China Minzhong Food Corporation

The lessons learnt (Do feel free to cut this and continue the list)
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1) Be weary about analyst buy calls and their computation of values. Short prior to this ordeal analyst is still putting out buy calls and suddenly the cease coverage
2) Check the motivations of substantial shareholders in pushing the company in the right or wrong directions. Areas to check are amount of holdings, type of renumerations and warrants issued
3) Be realistic about exceptionally good margins, profits. Check against other industry competitors to see if there is a realistic justification why they are better
4) Compare the total returns since IPO to minority shareholders (and perhaps against substantial shareholders) versus the amount they raise during IPO to see if minority share holders are getting a good return
5) Check the level of withholding tax paid from the parent company to ascertain whether the funds raise in IPO are truly used in the operations or kept offshore (or anywhere else) and also if the cash flows to parent is fabricated
6) Large receivables accumulated that do not match Sales perhaps is a red flag of underlying issues (in this case and CH Offshore)

When investing in S-Chips always put FEAR at the top of the pecking order.
Fear is the one thing that will keep you alive when thing starts to turn

(27-08-2013, 10:55 AM)Temperament Wrote: Very good for you. i always believe in the stock market is so complicated that there are always ways to make money more than you can think of. If you only know how. How?

How?

I buy on the belief that the government is so afraid of backlash they will quietly step in and do the necessary. Of course I don't think they will ever officially admit it.

consider china aviation oil debacle, dbs minibonds - both affected a lot of people and investors what happened, temasek took over CAO and DBS repaid investors for minibonds if these are not cases of "subtle" government intervention and bailout then what is.

(27-08-2013, 10:47 AM)sgd Wrote:

(27-08-2013, 10:31 AM)starcraft_76 Wrote: I believe many of us here had went through the pain of involving in a bad trade / investment.

Me not excluded, as I had bought Fibrechem in early 2008. I had lost make a paper loss of 5 figures amount, likelihood to become realized loss sometime in futures, as Fibrechem had been in trading halt for many years until today.

Lesson Learnt: Never make a buy decision just because some analyst put a buy call to a stock. History had shown too many time that the buy call could keep being downward adjusted over and over again by the same analyst or broker house when the price move downward.

I had since write off my investment in Fibrechem, but keep the track record as a reminder.

That's where you and many people got it wrong. I don't know whether you noticed that MAS will not let a company go under. over the years have seen many companies in the red eventually halted and placed under a judicial manager and eventually things got better from there.

I like to use Mediastream, it is the only company that has the best "worst case" scenario. Before it was halted and placed under jm it went thru a series of reverse takeovers from at least 2 different suitors and then it still lost money, it was negative capital for sometime and eventually halted and placed under JM who cleaned up, found and brought in the current owners.

Yongnam also same thing, was in trouble placed a judicial manager who managed to clean up and turn things around.

I put money investing in these 2 cigar butts and made money after several years. Since then I'm always on the look out for cigar butts to put money in.

... fiberchem huh I'll bear that in mind.

You could be right..

If the company did turn around, it will still be a good surprises for me, since it mean that I will be able to reinstate some $$ from the investment that I had written off.

Anyway, I don't really put a high hope on it as it is a S-Chip after all, where the jurisdiction is hard to reach.

(27-08-2013, 08:08 AM)kelvesy Wrote: I nearly wanted to invest in this counter when I encountered it. I could have probably be another victim of CMZ.

However, what stopped me was, its absurd profit margins and the rate of growth. Can selling mushrooms be that profitable? And also, some of their photos look photoshopped. When something is too good to be true, I probably would avoid it.

I am not sure which respectable companies will want to resort to using photoshopped photos.
Changing the hue, brightness, sharpness are fine. But, cut and paste is simply absurd.

Especially for a company that has a revenue of more than RMB 2 billion and there is no available ready plant to show your magnificent production facilities?

Like many of you here, I too have been hit by a few of these S-chips. I too bought into CMZ but sold off last year at a loss of a five digit sum and never look back. Most recently, it was Sinopipe. The loss is even bigger. And this is why I do concur very much with Temperament's signature, which is a constant reminder.

Having paid such big lesson fees, I think it is important that we at least pick up a thing or two. Thanks to all who so willingly shared your experiences here. It really makes the learning curve shorter for anyone who who wants to learn.

