China Sunsine Chemicals Holdings

It was indeed a bit surprising that price corrected 10% despite strong set of 3Q results. On deeper thought, was it really surprising? There would be people who were vested since the price was around 20 cents and it was only nature if they wanted to cash out now. There would also people who panic seeing the price slide and started selling. One swallow doesn't make a summer and we also shouldn't read too much into 1 day's price movement. I don't know what cause the price slide today, who knows? However, I do know I still can hold at this price and I admit I might need to sell if the price drop further. Keeping watch closely. Vested.

confession time for clarity
i sold some at 50cents lately
huat ah

wahkao Wrote:what reason might that be?

you got to ask the people who sold down

Did they feel not safe with their money , etc ...

Just to share...I attended the results briefing this week. Q4 results may not be as good as Q3, nevertheless it will be a record year for China Sunsine. A few of the attendees were pushing for an increase dividend payout in view of the record year. FC will feedback this message to the chairman. Do note profit margin cannot continue at current high levels due to easing of shortage and competitors increasing their supply. FC also mentioned they are fine if margins retrace to low 20s level instead of 30s in the last qtr.

My take.. I will continue to be vested and can add if there is a bigger price pullback. Strong eps and NAV of about 40ct (SGD) should be a good buffer.

Wah Lau,

Sorry that I have caused so much stir here...

I have no vested interests... largely due to the following:

i) I only invest in Chinese SOEs
ii) I only invest in companies with low beta business models, ie non cyclical, better predictability
iii) Preferably solid asset backed in regulated regime
iv) with stable cashflows over time
v) track record of good dividends, ie sharing of cashflow - preferably meaningful part of which - ie real business generating real cash;
vi) I have a portfolio of odd lots and the number of share certificates of drowned SChips are simply amazing. Luckily they are my stamp collections. Compared all these bad experiences to those that have lost their precious savings in decimated S chips over the years on top of their previously demised CLOB and dotgone shares, I m lucky to have pay low tuition fees for rich and painful experiences.

Anyway, this company is too tough for my ability. I have made a general statement in the light of another fallen star Sino Madness...

I hope that I will be given a chance to "Move On". I have no interests in how much you guys have made and lost.

Its only money and many a times for the sake of long term harmony and friendships, we should be more forgiving... moreover we are mostly invisible on a online community...

All the best in all your analysis here.

GG
Sincerely Apologetic
No Vested Interests

mslee888 Wrote:Just to share...I attended the results briefing this week. Q4 results may not be as good as Q3, nevertheless it will be a record year for China Sunsine. A few of the attendees were pushing for an increase dividend payout in view of the record year. FC will feedback this message to the chairman. Do note profit margin cannot continue at current high levels due to easing of shortage and competitors increasing their supply. FC also mentioned they are fine if margins retrace to low 20s level instead of 30s in the last qtr. My take.. I will continue to be vested and can add if there is a bigger price pullback. Strong eps and NAV of about 40ct (SGD) should be a good buffer.

as already mentioned before , such margin gain is not sustainable in a very competitive environment . There will be reversion to mean . If one manages to buy below 20 cents and sell at around 50 cents on average , it is already a big Huat .

(04-11-2014, 11:29 AM)portuser Wrote: Earlier, it was disconcerting to see Sunsine taking new loans successively, sending outstanding borrowings, in 10 months, from RMB 230m (as at 31 Dec 2013) to RMB 369m (as at 23 Sep 14).

We now know, from the two recent business updates, that higher borrowings paid, partly, the aggregate RMB 234m for three completed projects, namely steam/electricity plant (RMB 150m), 15,000-tonne 6PPD capacity (RMB 80m) and 4,000-tonne MBTS capacity (RMB 3.5m).

Current borrowings should be RMB 329m as two loans amounting to RMB 40m maturing last month were paid off without replacements.

Sunsine has stated that the 4,000-tonne MBTS project at the Weifang base was completed with a mere RMB 3.5m.

Before constructing the Weifang base, Sunsine announced in 2010 (?) that the base, ultimately housing 50,000 tonnes of accelerator capacity, would start off with only 10,000 tonnes with subsequent capacity addition dependent on demand. The initial RMB 100m capital cost back then covered infrastructure that would benefit future new capacities.

MBTS now sells for more than RMB 20,000/tonne. Revenue from 4,000 tonnes will be RMB 80m. Net margin of the RMB 80m should be higher than Sunsine’s 2Q overall net margin of 11%, as fixed costs will not be incurred for the incremental production. Even at 11%, net profit arising from selling the 4,000 tonnes of MBTS will be RMB 8.8m, more than twice the RMB 3.5m capital cost.

