China Minzhong Food Corporation

I think analyst reports are still useful in the sense that it provides additional insights to perspectives which we may not have realized. If we're vested in it, then it is natural that we will be biased. However, an investor should be aware of his/her bias and not be totally blind towards it. For instance, I make it a point to double check on my CMZ analysis and tries to counter-argue the pointers of the research report. I can't be for certain that my counterargument is always right and it may be biased at times but at least I know what my risks are and when the next quarterly results are out, I know what to look out for, what to evaluate and whether my strategy should be changed.

I think the saddest thing is to get 'killed' by a stock plunge without even knowing why.

Of course, as for target prices, we won't attach too much weight to it as it is often based on a short term outlook. But still, it can be a good reference to how the markets will be. Analyst reports sometimes can be a ST catalyst as well.

(16-07-2012, 06:06 PM)dzwm87 Wrote: I think analyst reports are still useful in the sense that it provides additional insights to perspectives which we may not have realized. If we're vested in it, then it is natural that we will be biased. However, an investor should be aware of his/her bias and not be totally blind towards it. For instance, I make it a point to double check on my CMZ analysis and tries to counter-argue the pointers of the research report. I can't be for certain that my counterargument is always right and it may be biased at times but at least I know what my risks are and when the next quarterly results are out, I know what to look out for, what to evaluate and whether my strategy should be changed.

I think the saddest thing is to get 'killed' by a stock plunge without even knowing why.

I agree that one of the only usefulness of analyst's reports are really their additional insights. As for the rest, it will really do much help to ignore the noise totally. But then again, without them (the brokerage reports), we will lose these 'additional insights'. So from a vested interest standpoint, i should really hope people continue to listen to such reports and may those brokerage houses flourish and generate more market liquidity!

Personally, i think the saddest thing is to REPEAT my own mistake..

(16-07-2012, 10:54 PM)weijian Wrote: I agree that one of the only usefulness of analyst's reports are really their additional insights. As for the rest, it will really do much help to ignore the noise totally. But then again, without them (the brokerage reports), we will lose these 'additional insights'. So from a vested interest standpoint, i should really hope people continue to listen to such reports and may those brokerage houses flourish and generate more market liquidity!

Personally, i think the saddest thing is to REPEAT my own mistake..

Firstly, I frankly doubt I'm anywhere much smarter than the general markets. So I believe brokerage reports do have their credibility at times but they are for a very short term perspective.

But I doubt a lot of people put in much effort in doing extensive due diligence work and I doubt a lot of people can be emotionally-disciplined. I can prioritise my time to accommodate for the former but I guess the latter will be a lifelong lesson since emotions is really a function of many variables!

Yes you're right.. repeating one's own mistake should be avoidable as well!

(17-07-2012, 04:20 PM)dzwm87 Wrote: But I doubt a lot of people put in much effort in doing extensive due diligence work and I doubt a lot of people can be emotionally-disciplined.

In this case, how do you conduct your due diligence?
I mean it is kind of hard since the farms are so far away. I googled, baidu or whatever search engine and I could not even find one meter square of farmland photo.

So, I thought all agriculture companies are liked that but when I searched Bumitama, I could find lots of palm plantation photos of Bumitama.

Maybe the farms are there but I am just felt that it is all too virtual.

(17-07-2012, 04:55 PM)yeokiwi Wrote: In this case, how do you conduct your due diligence?

I can't be 100% sure that CMZ's farmland is certainly there. Even if there's a picture of the farmland, it doesn't certify anything except creating a false sense of security - pictures can be faked as suggested by Huabao Intl. It doesn't need to be a Chinese S-chips to allow fraud to happen.

I think what makes CMZ different (with respect to farmland) is this:
1. They are more transparent in their disclosure - their FY2010 or FY2011 AR has a list of their leased farmland. And they are the only agricultural company (at least from what I know) who makes the effort to do this. Chaoda doesn't and China Green doesn't either. Of course, the list can be a fake. Nobody can guarantee this. But if they truly want to create a fraud then by going through all this means of exposing themselves (by creating a fake list), it's either they want to steal the cash big time or they are genuine. As of date, we know management may have yet to cash out any huge sum at all.

2. They organize site visits to their new processing plant in Putian. They do have site visits to their old Putian plant as well. In fact, I suppose there is an analyst site visit sometime this month but I'm not sure if it was executed. I believe you can request to their IR if you're interested but at my investment level, my cost-benefit weight suggests otherwise.

