Foreland Fabrictech

Well Foreland has touched S$0.10 today, the conversion price for the scrip dividend scheme.

Let's see how much lower it goes. At current price the company is being valued at S$51.1 million. As per the HY2011 results they have S$38.7 million in net cash (Foreland is a zero debt company). This means the market is willing to sell the whole company for a net valuation of S$12.4 million. This is ridiculous considering the fact that Foreland earned S$13.51 million in the first 6 months of 2011 (Please refer their HY results announcement).

SOMETHING IS REALLY OUT OF PLACE HERE. dydx would really appreciate your take on this gross anomaly...

(06-09-2011, 03:38 PM)sgmystique Wrote: Foreland is now available at S$0.104 per share. That's a PE ratio of less than 2 based on the forecast EPS for 2011. So if the company is genuine and we can hold onto our investment for less than 2 years the company should be able to earn enough to pay for itself (:

This does sound too good to be true...or is it...

Only time will tell...In the meantime I need to decide whether to accept my dividends in cash or as scrip at S$0.10 per share...

(28-09-2011, 05:47 PM)sgmystique Wrote: SOMETHING IS REALLY OUT OF PLACE HERE. dydx would really appreciate your take on this gross anomaly...

All I can say for this case is that Mr Market is now totally merciless, punishing those shareholders who are not resolute enough to hold on to their shares or are in need of cash. I should add that this situation is quite common now especially for 2nd-tier stock counters. It is also important to note that there are buyers for Foreland everyday, patiently queueing at lower pirices.

Based on today's low volume done of 474 lots transacted between $0.10 and $0.101 - i.e. giving a total transaction value of approx. $47.5k - frankly I will not lose any sleep.

The coming Q3 results expected by 15Nov should confirm the sustainability of this well established business.

Well today the price is S$0.092, does not look too good for Foreland...what is a bit disturbing is the fact that volumes have completely dried up and there is a negligible buy queue for the stock...I would have felt that with their excellent results in 2011 so far and expectations of a good Q311 the price would be able to hold on...but then strange are the ways of the market...

(28-09-2011, 08:37 PM)dydx Wrote:

(28-09-2011, 05:47 PM)sgmystique Wrote: SOMETHING IS REALLY OUT OF PLACE HERE. dydx would really appreciate your take on this gross anomaly...

All I can say for this case is that Mr Market is now totally merciless, punishing those shareholders who are not resolute enough to hold on to their shares or are in need of cash. I should add that this situation is quite common now especially for 2nd-tier stock counters. It is also important to note that there are buyers for Foreland everyday, patiently queueing at lower pirices.

Based on today's low volume done of 474 lots transacted between $0.10 and $0.101 - i.e. giving a total transaction value of approx. $47.5k - frankly I will not lose any sleep.

The coming Q3 results expected by 15Nov should confirm the sustainability of this well established business.

INCREASE IN REGISTERED AND PAID UP CAPITAL OF FULIAN KNITTING CO., LTD.

Further to the announcement on 11 December 2008, the Board of Directors of Foreland Fabrictech Holdings Limited (the “Company”, together with its subsidiaries, the “Group”) wishes to announce that the registered capital of its wholly-owned subsidiary, Fulian Knitting Co., Ltd. (“Fulian”), was further increased from RMB202,280,000 to RMB242,280,000, and its paid-up capital was recently increased from RMB202,351,545 approximately S$16,953,000) to RMB221,624,505 (approximately S$20,553,000).

The increase in the paid-up capital of Fulian was made by way of a cash injection using the proceeds of the Company’s placement exercise completed in June 2011, and shall be used to fund the working capital requirements of Fulian.

The above transaction is not expected to have any material impact on the consolidated net tangible assets and earnings per share of the Group for the financial year ending 31 December 2011.

None of the Directors or the controlling shareholder of the Company has any interest, direct or indirect (other than through their shareholdings in the Company), in the above transaction.

With cash and bank balances of RMB 192.353 million (S$39.32 million) as per 2Q11 results, I wonder why Foreland had to have a placement exercise to fund working capital requirements. It does not make any logic to keep increasing your paid up capital by making share placements when your share price is going to the dogs. dydx your thoughts please...

