China Sunsine Chemicals Holdings

I started investing in China Sunsine in 2010. The chairman had articulated his strategies in the IPO prospectus, quarterly announcements and annual reports and most of them had been executed very well.

I am very pleased that Amfraser had started initiating the counter, probably at an appropriate time because the company's future has arrived. Bigger market share, lesser competitors (for next 1/2 years because entry costs are very high due to costly environmental friendly manufacturing processes) and more products in insoluble sulphur and 6PPD that will be sold to existing customers.

Latest AMfraser report available at:
http://nextinsight.net/index.php/story-a...n-controls

Amfraser's target price SGD0.65 at FY2014 PE 7 times only.

The cost of implementing pollution control will come down over time due to the competition amongst vendors to provide such services.

E.g. The cost desalinated water few years ago was in the order of $2 per m3.
Now, it has dropped by 100% to around $1 per m3.

Competition to provide environmental services will drive the cost down rapidly over time. The barrier to entry will drop over time. Many vendors would want to catch a piece of the pie in China..

(12-08-2014, 08:12 AM)Adagio Wrote: I started investing in China Sunsine in 2010. The chairman had articulated his strategies in the IPO prospectus, quarterly announcements and annual reports and most of them had been executed very well.

I am very pleased that Amfraser had started initiating the counter, probably at an appropriate time because the company's future has arrived. Bigger market share, lesser competitors (for next 1/2 years because entry costs are very high due to costly environmental friendly manufacturing processes) and more products in insoluble sulphur and 6PPD that will be sold to existing customers.

Latest AMfraser report available at:
http://nextinsight.net/index.php/story-a...n-controls

Amfraser's target price SGD0.65 at FY2014 PE 7 times only.

(12-08-2014, 08:50 AM)Curiousparty Wrote: The cost of implementing pollution control will come down over time due to the competition amongst vendors to provide such services.

E.g. The cost desalinated water few years ago was in the order of $2 per m3.
Now, it has dropped by 100% to around $1 per m3.

Competition to provide environmental services will drive the cost down rapidly over time. The barrier to entry will drop over time. Many vendors would want to catch a piece of the pie in China..

(12-08-2014, 08:12 AM)Adagio Wrote: I started investing in China Sunsine in 2010. The chairman had articulated his strategies in the IPO prospectus, quarterly announcements and annual reports and most of them had been executed very well.

I am very pleased that Amfraser had started initiating the counter, probably at an appropriate time because the company's future has arrived. Bigger market share, lesser competitors (for next 1/2 years because entry costs are very high due to costly environmental friendly manufacturing processes) and more products in insoluble sulphur and 6PPD that will be sold to existing customers.

Latest AMfraser report available at:
http://nextinsight.net/index.php/story-a...n-controls

Amfraser's target price SGD0.65 at FY2014 PE 7 times only.

CP,

Your points are mostly valid but I have to give huge discount as I know you have divested and could be bias. No offence.

I have not divested fully
My average price is low 20 cents. If price drops below 30 cents, I will fully divest the remaining portion I have.

I will never allow the main "staple" of my portfolio to be dominated by S-chips, even if it looks like "Gold"

The key rationale here is there are more risky factors surrounding S-chips compared to non-S chips, or else Mr Market would have traded them at a premium to their assets or at least close to their "book NAV".

(12-08-2014, 09:23 AM)Bluechipfan Wrote:

(12-08-2014, 08:50 AM)Curiousparty Wrote: The cost of implementing pollution control will come down over time due to the competition amongst vendors to provide such services.

E.g. The cost desalinated water few years ago was in the order of $2 per m3.
Now, it has dropped by 100% to around $1 per m3.

Competition to provide environmental services will drive the cost down rapidly over time. The barrier to entry will drop over time. Many vendors would want to catch a piece of the pie in China..

(12-08-2014, 08:12 AM)Adagio Wrote: I started investing in China Sunsine in 2010. The chairman had articulated his strategies in the IPO prospectus, quarterly announcements and annual reports and most of them had been executed very well.

I am very pleased that Amfraser had started initiating the counter, probably at an appropriate time because the company's future has arrived. Bigger market share, lesser competitors (for next 1/2 years because entry costs are very high due to costly environmental friendly manufacturing processes) and more products in insoluble sulphur and 6PPD that will be sold to existing customers.

Latest AMfraser report available at:
http://nextinsight.net/index.php/story-a...n-controls

Amfraser's target price SGD0.65 at FY2014 PE 7 times only.

CP,

Your points are mostly valid but I have to give huge discount as I know you have divested and could be bias. No offence.

My summary view on the company, after digested the recent 1H result.

