Sunvic Chemical

[Nick]

It is interesting to note that the Company has repurchased 1,998,000 shares this week - the first time since June 2010. Most would recall that Sunvic was gobbling up its shares from Aug 2008 - June 2010 at a frantic pace. It purchased 56.965 million shares in the 2 years - a substantial amount considering that its total share float was 603 million shares initially. It subsequently cancelled 50 million shares in Jul 2010. The only other S Chip which came close to such a feat was YZJ.

(Not Vested)

[chatime]

So basically the directors are using company money to boost up the share price or they don't have better use of the funds? Looking at the latest quarterly announcement, they have adding substantial assets to their B/S...Directors are focus on the share price rather than the business.

[ValueBeliever]

May be this 1 will run wild soon.....

Explosion, fire at Nippon Shokubai's Himeji plant will lead to diaper shortages

8:11 AM MDT | October 1, 2012 | Natasha Alperowicz
An explosion and a fire at Nippon Shokubai’s superabsorbents manufacturing facility at Himeji, near Osaka, on Saturday killed a fireman and injured 35 other emergency service workers. Nippon Shokubai is the world’s leading producer of superabsorbents and the Himeji plant, with capacity for 320,000 m.t./year of superabsorbents, accounts for about 20% of the global market. Analysts say the incident may lead to shortages of superabsorbents, used to make diapers.

Nippon Shokubai said the first explosion occurred at around 2:40 p.m., as fire fighters were spraying an acrylic acid tank with water, and another shortly afterward. Acrylic acid is used as the raw material in the production of superabsorbents.

Nippon Shokubai’s global superabsorbent capacity was expected to rise to 560,000 m.t./year next year, when the company was due to complete construction of a 90,000-m.t./year superabsorbent plant at Cilegon, Indonesia. Its other manufacturing facilities are based at Zwijndrecht, Belgium, where it operates a 60,000-m.t./year unit; and at Pasadena, where there is a unit with similar capacity. In addition, Nippon Shokubai has a 30,000-m.t./year superabsorbentsplant at Zhanjiagang, China.

The company has been experiencing high demand for its superabsorbent material and the Himeji facility, the largest such unit that Nippon Shokubai owns, has been working at full capacity. The company will operate at higher rates at its other facilities to meet some of the shortfall.

[ValueBeliever]

not sure what is the worldwide impact going to be but for a Co. that produce 20% of the world capacity that is surely something to watch out for!

Technically, the chart of SunVic is also gaping up from previous gap down. It could well proof to be a profitable trade if got in early.

Dont like chinese shares but this worth bear watching as its plant asset is now worth a lot more than the market price of its shares, 50% discount from its NTA?

Its definitely in the Super Absorbent Polymer supply of AE in diapers production. I think this 1 have room to recover.

[AlphaQuant]

Yet another S-chip...

auditor's comments from E&Y below:

Basis for Qualified Opinion
During the course of our audit, we noted an arrangement between the Company’s Director, Mr. Sun
Liping and one of the Group’s customers which was not previously disclosed to us by management. We
were unable to perform practicable alternative audit procedures to satisfy ourselves as to the nature of
the above arrangement, and the completeness of related party disclosures in general.

[mkmk]

http://infopub.sgx.com/FileOpen/Sunvic_R...eID=260230

RESIGNATION OF AUDITOR

EY’s resignation is a purely commercial decision, as the Company and EY have been unable to reach a mutual agreement on the quantum of professional fees for the audit services to be provided by EY. The Company is in the process of seeking a suitable replacement in place of EY.

Question: Would this sort of news be considered a red flag?


(not vested, not on my watchlist)

[simpleman]

What do you think of the offer by Arkema to buy over a factory from Sunvic for RMB 3.9 billion.

Can we not conclude that since the French firm is willing to pay such a high price, Sunvic must be real?

The terms for the sale are rather complicated.

[ongweehiang]

The current deal is a takeover of production capacity, thus the complication. The step purchase of production line, help to limit investment risk for Arkema. That ensures that they get to consolidate the revenue and profit while only effectively taking over one line out of the possible three line. The deal also provide Sunvic an optionality in which if Arkema choose not to proceed with its second purchase option, Sunvic can effectively takeover the control of the JV through additional cash injection into the JV. The structuring of the deal is fair and reasonable for both parties indicating that there is much thought given to it.

If you look into the press release from Arkema, they are really keen on the deal and the deal should have high chance of closing. Sunvic has been a provider of AA and AE to their down stream plant producing various downstream materials. So buying over Taixing plant is just a way for them to ensure a steady supply of AA and AE. The plant in Jiangsu Yancheng is also near to Arkema's other plants providing certain level of economies of scale for them.

Most of the coming increase in AA and AE production capacity in China will come from the expansion of the Taixing plant. Arkema takeover of the plant will help them ensure that they have the optionality of increasing production of their other downstream product when required.

In addition, AA and AE supply has been tight in China as Shanghai Huayi - a competitor plant in Pudong has experienced an explosion and have stop production. The drop in supply has cause an increase in prices as most of the sale in China is conducted through spot prices.

Prices will be more stable going forward as most of the buyer of AA and AE would be more inclined to signed long term supply contract which is currently being pioneered by Sunvic. Sales volume of AA and AE will continue to be high as long as the everyone continue to use adhesive, diapers, etc...

Vested in Sunvic

[portuser]

The higher spot price after the explosion at Shanghai Huayi (in June 2013) does not seem to have benefitted Sunvic -- its AA/AE ASP in 2013 was the lowest for the 4-year period between 2010 and 2013:

..........Sales vol (tonnes)....Rev (RMB m)...ASP (RMB)..Profit (RMB m)
2013...........512,200...............5,486...........10,710........370
2012...........347,700...............3,940...........11,330..........97
2011...........216,000...............3,360...........15,560........504
2010...........228,500...............3,268...........14,300........650
2009...........174,600...............1,466.............8,400...........4

Could the higher 2013 profit be due to lower raw material (proplyene) price, higher AA/Ae price in 4Q 2013 after the explosion? Or was Sunvic constrained by supply agreements with downstream companies in adopting the higher spot price?

[ongweehiang]

Long term supply contract usually have a price adjustment component build in. I would assume the increase in spot price would be reflected in Sunvic asp in the quarters ahead. A slight increase in price would have a substantial impact on Sunvic bottom line.

My evidence supporting my hypothesis on Sunvic has been primarily based on

1. The details given by the Arkema management
2. The supposed tight supply situation of AA and AE in China.

Sunvic provide multiple ways to win

1. Higher asp, higher margin?
2. Closing of deal with Arkema?
3. Possible share buyback?
4. Possible dividends?

vested @ SGD 0.60

Rgds