Sino Grandness

If the loquat's claim is true that only a small fraction of trade and other receivables are more than 90 days old, why don't the loquat then wait for 90 days to get back 1.4bn and pay back the bondholders, invest in capex and also grow their loquat trees? Why do they keep raising money from placement, CBs and the thai?

Note higher taxes paid.
In my book you don`t pay higher taxes unless you have to!
PGL (vested)

Someone posted some photos taken from china tesco.

http://www.nextinsight.net/index.php/for...=282#21301

(19-11-2014, 09:56 PM)Young Investor Wrote: Someone posted some photos taken from china tesco.

http://www.nextinsight.net/index.php/for...=282#21301

From the photo = Date of production is June 2014. Today, product on shelf for sale. Almost 5 months old. Expiry is 12 months.

Supermarket are well known to pay suppliers on long credit term and collect cash upfront from customer, negative cash conversion cycle. If we assume that the average credit term to customer is 90 days, then the drinks are in stock [at company warehouse] for about 60 days. Is it appropriate to carry two months or longer stock balance in a FMCG industry?

The photo imply that the product is not that fast moving afterall.
(not vested)

(19-11-2014, 12:24 PM)specuvestor Wrote: In addition just want to understand if I am reading it right: Capex also can claim VAT? I always thought it is only for sale of goods and services ie transaction related.

"When the Hubei factory was being built, the subsidiary paid the construction costs plus input VAT. The input VAT that is with the local tax department has remained as VAT receivable in Sino’s accounts and can be used to offset the output VAT on products sold by the Hubei subsidiary in the future"

Firm runs into VAT in two ways.

When firm A buys goods or services, it pays the vendor the purchase price plus VAT. The VAT is known as input VAT incurred by firm A.

When firm A sells goods to firm B, firm A charges the selling price plus VAT. The VAT is known as output VAT collected by A. This same VAT is also the input VAT incurred by firm B.

VAT operates on the principle that firms in the value chain do not bear the burden of input VATs. The input VATs they incur can be set off against the output VATs they collect. The burden of VAT is solely borne by final consumers.

The Hubei factory is where raw materials are converted into beverages. The input VAT incurred by the Hubei subsidiary for constructing the factory as well as the input VAT incurred for raw material purchases are treated on the same footing.

(19-11-2014, 02:04 PM)chinafarmer Wrote: If the loquat's claim is true that only a small fraction of trade and other receivables are more than 90 days old, why don't the loquat then wait for 90 days to get back 1.4bn and pay back the bondholders, invest in capex and also grow their loquat trees? Why do they keep raising money from placement, CBs and the thai?

A reasonable and powerful point !

(19-11-2014, 11:04 PM)Arowana Wrote:

(19-11-2014, 02:04 PM)chinafarmer Wrote: If the loquat's claim is true that only a small fraction of trade and other receivables are more than 90 days old, why don't the loquat then wait for 90 days to get back 1.4bn and pay back the bondholders, invest in capex and also grow their loquat trees? Why do they keep raising money from placement, CBs and the thai?

A reasonable and powerful point !

Chinafarmer must be joking only.

Garden Fresh's cash flows will be severely affected and it would mean that moving forward they sell only on cash basis and stop giving credit terms.

(19-11-2014, 11:00 PM)portuser Wrote:

(19-11-2014, 12:24 PM)specuvestor Wrote: In addition just want to understand if I am reading it right: Capex also can claim VAT? I always thought it is only for sale of goods and services ie transaction related.

"When the Hubei factory was being built, the subsidiary paid the construction costs plus input VAT. The input VAT that is with the local tax department has remained as VAT receivable in Sino’s accounts and can be used to offset the output VAT on products sold by the Hubei subsidiary in the future"

Firm runs into VAT in two ways.

When firm A buys goods or services, it pays the vendor the purchase price plus VAT. The VAT is known as input VAT incurred by firm A.

When firm A sells goods to firm B, firm A charges the selling price plus VAT. The VAT is known as output VAT collected by A. This same VAT is also the input VAT incurred by firm B.

