Conscience Food Holdings

[andrefre]

Hi Chris,

Any thoughts on why the price has slid back down? Can't see any reason for the slide since March of this year.

Cheers,
Ian

There are several well-known instant noodle brands in Indonesia : Indomie, Supermi, Sarimi, Mie Sedaap, Salam Mie, Mi ABC, Mie Kare, Alhami, Sakura Mi Instan, and Gaga Mie.
Indomie, Supermi, Sarimi, Sakura are produced by Indofood Sukses Makmur. Mie Sedaap is produced by Wings Food.
These 2 instant noodle producers probably get 95% market shares ??

I think they did mention somewhere Conscience has about 4% of the market. For them to go against the jaggernuts like Indofood will not be easy. But the market is definitely growing in Indonesia. Besides the organic growth in instant noodles, will be good for the Company to articulate their strategies too.

Management did mention that one of the main focus is to develop beverage which can generate more income than instant noddle on a per unit basis. However, how good the company can execute this initiative remains to be seen.

One thing I am not too sure is why company goes for loan for expansion when they have the cash.

I've done some research in this company before and vested(previously).

Even thought the PE looks very attractive, the company is not performing as expected in the last 2 quarters.

Indonesia, in general is still a poor country and local population do mix instant noodle with rich as a staple food as they can't afford purely rice.

Looking this industry, Pricing will be an important factor, which will influence the market shares and this is where Conscience Food market segment is.

So far, I do not see them having a strong economic moat:
a. Any price reduction in their competitors will erode their market shares.
b. Cost of raw material increase will affect their cost which is difficult to be passed down to consumer.

In addition, there is not much transparency and information about their management except those posted in SGX and some info which were featured at some security firms' research report and forum.

No dividend and AGM been called in SG for the past 2 years.

You decide whether to invest.

My 2 cents

[VIChris]

Hi Ian,
not too sure what is your question, but looking at its recent quarterly/1H reporting, the result is not impressive at all.

Take a look at its net profit, 1H Yr to Yr Net profit only increase by 3%:
"The Group achieved a net profit after tax (“NPAT”) of Rp41,604 million in 2QFY13, an increase of 41.9% as compared to 2QFY12. The increase was mainly due to the income from the fire insurance claim amount of
Rp30,900 million in 2QFY13.
Without this insurance claim, I believe her profit Yr to Yr should be dipping instead of increase.

Anyway as mentioned, in my previous posting, I do not see her having a strong economic moat......

[LionFlyer]

http://infopub.sgx.com/FileOpen/CHL-Ann_...eID=257908

Delisting just 3 years after IPO back in 2010 with offer of 0.184. The closing price was 0.149.

Considering that the IPO was 0.22, does it seem to have short changed investors?

[CY09]

Just smart management. As Conscience food is turning around, they take the opportunity to delist it. Well, its up to minority holders to say no.

Recently, sound global is another firm where just as when it is growing, the owners proposes a delist.

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One interesting observation is that most of the IPOs of 2010 excluding GLP and Maple tree industrial are under their IPO prices. Major successes are Kruez and cache

[VIChris]

Just smart management. As Conscience food is turning around, they take the opportunity to delist it. Well, its up to minority holders to say no.

Recently, sound global is another firm where just as when it is growing, the owners proposes a delist.

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One interesting observation is that most of the IPOs of 2010 excluding GLP and Maple tree industrial are under their IPO prices. Major successes are Kruez and cache

If it is truly turning around, then I am wondering whether the management is truly inline with the shareholders?

[CY09]

Hi,

Sometimes the major shareholders of the firm are the management of the company as well. So I will rephrase your question to " I am wondering whether the management is truly inline with the MINORITY shareholders? " For conscience case, the management is simple enjoying the cash difference where anticipating that the company is turning around soon.

My short 2 years of investing has seen cases where the interest of the management are mainly for themselves (they are the majority shareholders as well). LionTeckChiang was an example a year back where minority shareholders received little dividends, while the company had a large cash hoard and a strong cashflow generating business. There are many other example of management squeezing out minority shareholders.

In the area of IPO, companies have re-listed/IPOed at ridiculous price. Some examples include Amtek which re-IPOed with more debts. Often companies IPO not to let shareholders enjoy the potential growth of the company but to a) cash out, b) need the $$, c) some other reasons

[CityFarmer]

Just smart management. As Conscience food is turning around, they take the opportunity to delist it. Well, its up to minority holders to say no.

Recently, sound global is another firm where just as when it is growing, the owners proposes a delist.

The Sound Global case is different. It is a restructuring exercise, which benefits shareholders, including the minority shareholders.

The controlling shareholder didn't shortchange minority shareholders, who are given a choice to retain their stake with HKEx listing.

The ITG (Internet Technology Group) may be is the company matching the description.

[freedom]

How much effort did minority shareholders put in the company to demand the same benefit as the management?

The management put all their interest in the company in most cases. They stay with the company, rain or shine.

What would minority shareholders do? Often they will run at first sight of trouble. They mere buy the share in the company, which contributes almost nothing to the company, yet demanding so much.

[CY09]

Hi Cityfarmer,

Yes, putting the option of holding HKSE shares is pherhaps a way for shareholders to benefit from the continued growth of SoundGlobal.

I do agree that management are the one who put in the most effort to ensure the growth of their company and thus should reap a greater proportion of the fruits of labour. The main underlying issue is that as retail investors who are likely to be in the group of minority shareholders too, we must be aware that the management will not put our financial interest as the main priority, its their interest before ours. And also do note that "the company does not know we (retail investors) own shares in it" (unless probably when you are the top 20 shareholder).

For conscience case, it is that the mgmt. acknowledges the position the coy is in and deems it to be undervalued. Hence, the proposed takeover potentially do not adequately reward shareholders.

[VIChris]

How much effort did minority shareholders put in the company to demand the same benefit as the management?

The management put all their interest in the company in most cases. They stay with the company, rain or shine.

What would minority shareholders do? Often they will run at first sight of trouble. They mere buy the share in the company, which contributes almost nothing to the company, yet demanding so much.

Good point. If that is the case, don't list. Don't make use of public money for ones good. As such integrity will be questioned and whether they are inline with shareholders.

Anyway, I see that the management might be questionable as it is only listed 3 years and for the past 3 yrs (if I am not wrong) no AGM has taken place.

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For conscience case, it is that the mgmt. acknowledges the position the coy is in and deems it to be undervalued. Hence, the proposed takeover potentially do not adequately reward shareholders.

1. No strong economic moat,
2. Earning is dropping Yr to Yr
3. Plants sit on land that doesn't belong to the company (belong to the chairman)....

Undervalue? Can think again.

Just my humble opinion.

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