Sino Grandness

(27-05-2013, 08:27 AM)felixleong Wrote: management of sino grandess is pretty shady, if they had needed $$ for expansion they should had gone to the market for a simple bond issue, instead they got into such a complex CB

if you really go study the CB you will understand that its almost a sure win for goldman and very little to negative value for shareholders

Perhaps they have some credit rating issue. Need other sophisticated investor buddies to confirm.

generally if one is a listed company, should have no problems borrowing $$, unless itself has high gearing

can issue bonds to accredited investors, no need crediting rating also can
example olam bonds are not rated

can also borrow from banks, or raise cash via rights or warrants

in my view doing this CB is really like the worst type of way to raise $$, very high risk/cost

If I am not mistaken, it is the beverage subsidiary (and not the Group) which issued the CB. So its quite interesting that the listed entity isn't raising funds.

CB has been a popular means of fund raising. Generally, the interest rates are much lower than the conventional bank loan so it could be attractive to fast growers. There has been defaults among S Chips in the past like China Milk or Celestial Nutrifoods. Though last year, we have seen some companies issuing CB again - Sound Global issued convertible bonds due in 2015 and has been repurchasing them partially, CM Pacific issued 1.25% convertible bonds due in 2015. So I won't immediately claim CB is bad form of financing.

CB if properly done can be a good way to raise funds

but sino's CB is quite different from the regular CB we see in the market

normally for CB investors, heads get low interest rates, tails stock prices gets high I convert and get capital gains

this CB for sino grandness is very very different
for goldman its heads I win as you have to pay me a big fine, tails the IPO is successful and I get to cash out big

if both heads or tail is a nice gain for goldman, who is the one on the losing end?

I think this is only a simple way of my explaining it, but if you do have the time, please full go through sino gardness's CD, when you get the full picture maybe you will understand what I'm trying to say ^^

cheers

Why then is Sinograndness willing to take the "short end" of the stick? there must be a reason.

Is it because the margin from the drink business is so fat that it can easily cover for the CB interest payments?

(27-05-2013, 07:56 PM)Stockerman Wrote: Why then is Sinograndness willing to take the "short end" of the stick? there must be a reason.

Is it because the margin from the drink business is so fat that it can easily cover for the CB interest payments?

Even if true, if there is a better option out there, nobody will choose the worse alternative.

I focus little creditability in Nextinsight as its usually involve interested parties transactions

(27-05-2013, 08:58 AM)portuser Wrote: The following Nextinsight article contains some relevant info:
http://www.nextinsight.net/index.php/sto...n-shenzhen

Possible for Sinograndness to be the next Coca Cola or F&N or Pepsi of China?

(27-05-2013, 11:29 PM)Underdogger Wrote: Possible for Sinograndness to be the next Coca Cola or F&N or Pepsi of China?

Personally, I'd like to believe so. But only time and numbers will tell. As growth in current 1st tier regions will become saturated overtime, I'm hoping that their marketing efforts in 1st tier would see them far in 2nd and 3rd tier as word of the xian Lu yuan (garden fresh) brand spreads. Their insane growth in revenue is not unjustified, as China is just so huge! As long as competitors are kept at bay (but I believe this is hard to track unless we pay China regular visits), and the reputation/ brand remains strong from effective and cheap marketing/ advertising, I think Sino Grandness is safe bet for this coming year at the very least.

I wouldn't be too optimistic and say its going to become as successful as coca cola or Pepsi. After all, it still has a long way, but I have faith in Huang.

Now to address the bond issue that felixleong raised. From what i understand from my bit of research, zero coupon convertible bonds pay no interest to shareholders, so for the issuer, it's a good thing as it lowers their funding cost. Also, its a debt with an equity feature- again, good for the issuer, because it allows them to acquire fundings in the future much more easily once the debt is converted to equity. This is especially important for a growth company like sino grandness as with high gearing and difficulty in acquiring funds, it wont be able to expand so easily as it wishes. For the shareholders, such zero coupon bonds offer higher yield than normal bonds as they are usually at a huge discount to par value. So in a way, even without receiving interest payments, the higher yield kind of offset this disadvantage to shareholders.

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(27-05-2013, 10:47 PM)2V. Wrote: I focus little creditability in Nextinsight as its usually involve interested parties transactions

(27-05-2013, 08:58 AM)portuser Wrote: The following Nextinsight article contains some relevant info:
http://www.nextinsight.net/index.php/sto...n-shenzhen

Care to explain more? You mean to say the reports are fairly biased?

(27-05-2013, 06:56 PM)felixleong Wrote: CB if properly done can be a good way to raise funds

but sino's CB is quite different from the regular CB we see in the market

normally for CB investors, heads get low interest rates, tails stock prices gets high I convert and get capital gains

this CB for sino grandness is very very different
for goldman its heads I win as you have to pay me a big fine, tails the IPO is successful and I get to cash out big

if both heads or tail is a nice gain for goldman, who is the one on the losing end?

I think this is only a simple way of my explaining it, but if you do have the time, please full go through sino gardness's CD, when you get the full picture maybe you will understand what I'm trying to say ^^

cheers

Totally Agree... IIRC they did this deal with GS because they were strapped for cash... can't remember why but that should give an indication that they had low bargaining power

(27-05-2013, 11:53 PM)MrMsus Wrote: Now to address the bond issue that felixleong raised. From what i understand from my bit of research, zero coupon convertible bonds pay no interest to shareholders, so for the issuer, it's a good thing as it lowers their funding cost. Also, its a debt with an equity feature- again, good for the issuer, because it allows them to acquire fundings in the future much more easily once the debt is converted to equity. This is especially important for a growth company like sino grandness as with high gearing and difficulty in acquiring funds, it wont be able to expand so easily as it wishes. For the shareholders, such zero coupon bonds offer higher yield than normal bonds as they are usually at a huge discount to par value. So in a way, even without receiving interest payments, the higher yield kind of offset this disadvantage to shareholders.

It is good thing for issuer (esp CFO) is right, but not for shareholders when stake is diluted when converted, OTOH probably not positive either if share price don't move high enough to be converted. Company and shareholder can have diverse interest, and also diverse interest from management.

And shareholders are not the same as bond holders who are compensated by the discount to par.