China Minzhong Food Corporation

(14-02-2014, 05:28 PM)minimax Wrote: If you don't know whether Indofood did do a financial due diliegence on CMZ, then why are you pretending that you had the knowledge?

Just curious, how do u know that salim didnt do a DD on Minz . I ve no idea if they do actually , but its just common sense (to me) that they did.

(14-02-2014, 05:37 PM)investingsgx Wrote: China stocks come with accounting frauds and hidden debts. Although fundamentally food prices will rise due to the lack of farmers, i cannot trust China stocks due to a string of poor historical performances despite its good earnings.

With references from Dukang Distillers. Luckily managed to sell it at a higher price.

With the lack of consistent performances of China stocks, i am determined to stay away from them.

Food price will raise with inflation, cost of production will raise in the short run along with wages, but in the long run cost will go down once China automate everything like their western counterpart (ie the industrialized farming that Minzhong is trying so hard to push for). It is just a necessary and inevitable path that they will take. The question is only by whom and by when.

By performance, you mean stock price performance? Usually it has little to do with underlying fundamentals and more to do with market sentiments.

That said, I'm not sure you can say S-Chip definitely will never have good share price performance. Check out Sino-Grandness or even the recent Sound Global (although it cheated a little by listing on the HK exchange, but those who bought it back in Singapore has a good run for their money).

And now with Indofood owning 80+% of the shares, I don't think we should hold the same standard to it like ordinary S-Chip shares. For one thing, we know it can never be delisted on the cheap easily.

With Indofood as their major and controlling shareholder, I don't think legal accountability is an issue any more. The intrinsic value of China Minzhong has fundamentally changed when Indofood took over.

Most buyers overpay in M&A. Also most big M&A end up to be value destroyers.

(14-02-2014, 05:04 PM)Wildreamz Wrote:

Quote:What nonsense are you talking about? Indofood never had any access to CMZ's internal documents before they make the GO.

They rely solely on CMZ's audited FS to make the GO.

Quote:Confidence in CMFC

Indofood has taken all necessary steps to ensure that its investment in CMFC is prudent, including the conduct of due diligence
prior to its initial investment in February 2013. Indofood is confident that the due diligence that it conducted was sufficient to
provide comfort over its investment.

Following the allegations, till date, the auditors of CMFC have not withdrawn any of its audit opinion on CMFC’s past audited
financials.

In response to the recent allegations made against CMFC, Indofood has noted the detailed point-by-point rebuttals of the
allegations, released by CMFC on SGX on 1 September 2013 and 3 September 2013, where it has specifically addressed the
allegations in detail and has provided substantiation of facts. Indofood is satisfied with CMFC’s rebuttals of the allegations and
finds the rebuttals to be consistent with Indofood’s due diligence findings and analysis.

Despite the allegations, CMFC has remained transparent and open in their communication with the investor public, with clear
analysis and discussion of their operating performance in their results announcement even as it strives to prepare the first
rebuttal under intense time pressure. This is in line with Indofood’s policy of making timely disclosures to the investor public and
also indicative of CMFC and its management’s ability to operate and thrive under adverse conditions.

It is clear that the intention of the recent allegations is to benefit from the decline in CMFC’s share price as the issuer of the
malicious report has stated clearly that they maintain a short-sell in CMFC.

http://infopub.sgx.com/FileOpen/Press_Re...eID=255109

As far as I know, Indofood never stated in detail what does their due deligence comprises (site visits, internal audit, 3rd party valuator etc)

I don't think it is fair to make assumptions like that.

I thought this is clear that Indofood was relying on their DD done in Feb for their GO just 7 months later. What exactly is the difference between DD for substantial stake increase of 15% to almost 30%, and DD for GO? Buyer for such stake rely on analysts' reports?

I would think when there is substantial investment or long term interest involved, the acquiring party would have done a lot of homework. They are not going to be able to sell it in the open market as easily... ie they are in it in the long run. This is no love at first sight.

(14-02-2014, 06:25 PM)specuvestor Wrote:

(14-02-2014, 05:04 PM)Wildreamz Wrote:

Quote:What nonsense are you talking about? Indofood never had any access to CMZ's internal documents before they make the GO.

They rely solely on CMZ's audited FS to make the GO.

Quote:Confidence in CMFC

Indofood has taken all necessary steps to ensure that its investment in CMFC is prudent, including the conduct of due diligence
prior to its initial investment in February 2013. Indofood is confident that the due diligence that it conducted was sufficient to
provide comfort over its investment.

Following the allegations, till date, the auditors of CMFC have not withdrawn any of its audit opinion on CMFC’s past audited
financials.

In response to the recent allegations made against CMFC, Indofood has noted the detailed point-by-point rebuttals of the
allegations, released by CMFC on SGX on 1 September 2013 and 3 September 2013, where it has specifically addressed the
allegations in detail and has provided substantiation of facts. Indofood is satisfied with CMFC’s rebuttals of the allegations and
finds the rebuttals to be consistent with Indofood’s due diligence findings and analysis.

