China Sunsine Chemicals Holdings

[CityFarmer]

CF ok points taken and thank you for sharing. Sunsine has increased dividend payout in tandem with increased profit. The increase was not quantum leap which is understandable as company was still expanding and there was capex consideration. Now the company is net cash even with the latest expansion plan due for completion next year. I don't think Sunsine cut price for the purpose of achieving high utilisation rate. If that's the case they won't be plan for a new factory. The company anticipate higher demand and thus the new plant, which was originally planned few years back but  put off due to poor economy conditions then. As investors we can only rely on our assessment so your sharing is appreciated as it allow for a comprehensive and informed decision. Having said that, I would have to disagree with your negative views and I think I will continue to vest. I am not sure you are already inclined to hold negative view for whatever reason. After all, it is well documented you are not vested and out of the blue, you started this round of 'debate' when you could simply remain not vested when this thread is quiet and calm for few months already. It is not as if someone is blowing the trumpet how good this company is and thereby, you deem fit to post a message of caution, which I would understand perfectly. Anyhow, I do take note of some points raised and would pay attention to my investment in this company. After all, nobody should care more about my money other than myself.

It is perfectly OK, for anyone to ignore my assessment. As you said, you should take care of your money, not me 

I have tracked it for years, with an optimistic mind. Doubts were self-raised, and quest started (For old buddies, might know, I used to Q&A myself like a psycho ). It has reached a point, a thesis was drafted. I am not here to tell you what is wrong and right in a investment decision, but to share and validate the thesis along the way with logic and facts. Hopefully I learn. Best of all, all of us here learn. Isn't it what this forum meant for? The forum, isn't meant to blow trumpet for whatever reason(s) it might be. The forum is dead, without quality sharing from our VBs.

Why company invested, and ended up in an over-cap market? Isn't it commonly happening now? Shipping, coal and steel production, shipbuilding etc, are having similar issue now. Are the management teams not smart enough? IMO, it is a complex problem. Firstly, investment takes years, and in large capex. Next, demand forecast might be too optimistic, or might be caught surprise by slower China growth.  Last and not least, supply might be built-up unexpectedly faster, with high liquidity after the last crisis in 2008. What do you think on the logic? 

[Bluechipfan]

CF ok points taken and thank you for sharing. Sunsine has increased dividend payout in tandem with increased profit. The increase was not quantum leap which is understandable as company was still expanding and there was capex consideration. Now the company is net cash even with the latest expansion plan due for completion next year. I don't think Sunsine cut price for the purpose of achieving high utilisation rate. If that's the case they won't be plan for a new factory. The company anticipate higher demand and thus the new plant, which was originally planned few years back but  put off due to poor economy conditions then. As investors we can only rely on our assessment so your sharing is appreciated as it allow for a comprehensive and informed decision. Having said that, I would have to disagree with your negative views and I think I will continue to vest. I am not sure you are already inclined to hold negative view for whatever reason. After all, it is well documented you are not vested and out of the blue, you started this round of 'debate' when you could simply remain not vested when this thread is quiet and calm for few months already. It is not as if someone is blowing the trumpet how good this company is and thereby, you deem fit to post a message of caution, which I would understand perfectly. Anyhow, I do take note of some points raised and would pay attention to my investment in this company. After all, nobody should care more about my money other than myself.

It is perfectly OK, for anyone to ignore my assessment. As you said, you should take care of your money, not me 

I have tracked it for years, with an optimistic mind. Doubts were self-raised, and quest started (For old buddies, might know, I used to Q&A myself like a psycho ). It has reached a point, a thesis was drafted. I am not here to tell you what is wrong and right in a investment decision, but to share and validate the thesis along the way with logic and facts. Hopefully I learn. Best of all, all of us here learn. Isn't it what this forum meant for? The forum, isn't meant to blow trumpet for whatever reason(s) it might be. The forum is dead, without quality sharing from our VBs.

Why company invested, and ended up in an over-cap market? Isn't it commonly happening now? Shipping, coal and steel production, shipbuilding etc, are having similar issue now. Are the management teams not smart enough? IMO, it is a complex problem. Firstly, investment takes years, and in large capex. Next, demand forecast might be too optimistic, or might be caught surprise by slower China growth.  Last and not least, supply might be built-up unexpectedly faster, with high liquidity after the last crisis in 2008. What do you think on the logic? 