Weifang base now has an accelerator capacity of 24,000 tonnes. There is room for another 26,000 tonnes. If incremental capital cost continues to stay low, payoff will be big.

The same goes for the 8,000-tonne DCBS capacity under construction to be completed before year end. As Sunsine has shared, the company ceased producing DCBS earlier because the conventional process adopted then was pollutive. It is reintroducing this product after acquiring cleaner process.

DCBS therefore can fetch good price now. Even if it is just RMB 20,000/tonne, the RMB 9m capital cost is dwarfed by an estimated RMB 17.6m profit (based on 11% net margin of RMB 160m revenue).

More importantly, Sunsine’s share of global accelerator output will be close to 20%, from 17% before the addition of the 12,000 tonnes.

I don't like company to take on loan unless it is justify and clearly accounted for. In Sunsine case, in my view, I am glad they passed! Their loans based on 3Q report stand at 366m and if you read it in conjunction with their rules 704 and 728 SGX announcements, you would realise that their actual loan could be as low as 328m NOW. This is because 2 loans that matured in Oct 14 were paid off. How do we know? Because they are no new 704/728 announcement on new loan taken.

Going forward, with strong 2Q and 3Q results, plus expected on par 4Q results, coupled with reduced capex, the company should pay off more loans. They could reduce the loans by another 69m if 3 more loans that mature in Dec is paid off without replacement of new loans. Do they have to take on new loans? I'd be surprised if they do, as the company just completed several expansion projects.

The full FY14 EPS is expected to be SGD 10 cents. The NAV as of FY 3Q is already SGD 43.5 cents. If FY15 results are as good or even declined slightly, the company is still in strong position to generate high profits. What would they do with the increased cash? dividends?

Having said the above, this is s-chip. A lot of people are wary of s-chip, so am I so I will take no chances. By my reckoning, the company should not chalk up any more debt and I will be watching it closely. They are doing a great job with the receivable as they managed to obtain promissory note from banks for some of their receivable (206m?).If they can pare down debt it would be fantastic and I see increase in dividend as a result.

Another thing I noticed is that company did not paint rosy picture for future prospects. They simply pointed out in matter of fact manner what are the challenges ahead, i.e., curbing of tire import by US, softening of ASP, etc. They also pointed out they are well equip to face the challenges as the company should increase it market shares with expanded capacity.

In summary, if there is no more new loans and those loans that mature in Dec 14 are paid off, maybe it is time to buy more shares.

AmFraser analyst has released the following report after 3Q result.

"3Q14 blows past expectations. Sunsine’s reported 3Q14 revenue of RMB582.2m (+32% yoy) and net profit of RMB83m (+206% yoy), versus our estimates of RMB555m (+5% variance) and RMB71m (+17% variance), respectively. Key variance from our projections came from, higher than expected rubber accelerator (RA) sales volume, lower than expected raw material costs, depreciation and tax. "


http://nextinsight.net/index.php/story-a...les-volume-

(15-11-2014, 11:48 AM)mslee888 Wrote: Just to share...I attended the results briefing this week. Q4 results may not be as good as Q3, nevertheless it will be a record year for China Sunsine. A few of the attendees were pushing for an increase dividend payout in view of the record year. FC will feedback this message to the chairman. Do note profit margin cannot continue at current high levels due to easing of shortage and competitors increasing their supply. FC also mentioned they are fine if margins retrace to low 20s level instead of 30s in the last qtr.

My take.. I will continue to be vested and can add if there is a bigger price pullback. Strong eps and NAV of about 40ct (SGD) should be a good buffer.

It is consistent with my view. The company performance is highly depended on ASP, and the ASP might pull back, upon competitors resume production, as early as 4Q this FY. The pull back can be as bad as -40%, as experienced by last occurrence in FY2008/2009.

(not vested, but monitoring closely)

I was at the results briefing too.
Management shared that the top two competitors have yet to resume production of rubber accelerators. One of them cannot meet environmental regulation while the other have sold its plant to someone not in the rubber accelerator industry.
It is likely that supply is likely to remain relatively tight for at least a few quarters and that may explain why Sunsine is expanding so rapidly at the moment.
Management also confirmed the low capex required for rubber accelerator expansion as the infrastructure has already been built previously. Only new machineries need to be install.
DCBS is a high end and high margin rubber accelerator and is selling at around RMB24,000 per tonne as in the AM Fraser Nextinsight report.
Sunsine is still negotiating with the government on the compensation for the Facility 1 relocation. As Facility 1 has been written down to nearly zero in Sunsine's book, any compensation will be counted as 'pure' profit.