China Essence

Hi JZK

why do u think starch price is still so depressed, despite the drop in overall starch production volume industry-wide?

Tks.

(30-05-2013, 02:15 PM)jzk Wrote: Sad but true. We are heading towards inevitable bankrupcy. In my opinion, the only way to salvage any shareholder value is chopping the company to pieces. They have five production facilites, of which they currently only use three. They have some patents and facilities in animal feed product line. Should there be any possible ways to sell those assets, they would recover even some amount of cash. With current working capital they are in a very quick death spiral ending in either current fiscal year or 2015.

Selling assets with reasonable prices may prove to be tricky, since all potential buyers know, that the assets would be fire-sold very soon. After selling animal feeds and unnecessary production facilities well below book prices the company would still be in difficulties, and the business volume would be just a fraction of what it used to be.

The other possible exit is teaming up with another company. Especially in this case it seems really unplausible, that mr. Zhao would ever find an ally to offer decent prices/conditions for merger.

I am preparing myself for writing this one down. But that's just investing. The only way to avoid all mistakes is to do nothing.

(02-06-2013, 09:45 PM)potatolover Wrote: Hi JZK

why do u think starch price is still so depressed, despite the drop in overall starch production volume industry-wide?

Tks.

(30-05-2013, 02:15 PM)jzk Wrote: Sad but true. We are heading towards inevitable bankrupcy. In my opinion, the only way to salvage any shareholder value is chopping the company to pieces. They have five production facilites, of which they currently only use three. They have some patents and facilities in animal feed product line. Should there be any possible ways to sell those assets, they would recover even some amount of cash. With current working capital they are in a very quick death spiral ending in either current fiscal year or 2015.

Selling assets with reasonable prices may prove to be tricky, since all potential buyers know, that the assets would be fire-sold very soon. After selling animal feeds and unnecessary production facilities well below book prices the company would still be in difficulties, and the business volume would be just a fraction of what it used to be.

The other possible exit is teaming up with another company. Especially in this case it seems really unplausible, that mr. Zhao would ever find an ally to offer decent prices/conditions for merger.

I am preparing myself for writing this one down. But that's just investing. The only way to avoid all mistakes is to do nothing.

If the asset of CE is of any value, the banks would have moved and taken possession of them. I am not vested but would like to see one of the major shareholders, Mr Ng, would have anything to say of this company.

Mr Ng (Ser Miang) is probably busier with some other things - IOC presidency...

(03-06-2013, 07:10 AM)xlandjy Wrote:

(02-06-2013, 09:45 PM)potatolover Wrote: Hi JZK

why do u think starch price is still so depressed, despite the drop in overall starch production volume industry-wide?

Tks.

(30-05-2013, 02:15 PM)jzk Wrote: Sad but true. We are heading towards inevitable bankrupcy. In my opinion, the only way to salvage any shareholder value is chopping the company to pieces. They have five production facilites, of which they currently only use three. They have some patents and facilities in animal feed product line. Should there be any possible ways to sell those assets, they would recover even some amount of cash. With current working capital they are in a very quick death spiral ending in either current fiscal year or 2015.

Selling assets with reasonable prices may prove to be tricky, since all potential buyers know, that the assets would be fire-sold very soon. After selling animal feeds and unnecessary production facilities well below book prices the company would still be in difficulties, and the business volume would be just a fraction of what it used to be.

The other possible exit is teaming up with another company. Especially in this case it seems really unplausible, that mr. Zhao would ever find an ally to offer decent prices/conditions for merger.

I am preparing myself for writing this one down. But that's just investing. The only way to avoid all mistakes is to do nothing.

If the asset of CE is of any value, the banks would have moved and taken possession of them. I am not vested but would like to see one of the major shareholders, Mr Ng, would have anything to say of this company.

Does anyone know whether the AGM will be held in China or Spore?

2.7 cents.

bids are at 1.5 cents...

(02-06-2013, 09:45 PM)potatolover Wrote: Hi JZK

why do u think starch price is still so depressed, despite the drop in overall starch production volume industry-wide?

ks.