- Cash flow is my ultimate concern. Base on the 1H result, OCF was approx RMB 52 mil, and Capex was slightly more than RMB 100 mil. FCF was still negative in 1H2014. The company was in negative FCF since 2009, except FY2013. Pending for the 2nd Half result, the FCF is very likely be negative in FY2014 again, and the dividend of RMB 23 mil (if any) will be likely funded by debt or retained earning again.
- Debt increased by approx RMB 90 mil, and with a favorable earning, where is all the money? Base on the 1H report, mostly trapped as working capital (approx RMB 100 mil) as receivables and capex (approx 100 mil).
- Earning wise, GPM improved from 18% to 23%, and NPM from 4% to 8%, a great improvement with the rising of ASP
- Most of the RMB 100 mil capex, should be allocated to non-core business in this 1H2014. The typical capacity expansion required much less capex than that.
- The overall ASP is slightly more than 18K/tons, about 6% increment from FY2013. The increment might extend further for 1-2 quarters, IMO

(not vested)

(12-08-2014, 11:41 AM)CityFarmer Wrote: My summary view on the company, after digested the recent 1H result.

- ......................
- Most of the RMB 100 mil capex, should be allocated to non-core business in this 1H2014. The typical capacity expansion required much less capex than that.

(not vested)

The management revealed during results briefing that RMB 100m formed the bulk of the RMB 150m project cost for installing central boilers to supply steam to the entire Shanxian Chemical Industrial Zone. Starting Sep 2014, all factories, including Sunsine’s, in the industrial zone will demolish their own boilers and rely on the central boilers.

As Sunsine’s factory is now producing steam for drying chemicals, the central boiler scheme cannot be characterised as non-core.

As disclosed in the announcement,
http://infopub.sgx.com/FileOpen/Incorp_S...leID=52568,
central boilers are more efficient. Sunsine’s factory in the zone will save RMB 15m a year consuming steam from central boilers, according to The Edge (11 Aug). Profit from external sales is not known.

Assuming I own the stock. I am trying to be honest with the possible downside of the stock, people will remark I am "talking down" to buy the counter on cheap.
(e.g. China Sunsine - partly divested, Chip Eng Seng, etc). The landscape is dynamic and no single counter can have an enduring competitive advantage..

Even if I don't own the stock, I highlight the possible dangers or blind spots of the counter, people also can accuse me of being "biased".

This world is interesting. There are so many examples of S-chips going sour but people just don't "learn", always thinking that this time round, this S-chip is different.

(12-08-2014, 09:23 AM)Bluechipfan Wrote:

(12-08-2014, 08:50 AM)Curiousparty Wrote: The cost of implementing pollution control will come down over time due to the competition amongst vendors to provide such services.

E.g. The cost desalinated water few years ago was in the order of $2 per m3.
Now, it has dropped by 100% to around $1 per m3.

Competition to provide environmental services will drive the cost down rapidly over time. The barrier to entry will drop over time. Many vendors would want to catch a piece of the pie in China..

(12-08-2014, 08:12 AM)Adagio Wrote: I started investing in China Sunsine in 2010. The chairman had articulated his strategies in the IPO prospectus, quarterly announcements and annual reports and most of them had been executed very well.

I am very pleased that Amfraser had started initiating the counter, probably at an appropriate time because the company's future has arrived. Bigger market share, lesser competitors (for next 1/2 years because entry costs are very high due to costly environmental friendly manufacturing processes) and more products in insoluble sulphur and 6PPD that will be sold to existing customers.

Latest AMfraser report available at:
http://nextinsight.net/index.php/story-a...n-controls

Amfraser's target price SGD0.65 at FY2014 PE 7 times only.

CP,

Your points are mostly valid but I have to give huge discount as I know you have divested and could be bias. No offence.

I trust most VB here value challenging opinions as well. So long as the info/views are valid, whether biases or not, they are valuable.

Portuser

Sunsine is now producing steam from small boilers. Installing central boilers to supply steam to its own factory and other factories in the industrial zone seems to make sense.

But why should Sunsine generate electricity:

“ Based on our needs for steam supply, our current steam cost, the requirements of Local Government, the results of the Feasibility Study, and the fact that it is customary practice in the PRC that users of steam pay the charges upfront before usage, and that the State Grid will purchase the by-product which is electricity from CHC which should ensure healthy cash-flow from operations, the Board is of the view that it is in the best interest of the Group to undertake the Project and for Shandong Sunsine to establish a New Subsidiary to operate the same.” (Sunsine Announcement on 30th Dec 14)

Sunsine does not generate electricity now. I presume a large part of RMB 150m project cost is for electricity generation. Why not produce steam only to keep the project cost low and reduce bank borrowings?

Hi Curiousparty,

I am confused by your two statements:

“This world is interesting. There are so many examples of S-chips going sour but people just don't "learn", always thinking that this time round, this S-chip is different.”

“My average price is low 20 cents. If price drops below 30 cents, I will fully divest the remaining portion I have.”

If you hold the view that the probability of a S-chip getting into trouble is high, why did you buy Sunsine in the first place? Why are you still holding on to the shares? What made you think that, in your own words, “this time round, this S-chip Sunsine is different.”

Did you buy just to punt?

Thank you.