China Sunsine Chemicals Holdings

[yeokiwi]

The net sales proceeds of approximately S$17.5 million will be retained by the Company
for payment of dividends in the future.

$17.5 million is equivalent to around 3.5cts per share.
Around 5% yield if Sunsine pays it to all shareholders.
But, it may take its own sweet time to pay shareholders...

[Jacmar]

when a company gets money from the mkt either through placement or rights issue to pay div, I get very nervous. a normal operating company especially one that purported to be doing well should be able to pay div out of their CF. don't accept this BS from s-chips that says they cannot remit money out.

[tiongkokgor]

when a company gets money from the mkt either through placement or rights issue to pay div, I get very nervous. a normal operating company especially one that purported to be doing well should be able to pay div out of their CF. don't accept this BS from s-chips that says they cannot remit money out.

Jacmar,

Do you know that Sunsine has been giving out dividends every year after its IPO? 1 cents each year between 2009 and 2014; and 1.5 cents between 2015 and 2017.

[Bluechipfan]

It's not the case where they sell treasury shares for sole purpose of paying dividends. it is a neutral way to say that the money will be used to pay future dividends. Can't expect them to say they will let the money idle in the account or that they will use it for acquisition (too sensitive unless really have concrete plan). They also can't say they will use it for capex because the fund for capex will come from FCF. In fact it seems better if they simply cancel the shares. However, as a shareholder it doesn't mean I know better than the management. So far I see no sign that the management is incompetent so I guess, personally, I will let the management do what it think is best to enhance shareholders' value.

[Bluechipfan]

It's not the case where they sell treasury shares for sole purpose of paying dividends. it is a neutral way to say that the money will be used to pay future dividends. Can't expect them to say they will let the money idle in the account or that they will use it for acquisition (too sensitive unless really have concrete plan). They also can't say they will use it for capex because the fund for capex will come from FCF. In fact it seems better if they simply cancel the shares. However, as a shareholder it doesn't mean I know better than the management. So far I see no sign that the management is incompetent so I guess, personally, I will let the management do what it think is best to enhance shareholders' value.

Oh ya, if I may add, you need real money to buy back share too.

[weijian]

A couple of observations:

- Gross proceeds are ~17.86mil and net proceeds are ~17.5mil. A cool 360k for Maybank for this placement and the 2% charge doesn't seem to be exorbitantly high that indicates that they have trouble selling (For example, i could contrast it to the extreme cases like the ~8% of gross proceeds that Goldman Sachs charged 1MDB for selling bonds, or the ~25% below par that Eratat paid to issue CBs)

- These treasury shares were bought and sold with real money. I suppose it would probably indicate the money is at company level (SG) and not going back to China any time soon?

- The company did not reveal the average cost of its treasury shares and i didn't follow it closely but looking at the last 5 years' price chart, they should have made at least 50% from cost or ~5mil. If all these profit is really distributed as dividends (as indicated in the announcement), shareholders should profit more than simply cancelling the treasury shares (buy low, sell high). I would try to follow up on this to prove it mathematically when i have the time.

- If all these 17.5mil is really distributed as dividends ONE TIME, then it would be a big GREEN flag ("i do what i say").

[sgpunter]

Looks like the placees of the steeply discounted shares are quickly taking profit. If only I was invited to participate in this placement as well!

They should have subjected the placees to a moratorium of at least 6 months before allowing them to sell and cash in.

[portuser]

Weijian Wrote:

"The company did not reveal the average cost of its treasury shares and i didn't follow it closely but looking at the last 5 years' price chart, they should have made at least 50% from cost or ~5mil. If all these profit is really distributed as dividends (as indicated in the announcement), shareholders should profit more than simply cancelling the treasury shares (buy low, sell high). I would try to follow up on this to prove it mathematically when i have the time."


Sunsine spent S$ 6.447m to buy back 27,653,200 shares, as stated in note 20 in page 72 of the annual report. The average purchase price was 23.3c.

[portuser]

Bluechip fan wrote on 11 May 2017:
"I read the figure somewhere and can't remember it now. Maybe portuser can help?"



TBBS is a high-end rubber accelerator, selling much higher than RMB 20,000 per tonne.

Kemai's draft IPO prospectus gave RMB 22,169 per tonne as TBBS average price in 2016, 40% higher than MBTS, a low end rubber accelerator.  
[page 1-1-139 of  科迈化工 首次公开发行股票招股说明书（申报稿 )] 

Sunsine does not reveal prices of its six types of rubber accelerators. Past announcements show that Sunsine's average rubber accelerator price fell from RMB 22,800 in 3Q 14 to RMB 17,200 in 2Q 2016, as aniline price plunged; only to recover and rise to RMB 20,000 in 1Q 2017, as aniline price firmed. (Rubber accelerator prices are pegged to aniline price, which moves in the same direction as crude oil.)



The following graph shows the price movements of TBBS and MBTS in Shandong, China:



Data extracted from  中国新材料网 http://zgxcl.oilchem.net/x/p_281_110_553_0_1.html

(TBBS is referred to as NS, and MBTS as DM, in the website.)  

The prices quoted in the website include the 17% VAT. Without it, average price of TBBS in 2016 was RMB 22,200, close to Kemai's RMB 22,169.

Based on the website, TBBS price (without VAT) surged in 2017:

Jan..............23,000
Feb - Mar....25,600
Apr - May....27,300

The reliability of these elevated prices remains to be seen.

[gongkia]

Risks - note potential further weakening in auto sales in the US and China may affect demand and sentiment of the stock.
-         Vehicle sales in China fell 2.2% to 2.1m in Apr 17, compared to a 4% rise in Mar 17. Auto sales growth in 4M17 is now at 4%, slower than the 5% growth forecast by CAAM for 2017. Nonetheless, China had targeted sales of 35m vehicles/year by 2025 with new energy vehicles making up at least 1/5 of that total (2016 China auto sales-28m).
-         US auto sales also slumped in April as it saw a 4.7% drop to 1.43m units.

The above was extracted from the latest article on Sunsine in Nextinsight by Money Plant.

Tyre sales should be related to both new vehicles and replacement tyres.

I wonder how the replacement tyre numbers will look like?