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SCMP Reporter

Products made by Want Want China Holdings may not appeal much to sophisticated adults, but the stock of  Asia's largest rice-cracker maker is one of the most wanted in the current volatile market.
Thanks to sustained profit  growth during the economic downturn, the company, which   is due to unveil on Thursday its first full-year results since its debut in March last year, is regarded as a safe haven by analysts.
Want Want, the second-largest food and beverage firm  on the Hong Kong stock market by market value, is expected to report a net profit of US$258.05 million, up 27.43 per cent from a year ago,  the mean estimate  by 16 analysts polled by Thomson Reuters shows.
Revenue is expected to jump 35.45 per cent to US$1.49 billion from US$1.1 billion a year earlier, the survey shows.
 Of the 16 analysts  polled, 10  had a 'strong buy' rating for the stock, five   made a 'buy' recommendation and one  had a 'hold' rating.
Analysts say Want Want's business is defensive and least affected in an economic downturn.
A BOC International report said that during a recession, consumers  tended to buy small, comforting items rather than large, luxury  goods.
'Want Want has always been among our top buy picks on its good earnings visibility and  relatively cheap valuation,' said Emma Liu, an analyst  at Nomura.
Shares in Want Want are trading at 19.54 times forecast earnings, according to Bloomberg. By comparison, those of Tingyi (Cayman Islands) Holding Corp, a leading maker of packaged food,  have a price-earnings ratio of 24.59 times.
Want Want was a bright spot in an otherwise bleak market last year, climbing 11.58 per cent since last March.  Its shares closed unchanged at HK$3.07  on Friday.
The company, 51.1 per cent owned by founder and chairman Tsai Eng-meng, produces and sells rice crackers, dairy products and other snack foods on the mainland.
Mr Tsai, whose net worth is estimated by Forbes at US$2.6 billion, was  under the spotlight recently for his personal investment in loss-making Asia Television,  Hong Kong's smaller terrestrial broadcaster.
Earlier last year, Mr Tsai and his family offered about NT$20.4 billion (HK$4.53 billion) for Taiwan's China Times Group.
Analysts said  although  Want Want did not attract as much attention as  its chairman,  it was a niche player with a strong sales force.
'Want Want focuses on a niche market and has positioned itself as a branded snack-food manufacturer. As such, its gross margin is a lot higher than other Chinese [food and beverage] players,'  BOCI said,  adding that  the firm  had a 40 per cent gross  margin in 2007,  higher than its mainland peers'  average of 31 per cent. 
In the first half of last year, Want Want increased the average selling price of its rice crackers  2 to 12 per cent and its beverage products  3 per cent because of rising prices of raw materials such as palm oil and rice.
It further managed to increase the selling price of fried rice crackers by 20 per cent in the second half despite drops in raw material prices.
The BOCI report expected  Want Want to hold its prices steady  this year and next.
'Owing to its dominance in the marketplace, Want Want has strong pricing power,' said Ms Liu. 
'And the low-ticket prices of its products indicate that consumers are not price-sensitive to these snacks.'
According to market research  firm AC Nielsen, Want Want's share of the mainland rice snacks market increased to 68.6 per cent in the first half of 2007 from 59.3 per cent in 2005. Its nearest competitor  had a market share of only 3.2 per cent.
Want Want was one of the first Taiwanese businesses to operate on the mainland. 
In 1989, Mr Tsai registered his Want Want trademark on the mainland, the first Taiwanese  brand to be registered there. 
Three years later, Want Want officially entered the mainland market with its products.



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