Yes lucrative business will attract new entrants as everyone want to have a share of the cake. Does the entry of new players automatically mean existing players will lose out? To certain extend yes as new players will undercut the profit margin of the existing players. In circumstances like this, how the existing players going to fend off the competition? No straight and simple answers but there will be a big different if the existing player is the market leader, as in the case of sunsine. The way I see it, sunsine's management is well aware of the competition and they are up to the challenge. I don't think it is necessary to elaborate my observation here but suffice to say as long as they don't rest on their laurels they should be able to generate FCF q after q. I do aware of the fact that some market leaders eventually lose out to new entrants such as Nokia to iPhone and Yahoo to Google. But there are also plenty examples of market leaders continue to stand strong such as Coke and McDonald's despite fierce competition by new entrants. In sunsine's case, not only they managed to sort of 'self fund' its expansion (no cash call whatsoever since IPO), they did it with yearly dividend payout to shareholders without fail as well. In addition, the company has growth steadily in size since IPO and to ignore this track record just because the company may face stiff competition seems to be overly risk averse. I would think the key is not whether there will be competition (bounce to have) but how the company deal with the competition.

[Young Investor]

Cityfarmer

Sunsine paid 1.5 c dividend for 2014 and 2015, up from 1c before.

You have suggested that Sunsine's future is not rosy:

" Last and not least, the historical dividend payout ratio was more than 20% before 2014. The company payout ratio were much lower in 2014/15, around 10%, even with record profits for two years.The decision might consistent with the thesis, which means the future might not be rosy all the time."

This year, Dutech did not pay a dividend, but you seemed forgiving:

"I am not sure why the company reduces the dividend? May be more M&A in the pipeline, or as more interim dividend within this year? "

[CityFarmer]

Cityfarmer

Sunsine paid 1.5 c dividend for 2014 and 2015, up from 1c before.

You have suggested that Sunsine's future is not rosy:

" Last and not least, the historical dividend payout ratio was more than 20% before 2014. The company payout ratio were much lower in 2014/15, around 10%, even with record profits for two years.The decision might consistent with the thesis, which means the future might not be rosy all the time."

This year, Dutech did not pay a dividend, but you seemed forgiving:

"I am not sure why the company reduces the dividend? May be more M&A in the pipeline, or as more interim dividend within this year? "

I have stated my thesis, with reasoning. What is yours?

Dutech dividend payout is inconsistent, and probably messy at worst. I am still not able to come up a thesis? Sunsine's ratio were pretty consistent since IPO, thus different interpretation. 

FYI, Dutech has the dividend this year, but it always do it on 1Q. Why? I don't know. It is probably the first company doing that, as far as I know.

[Young Investor]

Dutech dividend record
..........................interim
Before 2014 ...........nil
2014......................1 c
2015......................1.5c
2016......................1c


Sunsine (IPO in 2007) dividend record

...........................interim.....final
2007.......................1c
2008.......................1c
2009.......................1c..........1c
2010 to 2013.........................1c
2014 to 2015.........................1.5c

[tiongkokgor]

Rubber accelerator prices rising according to this 27 Sep 16 report in Chinese:


http://mp.weixin.qq.com/s?__biz=MzIxNjQ4...vEPj1ax#rd


Due to demand greater than supply, limited supply due to shut down of productions arising from anti pollution measures, rising anilene prices, rising logisitic costs and more buying (panicky) ahead of usual high sales volume season  (oct to dec). If anti pollution drive persists, prices will  continue to rise.

[portuser]

Rubber, carbon black and steel cords are among the raw materials for making tyres.

Rubber accelerators are catalysts. They shorten the time sulfer takes to improve the properties of rubber. Without accelerators, larger tyre factories are needed for the longer time sulfer takes to act on rubber.

Rubber accelerators form a small fraction of the cost of tyre.

Weight ratio of accelerators to rubber was roughly 15 to 1,000 in 2015 (note 1 below). 

Price ratio of accelerators to rubber was 2,676 to 1,000 (note 2 below).

To tyre makers, cost ratio of accelerators to rubber was therefore 40 to 1,000.

