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Synear Food Holdings Ltd: In the sweet spot for growth

Summary:  Recently, we visited Synear?s operations in Zhengzhou and Chengdu
to  gain  a better understanding of its fast-growing business. From its IPO
price  of  54 cents, the stock has outperformed the market, especially with
the endorsement from the Beijing Olympic Committee which selected Synear to
be  the  exclusive  supplier  of quick freeze food products for the Beijing
2008  Olympic Games. Management outlined a fairly aggressive expansion plan
which  will  see an almost doubling in its production capacity from 360,000
mt in 2006 to 660,000 mt by 2008. Funding for this expansion plan will come
from  the recent placement of shares. With the scaling up of its operation,
Synear  is  well-positioned  to  garner  a  bigger share of the staple food
market. With the introduction of higher margin products such as new savoury
dumplings, management is seeking to differentiate its products further from
its  peers  and  improve  margins.  Valuation  is  low  vis-à-vis   China or
HK-listed consumer stocks, but looks high versus Singapore-based stocks. We
do not have a rating for Synear. (Carmen Lee)

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24% over 2006 to 2010. BUY for 12-month price target of S$2.88.