3. Lastly, Templeton's huge investment stake. Even though their investment is not my primary anchoring factor, it does show a strong signal with regard to CMZ business. I know it can be a free ridership issue but I supposed the mgmt will tackle this similar issue before putting in a huge stake.

But I agree with you, there is always that possibility of fraud just as much as I can't prove against it 100%. But at current level, it is a discomfort level that I am comfortable with.

I certainly won't enter if CMZ was trading at around 80c or even past a dollar. But at around their all-time low, the market has probably priced in too much pessimism?

Sigh, am I the only one for CMZ now? :x

---

GAM has ceased to become a substantial shareholder. They had been net sellers ever since 3Q FY12

dzwm87,

Chin up

Consider now as on-the-job training.

Review your analysis 12 months from now and you will know what you have missed, or what you didn't know you already knew now

Lonely is good. Builds character.

One day you maybe the only analyst to issue sell cals when all your comrades are crying buy buy buy! And vice versa.

(not vested)

(17-07-2012, 05:31 PM)dzwm87 Wrote:

(17-07-2012, 04:55 PM)yeokiwi Wrote: In this case, how do you conduct your due diligence?

I can't be 100% sure that CMZ's farmland is certainly there. Even if there's a picture of the farmland, it doesn't certify anything except creating a false sense of security - pictures can be faked as suggested by Huabao Intl. It doesn't need to be a Chinese S-chips to allow fraud to happen.

I think what makes CMZ different (with respect to farmland) is this:
1. They are more transparent in their disclosure - their FY2010 or FY2011 AR has a list of their leased farmland. And they are the only agricultural company (at least from what I know) who makes the effort to do this. Chaoda doesn't and China Green doesn't either. Of course, the list can be a fake. Nobody can guarantee this. But if they truly want to create a fraud then by going through all this means of exposing themselves (by creating a fake list), it's either they want to steal the cash big time or they are genuine. As of date, we know management may have yet to cash out any huge sum at all.

2. They organize site visits to their new processing plant in Putian. They do have site visits to their old Putian plant as well. In fact, I suppose there is an analyst site visit sometime this month but I'm not sure if it was executed. I believe you can request to their IR if you're interested but at my investment level, my cost-benefit weight suggests otherwise.

3. Lastly, Templeton's huge investment stake. Even though their investment is not my primary anchoring factor, it does show a strong signal with regard to CMZ business. I know it can be a free ridership issue but I supposed the mgmt will tackle this similar issue before putting in a huge stake.

But I agree with you, there is always that possibility of fraud just as much as I can't prove against it 100%. But at current level, it is a discomfort level that I am comfortable with.

I certainly won't enter if CMZ was trading at around 80c or even past a dollar. But at around their all-time low, the market has probably priced in too much pessimism?

Sigh, am I the only one for CMZ now? :x

---

GAM has ceased to become a substantial shareholder. They had been net sellers ever since 3Q FY12

That remind me on WB quote

"In this game, the market has to keep pitching, but you don’t have to swing. You can stand there with the bat on your shoulder for six months until you get a fat pitch."

When in doubt and the stock investment involve too much of uncertainty, should we just ignore and move on to next one?

The market has plenty of worthy stocks for us to invest time and take advantage of

Templeton is not endorsement that its safe bet. So many ppl has been con by chinese. Earlier on we have all the frugal china man telling us how careful with money.

The share price is not performing, that means money must be exiting some where? Some1 knows something, either IPO price too high and projected earnings is too high.

The sell down is not done yet and from past experience, once the china man gets tired of same old price staying put, they will think of other means to exit. The long arm of the law for sure they do not fear.

+plus the fact, agri is a hot sector, yet it is performing so badly - this really freak me out!!

(17-07-2012, 05:31 PM)dzwm87 Wrote:

(17-07-2012, 04:55 PM)yeokiwi Wrote: In this case, how do you conduct your due diligence?

I can't be 100% sure that CMZ's farmland is certainly there. Even if there's a picture of the farmland, it doesn't certify anything except creating a false sense of security - pictures can be faked as suggested by Huabao Intl. It doesn't need to be a Chinese S-chips to allow fraud to happen.

