3 reasons why Sino Grandness can post higher earnings in FY12

DMG expects 3Q12 earnings of RMB77m.

DMG reviewed the numbers and believe that earlier earnings estimates – which were in line with consensus – may be too conservative. As such, DMG raised its FY12 earnings estimates by 11%, making it the most bullish on the street.

Here's more from DMG:

We are expecting 3Q12 earnings of RMB77m vs RMB45m in 3Q11. Our bullish stance is backed by: 1) Stronger orders for its export canned foods from Europe, 2) Raised ASP and gross margin assumptions for its asparagus and mushroom canned foods to be in line with 2Q results, 3) Lower opex and finance cost assumptions.

This has resulted in our net margins rising from 14.1% to 15.5%. We change our valuation methodology from sum-of-parts to P/E and derive a higher TP of S$0.65, pegged to 3x FY13F earnings (mean historical trading band). Results will be announced on Nov 6th after market close with a results briefing to be held the following day.