China Sunsine Chemicals Holdings

[Young Investor]

阳谷华泰半年度业绩预增35%-60%
中国证券报·中证网2017-07-06 18:47
 
   中证网讯  阳谷华泰（300121）7月6日晚间发布半年度业绩预告，报告期内归属于上市公司股东的净利润8,096.31万元-9,595.63万元，比上年同期变动幅度35%至60%。公司表示，报告期内，公司按照年度经营计划有序推进各项工作，生产经营持续稳定发展，同时受益于国家供给侧结构性改革以及环保安全政策对部分不规范产能的影响，促进剂等橡胶助剂品种供求一直较为紧张，价格较去年同期有较大涨幅，故2017年上半年主营业务收入及净利润有一定幅度的增长

35-60 % increase of 1H17 net profit is expected according to the report quoting yanggu's profit guidance announcement on 6.7.17. How about sunsine which already saw 70% jump in 1Q17 net profit? I would think being the bigger player, sunsine should achieve similar if not better results.

Sunsine profit for
1Q17 - RMB57.2m
2Q16 - RMB49.0m

What is your expected Net Profit for 2Q17? 
Can it achieve 70% QoQ growth for 2Q2017, i.e RMB83.3m?

I wouldn't be surprised if 2Q17's NP is also 70% more than 2Q16. Put it the other way, the NP different between 1Q16 and 2Q16 is 45% and if 2Q17's NP is 45% higher than 1Q17, we will be looking at almost 83m too. In fact, if they include the income received from the sale of treasury shares as 'other income' (SGD17m), it would definitely hit 83m. Actually I am looking at 3Q's NP and I hope it will hit the magical 100m. In summary, I envisage at least sgd 10 cents eps for FY17 but this is just my personal view.

Bluechipfan

The gain from sale of treasury shares was RMB 55m.

I do not think it can be included as part of profit. 

[Bluechipfan]

阳谷华泰半年度业绩预增35%-60%
中国证券报·中证网2017-07-06 18:47
 
   中证网讯  阳谷华泰（300121）7月6日晚间发布半年度业绩预告，报告期内归属于上市公司股东的净利润8,096.31万元-9,595.63万元，比上年同期变动幅度35%至60%。公司表示，报告期内，公司按照年度经营计划有序推进各项工作，生产经营持续稳定发展，同时受益于国家供给侧结构性改革以及环保安全政策对部分不规范产能的影响，促进剂等橡胶助剂品种供求一直较为紧张，价格较去年同期有较大涨幅，故2017年上半年主营业务收入及净利润有一定幅度的增长

35-60 % increase of 1H17 net profit is expected according to the report quoting yanggu's profit guidance announcement on 6.7.17. How about sunsine which already saw 70% jump in 1Q17 net profit? I would think being the bigger player, sunsine should achieve similar if not better results.

Sunsine profit for
1Q17 - RMB57.2m
2Q16 - RMB49.0m

What is your expected Net Profit for 2Q17? 
Can it achieve 70% QoQ growth for 2Q2017, i.e RMB83.3m?

I wouldn't be surprised if 2Q17's NP is also 70% more than 2Q16. Put it the other way, the NP different between 1Q16 and 2Q16 is 45% and if 2Q17's NP is 45% higher than 1Q17, we will be looking at almost 83m too. In fact, if they include the income received from the sale of treasury shares as 'other income' (SGD17m), it would definitely hit 83m. Actually I am looking at 3Q's NP and I hope it will hit the magical 100m. In summary, I envisage at least sgd 10 cents eps for FY17 but this is just my personal view.

Bluechipfan

The gain from sale of treasury shares was RMB 55m.

I do not think it can be included as part of profit. 

I don't know how the accounting treatment will be for the income received from the sale of treasury shares. However, I think the whole amount received, i.e., rmb 83m will have to be included and not just the 'gain', as money spent on buying back the shares in the past already accounted for in the respective years' BS. Since the sale of the treasury shares took place within 2Q, the sum of rmb 83m received has to be reflected somewhere in the cashflow. Let's wait and see. 4 more days only.

[Young Investor]

Bluechipfan

http://simplestudies.com/basics_of_accou...tions.html


Based on the article, the RMB 55m gain from sale of treasury shares will not be booked in Sunsine's P&L statement, but in the balance sheet:

"When a company buys and sells its own stock, you might think there is a possibility of income statement gains and losses when purchase and sale prices are different. Although gains and losses are realized, they are never recognized on the income statement because companies shouldn’t report current income or loss on transactions involving their own ownership shares. They can, however, be recognized as direct additions to and reductions from stockholder’s equity on the balance sheet."

[weijian]

PanUnited did something similar in 2012 - share buyback to treasury shares and subsequently re-sell them higher to investors, all in the same year. And so it might be informative to check out their FS to see how it moves:

PanUnited AR12: https://www.panunited.com.sg/assets/Annu...-AR-12.pdf

- Under pg55 of "Summary of Accounting policies for Treasury shares" - Acquiring treasury shares are recognized at cost and deducted from equity. No gain or loss is recognized at P/L on the purchase/sale/issue/cancellation of the Group's own equity instruments and any differences is recognized directly in equity.