VAT operates on the principle that firms in the value chain do not bear the burden of input VATs. The input VATs they incur can be set off against the output VATs they collect. The burden of VAT is solely borne by final consumers.

The Hubei factory is where raw materials are converted into beverages. The input VAT incurred by the Hubei subsidiary for constructing the factory as well as the input VAT incurred for raw material purchases are treated on the same footing.

Thanks portuser I know and understand what you have explained except for the following which I assume you are saying YES to capex being an input tax:

"The input VAT incurred by the Hubei subsidiary for constructing the factory"

This is something that I am not aware and will find out more. Thanks

(19-11-2014, 10:41 PM)Yoyo Wrote:

(19-11-2014, 09:56 PM)Young Investor Wrote: Someone posted some photos taken from china tesco.

http://www.nextinsight.net/index.php/for...=282#21301

From the photo = Date of production is June 2014. Today, product on shelf for sale. Almost 5 months old. Expiry is 12 months.

Supermarket are well known to pay suppliers on long credit term and collect cash upfront from customer, negative cash conversion cycle. If we assume that the average credit term to customer is 90 days, then the drinks are in stock [at company warehouse] for about 60 days. Is it appropriate to carry two months or longer stock balance in a FMCG industry?

The photo imply that the product is not that fast moving afterall.
(not vested)

It's not about whether it's on the shelves: key issue is actually as below:

(28-10-2014, 10:39 AM)specuvestor Wrote: But I agree with the premise that the sales prima facie seemed stretched as per the VIC report, even though the product is definitely there. The issue is volume.

(20-11-2014, 09:55 AM)Adagio Wrote:

(19-11-2014, 11:04 PM)Arowana Wrote:

(19-11-2014, 02:04 PM)chinafarmer Wrote: If the loquat's claim is true that only a small fraction of trade and other receivables are more than 90 days old, why don't the loquat then wait for 90 days to get back 1.4bn and pay back the bondholders, invest in capex and also grow their loquat trees? Why do they keep raising money from placement, CBs and the thai?

A reasonable and powerful point !

Chinafarmer must be joking only.

Garden Fresh's cash flows will be severely affected and it would mean that moving forward they sell only on cash basis and stop giving credit terms.

I am not joking.

If receivables are really 1.4bn RMB and most can be collected back within 90 days, loquat cash inflow will be 1.4bn RMB 90 days from 30 September 2014.

(19-11-2014, 10:46 AM)budgetier Wrote: Thank you very much for highlighting that trade receivables included 17% VAT that will be handed over to Government later.

As 3Q trade receivables of RMB 1,163m were inclusive of 17% VAT, the net amount belonging to Sino Grandness would then be RMB 994m. This would be lower than 3Q sales of RMB 1,022m.

By the way, why did Sino owe so little (RMB 8.7m) to Government at the end of 2013 since its annual sales were RMB 2,261m?

Exports do not attract VAT as domestic sales do.

Sino Grandness does not disclose how much of the RMB 1,163m trade receivables were owed by foreign customers.

Your estimate that RMB 169m (1,163m – 994m) was the VAT within the RMB 1,163m trade receivables is on the high side as exports are not liable for VAT. The note below shows that VAT was more likely to be RMB 130m.

In China, net VAT (the difference between output VAT and input VAT) is paid monthly. This explains why as at 31 Dec 13, Sino owed the various local tax departments a mere aggregate of RMB 8.7m.

It is tough to pay the tax departments before customers settle their bills, even tougher for companies experiencing rising domestic sales.

In Singapore, net GST is paid quarterly.

Note

If foreign customers and local customers take the same amount of time to pay up, then the money they owed can be roughly apportioned as follows:

(a) 3Q 14 Domestic sales….RMB 893m (= 763m + 130m [being 17% VAT])
(b) 3Q 14 Exports……………..RMB 259m
Total………...……………………….RMB 1,152m.

The estimated RMB 1,152m owed by foreign and local customers is close to the RMB 1,163m trade receivables reported by the company.