Despite the allegations, CMFC has remained transparent and open in their communication with the investor public, with clear
analysis and discussion of their operating performance in their results announcement even as it strives to prepare the first
rebuttal under intense time pressure. This is in line with Indofood’s policy of making timely disclosures to the investor public and
also indicative of CMFC and its management’s ability to operate and thrive under adverse conditions.

It is clear that the intention of the recent allegations is to benefit from the decline in CMFC’s share price as the issuer of the
malicious report has stated clearly that they maintain a short-sell in CMFC.

http://infopub.sgx.com/FileOpen/Press_Re...eID=255109

As far as I know, Indofood never stated in detail what does their due deligence comprises (site visits, internal audit, 3rd party valuator etc)

I don't think it is fair to make assumptions like that.

I thought this is clear that Indofood was relying on their DD done in Feb for their GO just 7 months later. What exactly is the difference between DD for substantial stake increase of 15% to almost 30%, and DD for GO? Buyer for such stake rely on analysts' reports?

I would think when there is substantial investment or long term interest involved, the acquiring party would have done a lot of homework. They are not going to be able to sell it in the open market as easily... ie they are in it in the long run. This is no love at first sight.

nope, financial due diligence requires that CMZ open up its books to Indofood, at no stage b4 the GO did Indofood do a financial due diligence.
Site visits, checking of public record are due diligence, but they are not financial due diligence.

So how do you conclude there is no financial DD? Or u assume it is only done when there is GO? I think companies do open their books to potential sizable investors upon the Board discretion. Venture capital or pre-IPO investors get access without GO. And the Board tends to "respect" major shareholders' requests. Not to mention when the Board themselves are selling.

(14-02-2014, 06:42 PM)specuvestor Wrote: So how do you conclude there is no financial DD? Or u assume it is only done when there is GO? I think companies do open their books to potential sizable investors upon the Board discretion. Venture capital or pre-IPO investors get access without GO. And the Board tends to "respect" major shareholders' requests. Not to mention when the Board themselves are selling.

because listed companies do not open their books unless it's a GO.

Interesting.

http://research.maybank-ib.com/pdf/docum...3_2796.pdf

Quote:Will the due diligence by HKSE be stricter in light of recent events?
This is not an issue as Sino Grandness is well prepared for it. The
listing requirements for Chinese companies have already been
tightened significantly in the last few years.
In fact, Garden Fresh has already been audited twice by a Big 4 auditor
– once in Oct 2011 and a second time in Jul 2012 – when they raised
funds from the convertible bond holders (essentially just Goldman and
another large investor). The investors’ auditors were extremely stringent
to the extent of interviewing Sino Grandness’ customers and suppliers
to cross-verify the company’s claims. Unlike share placements, where
the due diligence is usually done on a cursory basis, private equity
funds are significantly more stringent with the checks, especially when
they are also investing in a private company; in this case, Garden
Fresh, a private subsidiary of Sino Grandness.

Is it because Garden Fresh is only a subsidiary of a Public Company hence they allow their books to be audited by Goldman Sachs?

Are there any SGX rule preventing public company to reveal their books to another entity without a GO? Any corporate lawyers here to verify this?

Also I find it weird that the books can only be revealed to prospective buyer after clear intent of GO. It's like a rule that force you to commit, before you actually know what you are buying.

(14-02-2014, 06:34 PM)minimax Wrote: nope, financial due diligence requires that CMZ open up its books to Indofood, at no stage b4 the GO did Indofood do a financial due diligence.
Site visits, checking of public record are due diligence, but they are not financial due diligence.

It seems that you are confident on your statement. Instead of staying at your opinion level, you might want to refer to appropriate evidences, regulation, Rules, precedents etc, to support your statement. That will make the discussion more productive. Thanks

If the debate is about whether party launching a GO has access to financial info of the company that it intends to acquire, the following may offer some clues.
(1) On 1 June 2011, International Container Terminal Services Inc. (“ICTSI”), listed on the Philippine Stock Exchange, launched an unsolicited takeover bid of Portek.
(2) On 8 June 2011, Portek announced that it was in discussion with a potential bidder.
(3) On 12 July 2011, Portek announced that it had provided financial info to the bidder, in confidence; and to achieve parity of info vs-a vis Portek shareholders, the info was made public.
(4) The next day, 13 Jul 2011, when Mitsui announced its bid for Portek, at a higher offer price, it became clear that the bidder referred to in Portek’s earlier announcement was Mutsui.
It seems to me that in launching its unsolicited bid, ICTSI relied on industry knowledge since it was in the same line of business as Portek -- operating terminals.
As for Mitsui, its bid was not unsolicited, and when it asked to view Portek’s financial info, Portek promptly made public the info that was provided to Mitsui.

http://infopub.sgx.com/FileOpen/Portek_A...leID=78949