Stock Outperform Call: China Kangda with a target price of 0.72 by CIMB-GK

CIMB-GK Research said it has initiated coverage of frozen meats supplier China Kangda Food Co Ltd with an "outperform" rating and a target price of 0.72 sgd, given the strong growth prospects of the company going forward.
"With several initiatives in the pipeline, including trying to beef up Japanese sales and introducing onion rings with a strong debut in the US, we expect positive news flow and successful execution to provide share price catalysts," CIMB-GK analyst Kerryn Tay said in a note.
She said she expects to see a 22 pct year-on-year revenue growth for China Kangda in the fourth quarter, accounting for 35 pct of 2006 revenue, driven by processed food due to new product launches.
The brokerage forecasts China Kangda posting sales growth of 14 pct and 28 pct this year and next to 511.3 mln yuan and 654 mln, respectively.
"Going forward, we expect continuing strong growth to come from the processed food business. This upside will however be offset by lower average selling prices for rabbit meat, higher depreciation costs and lower gross profit margins as more research and development activity takes place," Tay said.
She added that China Kangda offers good exposure not just to China but also to its growing exports.
"We look positively on its diversified revenue base as well as its secure supply base," Tay said.
At 10.20 am, China Kangda was up 0.035 sgd or 6.93 pct at 0.540 on volume of 10.04 mln shares.