- Since there is no P/L, the differences in equity (gain) is recognized in "other reserve" portion for PanUnited (page 72). As such, it is curious that CS Mgt announced that it is retaining the amount to "pay dividends" in the future since dividends (in the strict sense) is from the "accumulated profits" portion of equity. Maybe, Mgt could do a capital reduction exercise to release cash from the "reserve" account?

[Bluechipfan]

Thanks YI and WJ. It's clear now the money won't be treated as part of P/L. So the equity will be beef up, perhaps under 'retained' cash. Technically, they still can use the treasury money to pay extra dividend. From the current FY's income, they just need to 'retain' less cash and put aside the equivalent amount of money (from the sale of treasury shares) and payout the same amount as dividend. Can?

[specuvestor]

I too am doubtful that one can pay dividend out of reserves. Otherwise reval reserves, including FX, can be used to pay out. Capital reduction maybe possible, because the court has to be satisfied. But I don't recall seeing it before, maybe other VB with experience can quote an example.

[ricklim1]

I quote from the Company's press release on 10th May 2017 "The net sales proceeds of approximately S$17.5 million will be retained by the Company for payment of dividends in the future."

[Bluechipfan]

Without a doubt thanks to input from YI and WJ, the sale proceeds of Sgd $17.5m would not be included as part of p/l and cannot be used for payment of dividend. The money will be retained as 'retained profit' and form part of company's equity (Personal view only, not accounting trained).

However, the company technically can still reward the shareholders with extra dividend. How? Assuming the company's net profit for FY17 is RMB300m (appx Sgd $60m) and in the past, only appx 10% of it will be paid as dividend, i.e., Sgd 6m. However, now if the company wanted to payout the Sgd $17.5m from the sale of treasury shares, theoretically, they can up the payout ratio higher than 10% (they have put in place 20% dividend policy recently). In this case, to payout the Sgd 17.5m on top of the normal payout, the company can hike the payout ratio to 40% so that the dividend amount would be Sgd 23.5m (17.5m from sale of treasure shares plus the usual 6m).

The Sgd 23.5m will be from current year's earning and can use for dividend purpose. So in a way the company says the proceeds will be used for future dividend payments they are not wrong. I think I don't have to bother with the accounting treatment of the treasury money as everything is legit.

I envisage huge increase of profit for the upcoming 2Q results. let's focus on company's business!

[weijian]

Without a doubt thanks to input from YI and WJ, the sale proceeds of Sgd $17.5m would not be included as part of p/l and cannot be used for payment of dividend. The money will be retained as 'retained profit' and form part of company's equity (Personal view only, not accounting trained).

However, the company technically can still reward the shareholders with extra dividend. How? Assuming the company's net profit for FY17 is RMB300m (appx Sgd $60m) and in the past, only appx 10% of it will be paid as dividend, i.e., Sgd 6m. However, now if the company wanted to payout the Sgd $17.5m from the sale of treasury shares, theoretically, they can up the payout ratio higher than 10% (they have put in place 20% dividend policy recently). In this case, to payout the Sgd 17.5m on top of the normal payout, the company can hike the payout ratio to 40% so that the dividend amount would be Sgd 23.5m (17.5m from sale of treasure shares plus the usual 6m).

The Sgd 23.5m will be from current year's earning and can use for dividend purpose. So in a way the company says the proceeds will be used for future dividend payments they are not wrong. I think I don't have to bother with the accounting treatment of the treasury money as everything is legit.

I envisage huge increase of profit for the upcoming 2Q results. let's focus on company's business!

hi Bluechipfan,
I think what you said is applicable. I think the only "downside" is the OPMIs' expectation of matching the same dividend payout ratio in subsequent years, with no more 1-time gain. Maybe it could come as a form of "special dividend"?

Nonetheless, i disagree with your statement "I think I don't have to bother with the accounting treatment of the treasury money as everything is legit". I tend to think understanding the rules will give one a better "model of the entire structure of China Sunsine". Along the lines of specuvestor's Asset/Business/Structure - Somehow i feel that the key for the OPMI's evaluation of China Sunsine as a SG-incorporated holding company with a foreign majority shareholder with foreign domiciled assets, is the "structure" part of ABS.

For example along the lines of structure, i do find it weird that Chairman Xu is paid 3x more (in AR16) than the combined board and Top5 Mgt (although he is also paid roughly the same through the dividends from his 63% holdings) - It seems like he wields alot of power in CSC and could become the key singular criteria for successful investment of the OPMI. If this is the case, then i have to ask how well i know Chairman Xu and his true background. Since he is pretty rich, so I find it weird for him to buy an small unrelated tourism asset under the group? Finally, my big red flag on the structure would be Lead ID Benny Lim - He had been with ZIWO (another S-chip) for the past 8years, although he has resigned from there in April2017. Anyone who knows more about ZIWO, might understand where i am pointing towards.

[weijian]

I too am doubtful that one can pay dividend out of reserves. Otherwise reval reserves, including FX, can be used to pay out. Capital reduction maybe possible, because the court has to be satisfied. But I don't recall seeing it before, maybe other VB with experience can quote an example.

I can't remember any example and so i googled and found a 2006 Singtel example. It is more troublesome than dividends in the sense that after shareholders' approval (same as final dividends), it still has to get court approval.

https://www.financierworldwide.com/retur...XXr7YiGM2w

"https://www.singtel.com/about-Us/news-releases/singtel-declares-shareholder-payout-s4-billion-through-capital-reduction-and-"