TS Wonders (1767 HK) - Tai Sun

The main thing is that most Chinese business family is more worried about 富不过三代 than making more money or building a legacy. The aim is to maintain and secure the pie than to grow it.

The listing of the business still allows for majority (family) control and the large pool of IPO cash helps to allay the above concern.

There is a need to differentiate founder led business vs family businesses. Their modus operandi is very different.

Family led businesses listed on the exchange often led to substantial inefficient capital allocation and often poor share price performance.

OWH
www.weightedresearch.com

(22-01-2022, 12:40 PM)ongweehiang Wrote: The main thing is that most Chinese business family is more worried about 富不过三代 than making more money or building a legacy. The aim is to maintain and secure the pie than to grow it.

I am not Chinese, so thanks for this perspective. I try to invest with prudence myself too, but in this case of TS Wonders I wonder if they fail to meet their obligations towards the IPO investors with their extreme caution. Let me add one more thought here.

Brexit and the US-China trade war are issues that develop gradually over the long term. TS Wonders was listed January 2019. I assume they have the proceeds from this listing available for investment within a few weeks. If you study the Wikipedia timelines that I linked, there are no particular shocking escalations concerning Brexit or the Trade War in those first few weeks of 2019. Both issues have been the same mess for at least a year at that time. Why did TS Wonders proceed with the listing in the first place if they consider Brexit and the Trade War as such extreme risks?

They could have considered these political issues before starting the listing process. Together with my doubts whether these two issues are relevant to their business to begin with, I wonder if they disclosed the true motivations for their decision not to invest the IPO proceeds. But here I can only speculate.

TS Wonders existing business is still good. I will keep the stock on a watchlist and keep an eye on the coming management decisions. Perhaps they will at some point overcome their caution and proceed with the investment plans (which seem sensible) without hesitation.

I'm guessing that they IPO'ed in Jan 2019, with the view that they needed funding to support new OEM business, particularly the Meadows brand for Dairy Farm which was launched late 2019/early 2020 according to Dairy Farm's reports.

From visiting cold storage, they do the potato chips (those $1 packets) and many of the nuts products under Meadows brand in SG. They don't do the newer Tortilla Chips and Potato Sticks products, which could have been missed opportunities that maybe explain why the capex plans never materialized. Incidentally a Tortilla chips production line was a significant component of the use of IPO proceeds.

That they chose to list in HK (where they were probably promised higher achievable valuation at IPO), instead of in SG where they will surely get a better following, suggests they much prefer to go under the radar rather than go make minority shareholders happy. The 3 siblings paid themselves a big bonus in 2020, i guess something like 15 months bonus each bringing their total comp to slightly below $1 mil each. It was a record year for them so understandable but worryingly they rewarded themselves but not shareholders.

Still its cheap and if it continues to generate cashflow without major capex, then it will trade at near zero EV soon at this price level. More concerned where the business goes after the covid bump driving up demand for snack products and whether there is really growth potential for their own brand Nature's Wonders snacks in Malaysia.