Sino Grandness

[mikh]

Hi Behappyalways,

thank you for your comments about Sino's depreciation rate. I looked up their AR 2012. Page 43 states depreciation at 15m RMB. Their notes on page page 44, 2(a) and further on page 50 states depreciation of machinery and equipment as 10 years.

i am not good at reading ARs. have I missed something?

tks your advice,

* been looking to invest

normally investors just look at P/L without digging into the Balance sheet and cashflow.......

when we read the newspapers, they also announced just the P/L.......like for example AAA company announces 50% profit growth and etc.... but in reality how 'clean' is the P/L


In order to publish a good set of P/L, mgmt might be tempted to under depreciate their equipment, under provide for loss in trade receivables and doubtful debts...etc etc.....

For an expanding company buying lots of new equip (Sino expands into drink biz), typically their depreciation is higher while an 'old' company has lower depreciation as most of their assets might have been fully depreciated($1 book value).

typically......computers and accessories' depreciation rate is 33% or 3 years, cars 5-10 years, land....depending on freehold and leasehold.....and machineries....typically I give around 10 years....(you wouldn't want to see your food company still using the same machinery after 50 years......). If 10 years, depreciation rate is around 10%.......

So as an estimate, normally I use a 10% depreciation rate to gauge 'healthy' P/L.

If you are interested to read more about depreciation, one typically company you can look at is Sunright......They are in semiconductor biz where it is fast moving so equip tends to depreciate very fast......look at their depreciation rate....look at how it affects their bottom line....

different industries have different depreciation rate......fast growth companies or high tech companies tends to have higher depreciation rate so it varies......but as a rule of thumb an asset like plant and machinery should be depreciated within 10 years....that's my personal view...but some companies think that they can use their machines for 50 years ...or more ^^