Sunmart Holdings Limited 
 

Main catalysts

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Favourable industry prospects. The global packaging industry is worth about US$424 billion. The Chinese government considers packaging a vital industry. According to the China Packaging Federation, the value of China ’s packaging industry production is estimated to exceed RMB1.2 trillion this year. 
 
The robust growth of the pharmaceutical sector in China has been creating significant business opportunities for packaging companies. The Chinese government introduced policies to accelerate the transformation of the country’s medical regime which could potentially develop the pharmaceutical packaging sector further. 
 
The amount of money a typical household spends on FMCG products is significant and recurring. The demands for the products are also linked to country GDP, consumer goods spending, population growth, increasing income levels and so on. With these factors in mind, we can see that this industry will likely do well going forward and thus benefitting downstream FMCG manufacturing companies like Sunmart.

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Korean Dual Listing.Sunmart is seeking a dual listing on the KOSDAQ market of the Korea Exchange (“KRX”). The listing in Korea gives Sunmart access to funds to purchase machinery/equipment as well as lower its debt levels. We like the fact that being in Korea opens doors for the Group to tap into potentially new customers and thus widen its geographical reach.

 
Recommendation

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At the last traded price of S$0.21, Sunmart is trading at a FY10F PE of 8.2x and FY11F PE of 7.4x. Based on the industry prospects and company fundamentals, we initiate with a BUY recommendation with a target price of S$0.33, representing a potential upside of 57.1% from the last traded price.