Dukang Distillers Holdings

[Wildreamz]

Due to a recent pull back in price, I re-examined the fundamentals of Dukang Distillers. The pull back is probably due to negative news on the Baijiu industry on 19 July (http://www.thedrinksbusiness.com/2013/07...-in-china/ ), that hit the share price of Baijiu sector badly. However, this information is not new, the Baijiu industry has been hit badly for the past year or so already.

I believe that Dukang's growth story shall continue though, as the market positioning of Dukang is unique, and their growth is partly driven by aggressive overseas expansion. Dukang has been able to maintain its healthy growth despite the bad market condition, and I believe will continue to do so. http://www.boraid.com/article/html/234/234475.asp

This pull back in price is a great buying opportunity for value and growth investor to initiate position.

On the side note, I noticed that there is a company called China Du Kang Co (CDKG) listed on OTC market.

More information on it:

1) http://investing.businessweek.com/resear...icker=CDKG

2) http://biz.yahoo.com/e/130416/cdkg10-k.html

Is it in anyway related to Dukang Distillers? Can any fellow buddies help enlighten?

(vested)

[rogerwilco]

On the side note, I noticed that there is a company called China Du Kang Co (CDKG) listed on OTC market.

More information on it:

1) http://investing.businessweek.com/resear...icker=CDKG

2) http://biz.yahoo.com/e/130416/cdkg10-k.html

Is it in anyway related to Dukang Distillers? Can any fellow buddies help enlighten?
(vested)

Wildreamz, i sent two e-mails to Dukang Distillers IR Manager (Mr Ngo Yit Sung) a few months ago and have posted his answer for each of the two e-mails in this thread. According to him, the company (not based in Henan) is not related Dukang Distillers (based in Henan).

[Wildreamz]

On the side note, I noticed that there is a company called China Du Kang Co (CDKG) listed on OTC market.

More information on it:

1) http://investing.businessweek.com/resear...icker=CDKG

2) http://biz.yahoo.com/e/130416/cdkg10-k.html

Is it in anyway related to Dukang Distillers? Can any fellow buddies help enlighten?
(vested)

Wildreamz, i sent two e-mails to Dukang Distillers IR Manager (Mr Ngo Yit Sung) a few months ago and have posted his answer for each of the two e-mails in this thread. According to him, the company (not based in Henan) is not related Dukang Distillers (based in Henan).

Thank you for the very informative posts!

[zz...]

On the side note, I noticed that there is a company called China Du Kang Co (CDKG) listed on OTC market.

More information on it:

1) http://investing.businessweek.com/resear...icker=CDKG

2) http://biz.yahoo.com/e/130416/cdkg10-k.html

Is it in anyway related to Dukang Distillers? Can any fellow buddies help enlighten?
(vested)

Wildreamz, i sent two e-mails to Dukang Distillers IR Manager (Mr Ngo Yit Sung) a few months ago and have posted his answer for each of the two e-mails in this thread. According to him, the company (not based in Henan) is not related Dukang Distillers (based in Henan).

Thank you for the very informative posts!

China Du Kang Co (CDKG) is based at Xi'an, Shaan xi province which produces Baishui Dukang, Baishui was the birth place of Dukang, but the company also does many other business: http://www.du-kang.cn/plus/list.php?tid=23. Previously 3 Dukang companies were fighting for the full control of Dukang Brand but no one was successful: http://news.xinhuanet.com/legal/2009-06/...525702.htm

Dukang Distillers were formed and merged the 2 companies in Henan province to control the market there, here is the link on how it was formed: http://www.henan100.com/life/2011/47013.shtml

[Stockerman]

Baijiu brands resort to deep discounting as wine sales surge in China. How would Dukang bottom-line be affected?
is there enough fats in the margin for such deep discounting?

Will the quality of the products drop? Will the companies resort to unmoral means to cut costs to preserve margins?
There are crude Chinese companies, and we have no idea what they would be up to...

Dukang does not seem to have paid out any single dividend before in its history? why is this so? (Pls correct if I am wrong)

[Wildreamz]

Baijiu brands resort to deep discounting as wine sales surge in China. How would Dukang bottom-line be affected?
is there enough fats in the margin for such deep discounting?

Will the quality of the products drop? Will the companies resort to unmoral means to cut costs to preserve margins?
There are crude Chinese companies, and we have no idea what they would be up to...

Dukang does not seem to have paid out any single dividend before in its history? why is this so? (Pls correct if I am wrong)

To be more specific, premium brands of Baijiu (Moutai, Wuliangye etc), faced headwind due to China government's ban on "luxury spending", on 1st October 2012. As Dukang is mass marketed to the general consumer, they are not affected, in fact, I think they stood to benefit from this.

2012 was a challenging year for the baijiu industry due to a slowdown in the Chinese economy growth
and the clamp down on government’s profligacy which led to the ban on luxury baijiu at the expense on
public funds. The situation was further aggravated with the plasticizer contamination scandal haunting a
number of renowned baijiu brands at the end of the year.
Commenting on the baijiu sector performance and prospects, Mr. Zhou added, “We have minimal
exposure and is not much impacted by the current policies as they are primarily targeted at the firsttier baijiu brand.
The decline in the first-tier baijiu brands provides a good opportunity for second-tier baijiu to develop
due to the lower pricing.「Dukang」is currently a second-tier brand, which puts us in a sweet spot to
leverage on this opportunity.”

http://infopub.sgx.com/FileOpen/DKDH_2QF...ileID=6896

Recent endorsement as official baijiu to serve foreign dignitaries boost「Dukang」
brand equity expected to drive sales and strengthen customer loyalty

http://infopub.sgx.com/FileOpen/DKDH_3QF...eID=229910

Competition from wine seems to be insignificant on Dukang as of now, based on their 2Q and 3Q 2013 report. Moving forward, over the next 10 years, we will see more consumption pattern change from China as they embrace foreign alcohol, but a similar shift in foreign market can also be expected. However, I do expect the growth story of Dukang to end some point in the future as they gradually mature.

Currently Dukang isn't facing any pressure to cut cost. Yes, Chinese company has a bad reputation. You have to factor this risk into your valuation. I am on the stance that the management seems capable and will recognise the impact on the company's image if such scandal was made public. Dukang is currently establishing their brand name aggressively, and their Executive Chairman holds >65% of the shares. The interest of the management and the shareholders seems to be in line.

Dukang is still in its growth phase, and they manage to produce great returns on their reinvested earnings. I think a no dividend policy is a wise one.

[touzi]

Former Chairman has cashed out of his entire 43.8% stake. He sold at 47.42 cts per share.

With new controlling shareholders, will the current chairman and CEO Zhou Tao be replaced?

http://infopub.sgx.com/FileOpen/Form_3_K...eID=251975

http://infopub.sgx.com/FileOpen/Form_3_T...eID=251966

[felixleong]

wah how can the chairman like this sell out? he planning to retire or something ?

first time I see this kinda move.

[touzi]

wah how can the chariman like this sell out? he planning to retire or something?

My apologies, it should be former chairman, he stepped down several months back.

[Wildreamz]

http://infopub.sgx.com/Apps?A=COW_Corpor...gpgY5JmhcY

Health Issues. (?)

At 44 years old, this is unusual.

(Vested and recently increased holdings).