Dukang Distillers Holdings

[potatolover]

If in doubt , just dump . If there is strong conviction of fraud, can try short selling to target zero value ....

There are just too many warning signs ....

[Wildreamz]

The Board of Directors (the “Board”) of Dukang Distillers Holdings Ltd. (the “Company”, and together with its subsidiaries, the “Group”) wishes to announce that the Group expects its overall revenue and earnings to be significantly lower for the three months ended 31 December 2013 (“2Q2013”) compared to the three months ended 31 December 2012 (“2Q2012”).

This was mainly due to:

i) the decrease in average selling prices and sales volumes of Luoyang Dukang and Siwu products as Chinese austerity measures had affected the sales of wine and spirit across the nation; and

ii) higher advertising and promotional expenses due to intensified advertising and promotional activities.

http://infopub.sgx.com/FileOpen/DKDH-2Q2...eID=273445

Reserve my opinion until the financial report is out..

[potatolover]

think it is going to drop below its former low of 20 cents... Another fallen star....

[rogerwilco]

imho, baijiu is currently associated with luxury, politician, and old generation. Not all alcoholic drinks sales are declining though (Diageo reported that its Baileys sales in China is still up, Red wine seems to be getting more popular as well).

as one of Dukang's shareholder (yes, i am stubborn as a mule ) I hope Dukang's management can weather the crisis by cost cutting, speed up product and packaging innovation, and tweak the marketing message

[Tiggerbee]

imho, baijiu is currently associated with luxury, politician, and old generation. Not all alcoholic drinks sales are declining though (Diageo reported that its Baileys sales in China is still up, Red wine seems to be getting more popular as well).

as one of Dukang's shareholder (yes, i am stubborn as a mule ) I hope Dukang's management can weather the crisis by cost cutting, speed up product and packaging innovation, and tweak the marketing message

The whole baijiu industry peaked in 2013 and is going through a inventory correction due to a big fall in demand, not to mention that the industry has been expanding capacity in the past few years.

And officials don't drink Baileys, they drink maotai and wuliangye. The good old days of the baijiu industry is gone. It might take a few more years for the industry to bottom out.

[Curiousparty]

yes, agreed wholeheartedly. The whole Baijiu industry is going to restructure and consolidate.
many will close shop as have happened to the luxurious end of consumer industries.
have talked to friends doing businesses in China. it seemed that China Central Govt is really bent on cracking down on corruption...


will not be surprised if Dukang drops to less than 10 cents ....

[hh488]

Another thing abt Dukang was the recent sale of 44% stake by the ex-Chairman Gao Feng in Aug 2013. Worst, it was bought over none other by Wang Peng (CEO of Synear) & his friend.

And Wang Peng has bought out the minorities shares of Synear at 18.6 ct with much outcry from them.

Question is, will he do the same to Dukang?

Just wondering what did Wang Peng saw in this counter that prompted him & his allies to buy a substantial stake last year?

[hh488]

Look like Dukang going the way of Synear's share price & after which it will be delisted just as Synear did?

[specuvestor]

Looking on the other thread about Eratat, there is a high likelihood of fraud with a cash rich company. No doubt Dukang could be a next target.

Not to forget, Dukang had a complete change of ownership to the owner of Synear food holding which was delisted in 2013. Not entirely sure this new management acts in best interest of minority shareholder.

Look like Dukang going the way of Synear's share price & after which it will be delisted just as Synear did?

Is it a fraud? Probably not

Is it undervalued? Probably yes

Will shareholders' value be realised? Probably not

Will major shareholder be laughing to the bank? Probably yes

The structural layer in analysing Synear and Dukang far outweighs the business and value IMHO.

[Wildreamz]

Specuvestor make some pretty common sense and good point. I don't see why Wang Peng or any other interested party would not take this chance to buy up Dukang's remaining shares at depressed price.

On the fundamentals of Dukang though:

1. Dukang's performance this quarter is probably no surprise to industry watchers. http://finance.eastmoney.com/news/1353,2...26080.html

去年以来，茅台、五粮液(行情 股吧 买卖点)、泸州老窖、洋河等一线白酒巨头纷纷将目光开始聚焦到100元到300元价位的市场上，随着布局的完成，这些巨头毫无疑问将投入更大的资金、更多的资源“砸”市场，将进一步增加市场竞争的激烈性和残酷性。

2. The Baijiu industry is facing restructuring and consolidation. There are probably like 1000+ Baijiu brands, big and small, in China right now, in 10 years, the number remaining would probably be much less.

3. What the Baijiu industry will look like in 10 years, no one knows, but it probably will not look as lucrative at it was in the last decade.

4. Dukang is still generating healthy positive cash flow last quarter, if the trend continue to this quarter, we are expecting to see increased sales volume and market share (due to increased advertisement and marketing), flat/declining revenue (due to price pressure).

5. This is a good position for any Baijiu brand to be in, having lots of cash to devote into marketing and brand building. Dukang has been aggressively building up their brand for the past few years. They are just ramping up their effort in the last quarter.

a. http://www.dukang.com/index.aspx Just look at their list of activities over the past years. About 80% of company activity is a publicity campaign. And they seem to have some success.

b. http://baike.9928.tv/baike/1112.html

五年之内我们更多的是关注于杜康品牌的打造和企业发展基础的夯实，因此公司每年都会把全部的利润拿出来为品牌建设做加法。每年至少要拿出销售额的15%进行广告投入，去年除去终端市场广告外的实际广告投入3000多万元，今年的投入将达到8000余万元，以后每年会翻番追加投入。

c. It is actually quite applaudable for the management to stick true to their strategy of marketing aggressively. Despite constant pressure from shareholders each year to distribute the profits back to them in the form of dividends.

5. Dukang is a high risk counter now, due to uncertainty of its future. It doesn't have a long brand name that stood the test of time. With no competitive moat, their excess profit will just be eroded slowly until they disappear completely. So if you are a risk adverse shareholder, definitely avoid this counter until their future is more clear.

(vested, hence bias)