do it very soon," Chu told a media briefing. "We're doing this in response to the Taiwan government's policy aimed at getting Taiwan firms to come back home to list."

Chu added that Want Want China's capex budget for this year is about $180 million, and should be between $150-200 million in 2009.

Want Want's move is part of broader efforts by Taiwan to attract its firms that are operating in China to come home for listings, as Taiwan business ties with China have improved under the administration of new President Ma Ying-jeou. [ID:nSP344373]

Prior to recent policy changes, Taiwan firms with more than 40 percent of their net assets in China were barred from making public offerings in their home market -- the result of past measures designed to discourage over-reliance on China.

China has claimed self-ruled Taiwan as its territory since the end of the Chinese civil war in 1949 and pledged to bring the island under its rule, by force if necessary.

Despite close economic ties that have seen Taiwan firms invest more than $100 billion in China over the last two decades, diplomatic relations across the Taiwan Strait were icy for much of the last eight years under the previous administration.

Want Want kicked off its IPO in Hong Kong in March, and has expanded beyond its core business by buying hotels and an insurance firm in Taiwan on expectations of better trade ties between China and the island.
Want Want listed in Singapore in 1988 and delisted in September 2007.

( Winston's comment: Hotels: ok; What do they know about insurance ? )

On Tuesday, shares of Want Want rose 0.29 percent in Hong Kong, outperforming the Hang Seng Index's .HSI 1.46 percent drop.

[winston]

STOCK ALERT - Want Want tumbles in HK as China food-safety crisis worsens

HONG KONG (XFN-ASIA) - Want Want China Holdings Ltd shares were sharply lower as China's food safety crisis widened after the toxic chemical melamine was found in milk produced by many of the country's leading dairy producers.
At 10:48 am, Want Want, a mainland-based rice cracker and beverage maker, was down 0.5 hkd or 16.6 pct at 2.51.

Other mainland-based food makers were also lower.

Beverage and instant noodle maker Uni-President China Holdings Ltd, a unit of Taiwan's Uni-President Enterprises, was down 0.12 hkd or 5.0 pct at 2.28.

Beer maker Tsingtao Brewery was down 0.44 hkd or 3.02 pct at 14.12, while wine and beverage producer China Foods was down 0.02 hkd or 0.76 pct at 2.61.

[winston]

Not vested. Was not impressed with their decision to build a hospital when they were listed in S'pore. And will probably not be interested in them for a while due to the current dairy scandal in China

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From GS:-

Valuation scenario for a potential 2-3 year double

• WWCH is currently trading at 14X our 2009E EPS estimate, a discount to peers’ average of 20X, but with similar earnings growth outlook. We believe the discount is mainly due to its short track record (the stock was listed in March 2008) and concern on margin sustainability. We believe that its profitability is sustainable and that the valuation discount will diminish over time as investors become more familiar with the company.

• A 20X forward P/E, in line with peers’ average multiple, on our 2011E forecasted EPS of US$0.04 implies a price of HK$6.6, nearly double from current level.

Fundamental long-term outlook/strategic advantage

WWCH has a well diversified and balanced product portfolio in the China snack food market, with leading market position and strong brand. The company is a niche participant with unique consumer group (mainly children and teenagers).

WWCH enjoys higher operating margin (20.8% in 2007, vs. 5.2%-12.7% for peers), which is sustainable in our view, given its more differentiated product mix, less price-sensitive consumer group and lower risk for price competition. Compared with other F&B competitors in China, WWCH has less cost pressure on the back of its diversified inputs exposure and is unlikely to face government policy control on pricing. Hence we view it as a more defensive stock amid market concern on the potential slowdown in China economy/consumption demand.

Current view
WWCH has been dedicatedly expanding its distribution network in to 2nd-tier cities and counties since 2007. Its 1H08 results indicate encouraging results from the expansion with strong volume growth of rice crackers. We believe the efforts on network building and market penetration will drive further sales growth and margins will improve with better product mix, higher selling prices and better operating efficiency. The recent weakness in edible oil price and raw milk price should also help to release margin pressure.

Key risks
Risks include unexpected movement in raw materials prices, worsethan- expected competition and potential changes in consumer taste/preference, which the management may fail to anticipate and react to.

