Sino Grandness

[babyblue]

Hi debronic,


I probably made a mistake with that. It's not my first. Definitely wont be my last. I say probably, not because i dont want to own up to it, but its because I have a different interpretation of how Taobao works and I'm not vested enough to research more to prove im definitively wrong and you are definitively right. As for why I didnt "own up" earlier, I dont read the threads post to post, definitely will miss out posts when a thread gets busy ( and it was at that time)

I just felt that I had to speak out because first, it seems like not a few people were really just taking pot shots at Sino Grandness, from just a cursory look, or a cursory survey and were "uninformed skeptics". Also, I wanted to point out some flawed thinking / circular reasoning that some skeptics have, the root issue of which is that Sino is an schip. 

But such is life, in the end some of the skeptics could well turn out to be "correct", even though their reasoning is wrong. Its like playing a poker hand well but still losing, and the stock market is very much like poker.

My own take is this, there is good enough evidence that Sino sales is legit and not an outright fraud. The behaviour of convertible bond holders, their due dilligence, TTA's involvement and due dilligence, DBS as sponsor ( they have to take responsibility should facts turn out to be wrong according to recent HK laws; ie go to jail), market research by two separate reputable firms, circumstantial evidence in carry of products in supermarkets in china etc. 

Of course, Sino could turn out to be a fraud but based on the evidence is it probable? If it is, than it will be a fraud on the level of a Bernie Madoff scam or Enron. And that kind of fraud can happen to ANY stock. Although I have to say, it is much easier to verify figures of product like a drink vs the opaquness of a investing scheme ala Madoff or the complexities of the spv / marking to market of exotic products in the case of Enron. The way I protect against this kind of fraud is to invest only what I can afford to lose or the percentage I can make back through the performance of my other stocks in a year whichever is lower.

"the stock market is very much like poker", well only if you are gambling or speculating in the short term and making oversized bets on few individual stock picks, otherwise it has proven to be a good investment vehicle over the longer term with a well diversified portfolio or even an index tracking one.

"fraud can happen to ANY stock" , to big a generalisation. There is no way stocks with proven 20 or 30 past year history of prudent management and good dividend payouts be fraudulent. rather "fraud can happen to ANY S-chip" should be more reasonable.

And if Sino is a fraud, its just on the level of the other previous Schip listed here. Madoff and Enron were multi billion dollars. Sino hasn't reach the size of even 1 billion USD yet so not the same level.

Your other points are otherwise reasonable. It is good to speak out, but sometimes our fellow VBs can be very detailed in their analysis so be prepared for some critical comments

good luck with your SG investment, if the IPO does happen soon then things should be good...

Hi bluekelah,

Well there is probably more similarities between poker and the stock market. poker is not gambling for professionals : - its not a game of pure luck and skilled players have an Edge over the non skilled over the long run. skilled players make money consistently from poker. I was refering to the fact that you can do the right things but the OUTCOME might not be the right one. Simply because of probability. Of the idea that there might be alternate realities, a word either coin or popularised by Nassim Taleb. And by the way, not a few investment legends have made this analogy. I dont like to win arguments by quoting/ referencing authority figures but well sometimes it saves me lots of time.

When i refer to level, i wasnt refering to amount of money, im refering to the disingenuity of the fraudalant scheme. What i was trying to say is based on existing information, for Sino to turn out to be a fraud, so many things have to go wrong, so many actors have to be complicit in ways which are either illegal or detrimental to their self interests,  so many checks and balances have to fail, so many times Sino have to pull the wool over goldman's, dbs, established market research companies like euromonitor, tta and their various attempts at due diligence. For instance, the consequences for the team at dbs if Sino is a fraud is likely to be jail time.

But points taken.

Hi specuvestor,
I know your attitude is "show me the money". If i have a choice, obviously i will be more comfortable if the money is shown. But on the flip side what are you suggesting? That sino grandness/ garden fresh is faking their sales by orders of magnitude? and to make up for short fall in cashflow they are either over-inflating their capex by orders of magnitude or by other means? It will be more meaningful if you can draw out your analysis in its entirety (so we can learn and discuss) rather than casting a cloud of doubt and suspicions and stop there.

I too had similar train of thought but what is your conclusion after weighing the other side of the story, closely related to what i mentioned above, for this to be a major fraud (because if its not major than obviously the consequences are quite inconsequential), so many things have to go wrong, so many actors have to be complicit, so many checks and balances have to fail. Can such a fraud can be pulled off in a company with a simple business model of selling drinks.

As for the questions you have below, there are reasonable explanations. Which is that growth momentum was strong so capex had to be spent to feed that momentum. that interest was high and was acceptable was because garden fresh at that time was really zilch. he had no choice at the start. but as growth continued to be strong, a rational businessman had two choices, return the loan( and sacrifice investing for growth) or use all financial resources at his disposal to grow. i do get your point about working capital vs capex though. its a very nuanced point. in a vacuum i'll definitely agree with you but in a competitive world, it is rational to want to be one step ahead of your competitors, to have control, have your own production. long term capex may reap rewards only 2 years down the road. but delay doing it means you reap the rewards 2 years plus delay down the road and you reduce your flexibility in shaping your competitive environment.

thanks for both of your discourse so far. i know you are just trying to share for the buddies benefit.