Would I shun S-chips? Maybe, maybe not. My emotions, based on my experience, tells me yes, I should avoid ALL that starts with China-something or Sino-something. However, stepping back and asking myself: what do I know about these companies, I realise it is not these companies that we should be blaming (though in my heart, I will be cursing the CEOs, SGX and whoever I can think of), Like what Jared Seah said, I have only got myself to blame. Just look at what Glaucus Research dig out, though they didn't do much, as what weijian and d.o.g. said. On hindsight, they looked so obvious.

And some of us set rules as a protection against our investment, as Cityfarmer had earlier mentioned. I too did that, except that I always break those rules. Time to get back and do these so called 2nd level thinking.....

Yes. I learnt a lot. Liquidated all my S-Chips position at a substantial loss. A few Days ago, I'm still sitting at a healthy gain.

Whatever, life goes on

Time to do some value hunting.

(27-08-2013, 11:24 AM)Wildreamz Wrote: Yes. I learnt a lot. Liquidated all my S-Chips position at a substantial loss. A few Days ago, I'm still sitting at a healthy gain.

Whatever, life goes on

Time to do some value hunting.

Wish you All The Best & Luck in your value hunting!

(27-08-2013, 11:08 AM)starcraft_76 Wrote:

(27-08-2013, 10:47 AM)sgd Wrote:

(27-08-2013, 10:31 AM)starcraft_76 Wrote: I believe many of us here had went through the pain of involving in a bad trade / investment.

Me not excluded, as I had bought Fibrechem in early 2008. I had lost make a paper loss of 5 figures amount, likelihood to become realized loss sometime in futures, as Fibrechem had been in trading halt for many years until today.

Lesson Learnt: Never make a buy decision just because some analyst put a buy call to a stock. History had shown too many time that the buy call could keep being downward adjusted over and over again by the same analyst or broker house when the price move downward.

I had since write off my investment in Fibrechem, but keep the track record as a reminder.

That's where you and many people got it wrong. I don't know whether you noticed that MAS will not let a company go under. over the years have seen many companies in the red eventually halted and placed under a judicial manager and eventually things got better from there.

I like to use Mediastream, it is the only company that has the best "worst case" scenario. Before it was halted and placed under jm it went thru a series of reverse takeovers from at least 2 different suitors and then it still lost money, it was negative capital for sometime and eventually halted and placed under JM who cleaned up, found and brought in the current owners.

Yongnam also same thing, was in trouble placed a judicial manager who managed to clean up and turn things around.

I put money investing in these 2 cigar butts and made money after several years. Since then I'm always on the look out for cigar butts to put money in.

... fiberchem huh I'll bear that in mind.

You could be right..

If the company did turn around, it will still be a good surprises for me, since it mean that I will be able to reinstate some $$ from the investment that I had written off.

Anyway, I don't really put a high hope on it as it is a S-Chip after all, where the jurisdiction is hard to reach.

It's not MAS.... Found something about JM at a law firm site which explains briefly on JM. Refer to page 6.

I have the "experience" of being invested in stocks that went into JM... Unfortunately, not thro' choice but due to poor stocks selection ie. Buy @ High, hit by fraud / poor management, see prices plunge and then halted... It'll usually take many years if there's any hope of JM... Prices will more likely than not, plunge further if not halted. In the best case (just holding to original stake), the money I got back is only a tiny % of original invested amount...

If you wish to focus on such Special Situations, it'd be safer to enter only when there's more certainty or better still, only when JM is already in place. Prices don't often shoot to the sky immediately, unless the positive effects of JM can be seen and usually, after several quarters of results....

PS. Some of my mistakes which went into JM,

Amcol (fraud) -> AFP -> Sinarmas + Golden Agri + Bund Centre
MediaStream (mismanagement) -> Memstar

(27-08-2013, 08:11 AM)HitandRun Wrote:

(27-08-2013, 01:28 AM)Jared Seah Wrote: Wildreamz,
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(Not vested)

As usual, my idol Jared provides great advice, which can only come from a life of experience, especially the painful ones.

27 is still so very young, i.e. time in on your side. I've lost 50% or more of my capital twice, when I was in my 20s... the good old days.

As usual, my idol HitandRun provides great advise too.

I am learning alot from the postings by VB buddies Thank You.

<Not Vested>