I think what makes CMZ different (with respect to farmland) is this:
1. They are more transparent in their disclosure - their FY2010 or FY2011 AR has a list of their leased farmland. And they are the only agricultural company (at least from what I know) who makes the effort to do this. Chaoda doesn't and China Green doesn't either. Of course, the list can be a fake. Nobody can guarantee this. But if they truly want to create a fraud then by going through all this means of exposing themselves (by creating a fake list), it's either they want to steal the cash big time or they are genuine. As of date, we know management may have yet to cash out any huge sum at all.

2. They organize site visits to their new processing plant in Putian. They do have site visits to their old Putian plant as well. In fact, I suppose there is an analyst site visit sometime this month but I'm not sure if it was executed. I believe you can request to their IR if you're interested but at my investment level, my cost-benefit weight suggests otherwise.

3. Lastly, Templeton's huge investment stake. Even though their investment is not my primary anchoring factor, it does show a strong signal with regard to CMZ business. I know it can be a free ridership issue but I supposed the mgmt will tackle this similar issue before putting in a huge stake.

But I agree with you, there is always that possibility of fraud just as much as I can't prove against it 100%. But at current level, it is a discomfort level that I am comfortable with.

I certainly won't enter if CMZ was trading at around 80c or even past a dollar. But at around their all-time low, the market has probably priced in too much pessimism?

Sigh, am I the only one for CMZ now? :x

---

GAM has ceased to become a substantial shareholder. They had been net sellers ever since 3Q FY12

I'm a noob. I believe in CMZ, lost quite a bit of money, but still believe in CMZ. haha.
However, i also think that near term sentiments is really negative on the stock, especially Chinese stocks in general. Just look at the Shanghai Index, its one of the worst performing market in the world, except for some of the European markets. Its no surprise the stock should trend down given the worries over the assets, after all the concerns over the land rights have never been solved. This is unlike the Chinese property market which is highly regulated and controlled, with a physical building to observe (even from google maps). After Sino-forest, there is Chaoda (a competitor of CMZ), and then most recently there is Evergrande. Guess as concerns will never end.

Without actual land rights, its hard for CMZ to borrow at low rates, though the recent rate cuts should benefit them. Hopefully with a shift into industrial buildings, they are able to turn towards cheaper (secured) borrowings, allowing them to leverage up for higher returns. I thought secured borrowings from established banks kind of show that the assets are there, since the banks will have to go 'rigorous' credit reviews, taking copies of the building ownership documents etc. Besides, with the government eager to support SMEs and food security, i still think that agriculture is to benefit.

That said, mushrooms and vegetables arent staple like corn, so you wont see CMZ rallying like the other agricultural commodities. (i kind of think mushrooms are 'luxury' lol) They don't exactly benefit from the recent droughts. Historically, if it is to be believed, CMZ has always been rather lucky in that its fields in Fujian area were seldom affected by the droughts or floods.

As one of the analyst reports have mentioned (forgot which one). Think the catalyst would only be when CMZ starts giving out dividends. At a PE ratio of 2x, and perhaps a 30% dividend payout ratio, dividend yield would be 15%. That should provide some support for the stock. Actually, I wouldnt be that surprised if the company suddenly announces some dividends to boost stock price, especially this is the final quarter.
On the other hand, the high growth seemed to be tampered out due to higher staff costs etc... not too sure if earnings growth will return. Have to see the results from this quarter.

Finally, technicals look bad due to sell off from funds. As mentioned 1 year ago, the private equity funds (e.g. GAM) has a date to sell off the assets to redeem the fund. As seen in the announcements today and recently, seems like the selling down is taking place once again. That should continue to put pressure on the stock. Finally, the stock is now at its all-time low, technical speculators are unlikely to support the stock given its 'uncharted' status. A rebound would probably have to wait.

Just 2 cents worth... just here to learn... appreciate comments Thanks!

** not vested **

(17-07-2012, 05:31 PM)dzwm87 Wrote: Sigh, am I the only one for CMZ now? :x

LOL! Hi dzwm87, i am with you! I m vested too.

As SMOL mentioned, consider this OJT as part and parcel of a lifetime of investing. It is much easier to stay in the comfort of the crowd.
Of course, the Market is always the Great Humiliator - just don't lose the pants off when He proves us wrong - It is better always better to lose now and pay for the lesson, rather than attending the same lesson X years later!