Honestly, I don't have a clue. There might be some hidden wisdom behind all these comments of "government controlling the prices". As I don't understand the dynamics of state-controlled invisible hand of free markets, I just might be a wrong man to answer.

You are in the core of my central mistake in this case. What I expected was, that the sales margins would recover in the spirit of free market economy, or being helped by government. Even after losing some hard-earned money in CE, I don't buy the conspiracy theory. There are no "big boys intentionally screwing the small investor" in this case. I can't see, how the government or the "big boys" would benefit from this progress, so why bother.

At this stage, my original (too large) investment has diminished by 90%, and the rest has no fiscal meaning for me personally. So I will concentrate on other investments, with high hopes of finding a winner in the endless pile of Chinese small&mid caps. I don't think I learned anything from this experience, but it has been fun so far. Too expensive, though.

A lot of S-chips with high gearing will fail.
it is just a matter of time...

there is an intentional withholding of liquidity to rein in credit growth.

******

"By allowing rates to remain high for so long, the PBOC is sending a message that market participants should not take for granted that they will always have access to cheap interbank loans," says Mark Williams, economist for Capital Economics. "The bigger picture is that credit continues to grow at an unsustainable pace."
This is the real target of the China's new economic leadership, led by Prime Minister Li Keqiang. Li, who has a PhD in economics from Peking University, took the unusual step of retaining Zhou as Central Bank governor, even though he had reached the mandatory retirement age.
Now the pair are running a live experiment on the Chinese economy – the central bank is not independent. This first credit crunch is likely to be followed by a wind back of total lending.
"The PBOC seems to have intentionally withheld liquidity in the past two weeks to try to rein in credit growth," says Wang Tao, China economist for UBS. She expects money market rates to stay "elevated" and credit growth to slow. "We also think there is an increased risk of an unintended liquidity crunch as some of the complex off-balance sheet activities unwind."
That narrative remains intact despite the fact that short term interest rates eased back on Friday amid reports the central bank had selectively intervened to provide liquidity.
None of these stories are good for Australia. While disappointment is not unexpected with Japan, it remains Australia's second largest trading partner. A US recovery is clearly good – except that QE funding was also pouring into Australian markets.
But China . . . Not only is there an increased risk of a so called Black Swan event within China's financial markets, but the new policy is also about lower growth.
In trying to gradually deflate China's credit bubble the new leadership is signalling a willingness to accept a slower economic growth rate.
This will surely lead to lower iron ore prices and more falls in the seaborne coal market, which is already struggling as China begins to address its chronic environmental issues. On a more positive note, China's change of direction is really about reform. That means there should more access to the tightly controlled financial services sector and potential opening up of areas like health, transport and energy to private capital.
Green shoots – but for the moment the elephants are still stomping around.

China Essence has missed its Dec 2012 CB payment. Now it missed its June 2013 payment.

Will it has cash to start the upcoming production cycle?

I hardly doubt so. this is one counter to be included in "Short S-chip Fund"..

anyone still holding this stock?[/align]

Many of the original shareholders could still be holding, in the hope that company will turn around when starch price recovers..

a. Debt to equity ratio was 150% at end March 2013. CB, DBS and local bank borrowings were more than equity of company; the company is in net negative equity position.

b. NAV has reduced by 100% compared to 1 yr ago. Now it is approx 29 cents.

Has the starch price recovered? unfortunately, the answer is no.
it is no assurance that company can start the new harvesting season as there is hard any cash on hand.
then the next question is why does the local banks continue to renew their loans with the company?
Will the Chinese govt buy up this debt-ridden company in extremis? If so, at what price? 5 cents? 10 cents?

Mr Ng Ser Miang must have been very pissed off...

What are the valuation for distressed assets? Will minority shareholders get back anything?

(Not Vested)

Auditors are issuing some statements to cover their own backsides...

The key is Essence has no supporting evidence to provide to auditors to show that banks are willing to renew the loans, etc...

it is just a matter of time before death comes....