China Sunsine Chemicals Holdings

[Sfsh12]

According to the CIMB report (pg11), Sunsine's cash conversion cycle increased to 103 days in FY2013 as compared to 93 days in FY2012. However, according to Sunsine's 2013 AR (pg5), cash conversion cycle actually improved to 86 days in FY2013 as compared to 97 days in FY2012. How did this discrepancy arise?

[CityFarmer]

Hi Portuser

Just a suggestion: CityFarmer is voicing his views as an investor not Moderator. Would be better to address him as CityFarmer or just CF

Else it might give a mistaken perception that the Moderator is meddling for those who are not familiar with this forum's dynamics.

My 2cts

Thank you, Mr. specuvestor.

[CityFarmer]

According to the CIMB report (pg11), Sunsine's cash conversion cycle increased to 103 days in FY2013 as compared to 93 days in FY2012. However, according to Sunsine's 2013 AR (pg5), cash conversion cycle actually improved to 86 days in FY2013 as compared to 97 days in FY2012. How did this discrepancy arise?

I don't know which CIMB report you are referring, but the turnover days were tallied with the balance sheet numbers, and consistent with mine.

I am speculating that CIMB might use total receivable, and payable, but the company used trade receivable and payable, which is more appropriate.

(not vested)

[Sfsh12]

It is the latest CIMB report on China Sunsine which was posted on the nextinsight website.

http://www.nextinsight.net/index.php/for...t=54#20870

The trade receivables turnover days in Sunsine's 2013 AR is derived using trade receivables excluding notes receivables. I tried using trade receivables plus notes receivables to calculate turnover days but still did not arrive at the figures in CIMB report.

According to the CIMB report (pg11), Sunsine's cash conversion cycle increased to 103 days in FY2013 as compared to 93 days in FY2012. However, according to Sunsine's 2013 AR (pg5), cash conversion cycle actually improved to 86 days in FY2013 as compared to 97 days in FY2012. How did this discrepancy arise?

I don't know which CIMB report you are referring, but the turnover days were tallied with the balance sheet numbers, and consistent with mine.

I am speculating that CIMB might use total receivable, and payable, but the company used trade receivable and payable, which is more appropriate.

(not vested)

[CityFarmer]

It is the latest CIMB report on China Sunsine which was posted on the nextinsight website.

http://www.nextinsight.net/index.php/for...t=54#20870

The trade receivables turnover days in Sunsine's 2013 AR is derived using trade receivables excluding notes receivables. I tried using trade receivables plus notes receivables to calculate turnover days but still did not arrive at the figures in CIMB report.

It seems the only discrepancy is on receivable days.

In AR, the net trade receivables for the company were 321 mil (FY2013) and 255 mil (FY2012), and FY2013 revenue of 1696 mil. Base on formula of average(321, 255)/1696 * 365, give receivable day of 62, consistent with the AR's number

I reckon the receivable used in CIMB has excluded note receivable. The receivable was 540 mil (total) - 158 mil (note receivable) = 382 mil. Base on formula of 382/1696 * 365 = 82 days. This is the closer number I can get.

(not vested)

[Bluechipfan]

SGX query on sunsine price movement. I like the objective reply from the company. Now let see how SGX respond, if any. Plainly, it would be foolish for them to issue the standard 'Trade with caution'. They did that to SingPost not too long ago when it's clear that their price bounce to move up with Alibaba and e commerce effects.

[CityFarmer]

SGX query on sunsine price movement. I like the objective reply from the company. Now let see how SGX respond, if any. Plainly, it would be foolish for them to issue the standard 'Trade with caution'. They did that to SingPost not too long ago when it's clear that their price bounce to move up with Alibaba and e commerce effects.

There is quite a different between an obvious and a formal declaration. Mistake might occur after mistakingly assume an obvious.

[CityFarmer]

CIMB analyst report summary.

China Sunsine Chemical Hldgs - Eco-consciousness rewards
While some of its key competitors have been forced to suspend operations due
to tighter environmental regulations, Sunsine has been able to increase its
market share and profitability, thanks to its continuous implementation of
adequate environmental standards. We visited the key facilities of China
Sunsine, the world’s largest rubber accelerator producer, on 15-18 Sep. While
the operations of some key competitors have been suspended due to
environmental issues, Sunsine has expanded its market share and profitability.
Sunsine could be worth S$0.435 (based on its historical forward P/E of 5.95x)
or S$0.65 (peer average of 8.9x CY15 P/E), depending on your choice of
yardstick.
http://remisiers.org/cms_images/research...yBreak.pdf

[CityFarmer]

New debt arrangement, total debt is 368.9 mil RMB

http://infopub.sgx.com/FileOpen/CS_Discl...eID=315667

[portuser]

CIMB’s field trip report on China Sunsine has noted the lengthening of cash conversion cycle in 2013.

Things may be much better in 2014. In the first quarter, cash conversion cycle shortened by 1 day (from 85 to 84). The second quarter saw a drastic reduction of 13 days (from 83 to 70):

………………….(Days)……….…………………..2013…….1Q13…..….1Q14……..2Q13……....2Q14
Trade receivables turnover (A)…….….61.94….…64.26……..67.99……..64.57……….59.79
Inventory turnover (B).…………………...37.59….…35.47….….34.01………33.79……...27.09
Trade payables turnover ©........….…14.42......14.66…..…18.08...….15.45……...16.92
Cash conversion cycle (A + B – C)……85.11……..85.07......83.92……82.91………69.96

(Calculations based on conventions adopted by Sunsine – notes receivables excluded as they are risk-free)

Faster turnovers in trade receivables and inventory contributed very much to the improvement.

This seems to corroborate the following observation in Maybank’s report on the same field trip:
“we observed that Sunsine’s existing lines were mostly running at full capacity, and even the warehouses were low on stocks of finished products, reflective of the tight supply for rubber chemical products.”

An important indicator is impairment of trade receivables, which have been minimal for annual sales far exceeding RMB 1 billion:
2010……RMB 311k
2011……RMB 532k
2012……RMB 47k
2013…..RMB 866k.

This should come as no surprise as credit terms are granted to clients with better financial standing, whereas others have to back their purchases with bank-issued promissory notes.