(06-10-2011, 09:57 AM)sgmystique Wrote: With cash and bank balances of RMB 192.353 million (S$39.32 million) as per 2Q11 results, I wonder why Foreland had to have a placement exercise to fund working capital requirements.

i suppose this is why foreland is trading at a PE of less than 2. a business that has to seek funding for its working capital is not a good sign. you can imagine the worst when it has substantial cash in its bank accounts.

sgmystique Wrote:With cash and bank balances of RMB 192.353 million (S$39.32 million) as per 2Q11 results, I wonder why Foreland had to have a placement exercise to fund working capital requirements.

This appears very similar to the case of Dapai (fka China Zaino) which also did a share placement at below NTA, despite being debt-free and basically swimming in cash. Some simple explanations: the cash on the balance sheet is fake, or the controlling shareholder is an idiot.

Certainly there are other possibilities. But I am not smart enough to come up with more complicated answers. Occam's Razor usually suffices, anyway. If it walks like a duck and quacks like a duck...

As usual, caveat investor.

d.o.g..... always entertaining and informative.
If it walks like a duck and quacks like a duck....
then it's good enuff for us to roast it and make Peking duck out if it.

(06-10-2011, 07:52 PM)d.o.g. Wrote:

sgmystique Wrote:With cash and bank balances of RMB 192.353 million (S$39.32 million) as per 2Q11 results, I wonder why Foreland had to have a placement exercise to fund working capital requirements.

This appears very similar to the case of Dapai (fka China Zaino) which also did a share placement at below NTA, despite being debt-free and basically swimming in cash. Some simple explanations: the cash on the balance sheet is fake, or the controlling shareholder is an idiot.

Certainly there are other possibilities. But I am not smart enough to come up with more complicated answers. Occam's Razor usually suffices, anyway. If it walks like a duck and quacks like a duck...

As usual, caveat investor.

I own some foreland stocks. Let me add my probably biased viewpoints.

The additional >$160m capex required (estimated in a Aug 11 NRA Research report) and china companies' liking for excess cash explain the share placement.

Foreland updated in Dec 09 of construction cost over-run of $294m for its new factory. This explained the large capex required.

Next, its recent price drop is not unexpected. Foreland is badly affected during the last recession. Recently, the market is pricing in a likely recession down the road. Hence, Foreland unsurprisingly shows a large price drop.

Last, if I recall correctly, Dapai's share placement was a bit different. Its share placement price was below cash per share and this was pretty odd.

I thought it is relevant to note that CEO Tsoi Kin Chit has actually opted to take the full amount of the $0.0051/share Interim dividend in scrip, and accordingly 13,710,869 new shares have been issued to him.....
http://info.sgx.com/webcorannc.nsf/Annou...endocument
This has also raised his stake to 53.44% (from 52.59%) - an indication of his longer term commitment to Foreland's business.

Of course, Tsoi is not alone here, as another 3,856,863 new shares have been issued to other shareholders who also opted for scrip.

I think foreland fabrictech is one of the better s-chips. If you look at websites like NextInsight, they are covered extensively. CFO Simon Wong comes to Singapore to showcase the company's product. I got to say its technology is really remarkable. Also, they are recently featured in the Straits Time's weekly S-chips interview. But I am faced with many questions regarding their business. Will post a list over here soon to see if any of you guys might know the answers to it. However, just being curious, any private investor managed to meet up with the management themselves? Either through phone, email or face-to-face.

One of my main concern is why do S-chips like to dual-list elsewhere? If it's for the additional capital, then why the need for so much capital given the strong cash holding? "Chinese liking to hold lots of cash" isn't a good reason unless we know why they LIKE to hold it. Besides, it is common sense that business that constantly require placement burns capital and is never good for shareholders (let alone minority ones like us). The only other reason I can think of is that other listing allows better valuation. If that's the case, then the company no longer has any incentive for their listing in SGX to attain "fair valuation" since this will be better attained elsewhere (HK/Taiwan).. Might turn out to be a value trap.