[winston]

DJ MARKET TALK:Want Want China May Fall Despite FY Results Inline

0833 [Dow Jones] Want Want China (0151.HK) may fall on profit-taking following yesterday's 4.3% rise to HK$3.17, after rice-cracker maker's results, released after market close, show 2008 net profit +30.6% on-year at US$262.66 million, roughly in line with Thomson Reuters forecast of average US$258 million from poll of 12 analysts, despite net profit margin falling 1.5 percentage points to 16.9% due to cost pressure from raw materials, rise in tax expense.

But any decline set to be limited as stock remains a favorite for defensive qualities, with FactSet data showing most analysts rating at Hold or above; data also indicate consensus estimates expect FY09-10 EPS to rise 22% each year. 10-day moving average of HK$3.06 set to offer immediate support.

[winston]

DJ MARKET TALK: Want Want +6.6%; High Div Payout Sweetener-Nomura

1146 [Dow Jones] Want Want (0151.HK) +6.6% at HK$3.38, outperforming vs HSI's 1.1% fall after company reported FY08 net profit +30.6% on-year. Nomura says while results largely inline with house's expectations, but FY dividend payout ratio of 99% (dividend yield at 4.9%) surprised house on upside vs management guidance of no less than 30%; tips high dividend as sweetener.

Says although dividend payout not a regular basis, long-term high dividend payout possible. "It's reasonable for Want Want to have a high dividend payout ratio given its limited capital requirements as a result of its already established nationwide layout of production plants and strong operating cash flow," says Nomura. Keeps at Buy, target HK$3.80. Stock may revisit early high of HK$3.42; next resistance likely at 52-week high of HK$3.67, set May 22, 2008

[winston]

DJ MARKET TALK: Want Want +6.0%; Guoco Tips As Undervalued

1447 [Dow Jones] Want Want China (0151.HK) +6.0% at HK$3.36, with high dividend payout ratio (99% in 2008) ?supporting buying interest. "We believe it is undervalued (trading at 16X 2009 P/E) given its dominating position in several niche markets and larger exposure to lower-tier cities, which are less affected by economic slowdown," says Guoco Capital.

Keeps EPS forecasts for 2009, 2010 at 20 HK cents, 24 HK cents, respectively. Keeps at Buy, target HK$3.52 based on 18X 2009 P/E. Early high of HK$3.42 as immediate cap

[winston]

DJ MARKET TALK: Want Want China +2.8%; Good Div Payout Ahead - MS

1144 [Dow Jones] Want Want China (0151.HK) +2.8% at HK$3.35, extending 2.8% rise Friday after solid FY results (net profit +31% on-year), with high dividend payout ratio of 99% (dividend yield at 4.9%). Morgan Stanley raises target to HK$3.80 vs HK$3.60, keeps Overweight rating, while tipping earnings +21% in 2009 from gross margin expansion, more effective channel management.

"With strong brand franchise and strengthening channel management, we believe Want Want has solid foundation to counter economy slowdown," says Morgan Stanley. Notes company has US$284 million of cash end-2008, with net cash position of US$117 million, lower capex plan in 2009 of US$102 million; hence tips good payout ratio of 40%-60% in 2009-2011. Friday's high of HK$3.43 tipped as near-term cap

[winston]

DJ MARKET TALK: GS Ups Want Want Target To HK$3.75 From HK$3.64

1429 [Dow Jones] STOCK CALL: Goldman raises target of Want Want China (0151.HK) to HK$3.75 from HK$3.64, increases EPS forecasts (on HK dollar basis) slightly by 1%-3% for 2009-2010 following FY results last week.

"Gross margin should improve in 2009 with lower input costs and more benefit could be seen from (the second quarter of 2009)," says Goldman. House says robust growth, good earnings visibility and high dividend payout could continue to drive stock. Keeps at Buy and Conviction Buy. Stock +3.7% at HK$3.38.

[winston]

DJ MARKET TALK: Want Want +2.8%; Margins To Improve In 2009 -ICEA

1555 [Dow Jones] Want Want China (0151.HK) +2.8% at HK$3.35, vs HSI's 2.5% fall, extending Friday's 2.8% rise with solid FY results, high dividend payout supportive. ICEA tips Want Want's gross margin to improve slightly due to lower raw material costs and packaging material costs in 2009. Adds, company keeps introducing new products to grab market share from peers.

"We expect Want Want to outperform Tingyi (0322.HK) in the near-term since we believe the company has better execution in a recessionary-proof industry amid a slowing economy," says ICEA. House does not rate Want Want, but adds based on market consensus, its 2009 profit expected to rise about 25% on-year; if attaching 20X target P/E multiple, preliminary target set at HK$3.90. Early high of HK$3.40 as immediate cap