When other raw materials are taken into account, rubber accelerators form an even smaller part of tyre production cost.

It is therefore a reasonable proposition that the tyre industry is not adverse to absorbing higher rubber accelerator cost arising from pricier aniline, unless supply is abundant.

According to the following passage, the central government set up an inspectorate in May, and stepped-up enforcement has resulted in small and medium rubber accelerator factories in some regions either being closed down, suspended for overhaul, or ordered to reduce output.

" 进入今年5月份以来，国家为了加大环保力度从而成立了中央环保督察组。由于环保力度升级，河北、河南、天津、江苏、江西等地的中小橡胶助剂生产厂家，均不同程度地受到影响，有短期停产检修的、长期停产的、低负荷生产的，生产工厂不少开工率较低。"


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Note 1

Based on the following link, 27 million tonnes of rubber (both natural and synthetic) were consumed in 2015:  

https://www.google.com.sg/search?q=rubber+consumption+statistics&espv=2&biw=1920&bih=942&tbm=isch&imgil=TWNCA6b03C90uM%253A%253BY4DZGVQPKBXHgM%253Bhttp%25253A%25252F%25252F2013.igem.org%25252FTeam%25253ASDU-Denmark%25252FTour21&source=iu&pf=m&fir=TWNCA6b03C90uM%253A%252CY4DZGVQPKBXHgM%252C_&usg=__12vJht_jG6q4sLOEL8OB_FF28FU%3D&dpr=1&ved=0ahUKEwj897DZhrTPAhUFs48KHa4lAFQQyjcIWw&ei=hcLsV7yhKYXmvgSuy4CgBQ#imgrc=TWNCA6b03C90uM%3A

World's accelerator output in 2015 was 412,300 tonnes, as the 70,090 tonnes that Sunsine sold in that year were 17% of global output.

Weight ratio of accelerators to rubber was 15 to 1,000 


Note 2

Rubber price swings. Based on the following link, the recent lowest was 48.4 US cent per pound, or 1,065 US $ per tonne in 2015.

http://www.indexmundi.com/commodities/?c...months=300

Average accelerator price in 2015 was RMB 18,500 or US$ 2,850.

Price ratio of accelerators to rubber was 2,676 to 1,000.

[CityFarmer]

I have a similar figure on accelerator to rubber (weight). Mine is 1.7%, vs yours 1.5%. Anyway, a good point.

The important debate, is the level of competition (i.e. supply), which I have elaborated in previous post, IMO

[portuser]

The technology for producing general rubber accelerators is not difficult, and many entered the field to cash in on the burgeoning demand for tyres in China.

Rubber accelerator production generates toxic gas and wastewater. If not properly treated, they cause harm to the environment.

But proper waste treatment costs money, as treatment facilities have to be built and maintained. When demand for rubber accelerators is strong, there is also temptation to produce more than what the facilities can treat. 

Lax enforcement in the past resulted in over-supply of rubber accelerators as those who skimped on waste treatment enjoyed cost advantage over others.

If the report flashed out by Tiongkokgor is reliable, direct involvement by the central government since May underscores the resolve to confront the pollution issues.

[Bluechipfan]

The technology for producing general rubber accelerators is not difficult, and many entered the field to cash in on the burgeoning demand for tyres in China.

Rubber accelerator production generates toxic gas and wastewater. If not properly treated, they cause harm to the environment.

But proper waste treatment costs money, as treatment facilities have to be built and maintained. When demand for rubber accelerators is strong, there is also temptation to produce more than what the facilities can treat. 

Lax enforcement in the past resulted in over-supply of rubber accelerators as those who skimped on waste treatment enjoyed cost advantage over others.

If the report flashed out by Tiongkokgor is reliable, direct involvement by the central government since May underscores the resolve to confront the pollution issues.

From past communications by company through its quarterly reports and ARs, the company has been conveying factual messages, reflecting both bad and good news and company's strageies to grow its business. For examples note receivables underwrite by banks to reduce risk of bad debt, reduce margin to maintain market shares (yet refused to be taken for a ride and declined an overseas client due to ridiculous price requested by the client- this is possible due to Sunsine's market leader position). In brief, I am not surprised by the report flagged by TKG' as this is exactly what Sunsine said all this while.