Sino Grandness

[Yoyo]

Hi Aldar

Quote:
But I'm just puzzled by the increase in other receivables which was attributed to prepayments and deposits which I thought should not be refundable.

Based on my understanding, so long as there is underlying value in the prepayment and deposits, it will be taken up in the balance sheet. Examples such as prepaid property tax, prepaid insurance, rental deposits, deposits on contracts, deposits on utilities. These are captured as assets in the balance sheet (broadly other receivables, prepayment and deposits) as they have values to the business, bounding on the other parties to some obligation work/duties. It does not matter whether they are of refundable or non-refundable nature.

Whether the item is refundable or not depends on the terms of the contract between the two contracting parties.

[butcher]

Hi. None taken. DTL is a misnomer. The point is the economic reality of cash outflow is being understated. Even though the number is already that bad.

I did not say the cash outflow does not complie with accounting standards, I am saying that, similar to the Noble case, accounting information rarely match economic reality, and the economic reality for SinoG is massive cash outflow for seemingly no reason.

If I shift all of my trade receivables to other receivables, does it mean the business is better? No...it is just a restatement. Of course I can't prove that trade receivables are being shifted due to poor disclosure but the empirical data certainly points towards that direction. Of course one can say that other trade receivables does not have trade receivables in them, but that requires leap of faith I am u wiling to take, especially for a management team that time and again fail to keep their promises.

On a valuation standpoint, mechanically wise, SinoG is a short regardless of the growth potential.

Hi Blue, sorry no offence,

Just hope you understand the fundamental concept that Deferred Taxation arises due to timing differences due to differences in accounting and tax treatments. Cash out flows paid for tax will be offset against the provision for taxation account. These are widely applied almost globally no matter IFRS or GAAP.

I can't understand what are the reasons for the statement that 'economic reality of cash outflow is being understated' as mentioned.

With regards to your other statement that the company shifted receivables from trade to others. I think this is groundless statement and without merit. I thought I have pointed out in yesterday post that the company made disclosures on the decrease and increase in trade and other receivables which I think you had overlooked. The reasons can be found in the exact same announcement.

There are no shifting of amounts between trade and other receivables my dear friend.

Also wish to point out, any cash flows impacts due to trade & other receivables will also not impact free cash flows

An increase in trade & other receivables would translate to an increase in current assets and hence an increase in working capital.

An increase in working capital is Free Cash Flow to Firm ("FCFF") negative.

Calculations:
FCFF = Net Operating Profit after tax [or EBIT * (1-tax rate)] - Capex - increase in net working capital + depreciation (and any other non-cash expenses)

Sorry and noted
What I am trying to tell Blue are that even if by what he mentioned the management shift trade rcv to other rcv, it have no impacts on FCF.

Anyway, thanks and thumbs up! cheers

Actually I agree that Blue is hasty and irresponsible to claim that the management shifted trade receivables to other receivables.

But I'm just puzzled by the increase in other receivables which was attributed to prepayments and deposits which I thought should not be refundable.

Should these be prepayments for ppe but non-refundable, the mgmt. classified them under other rcv before capitalising under PPE are not wrong as in the situation they not yet meet criteria for capitalisation under PPE, they still need to be accounted under asset on balance sheet. Preparers of financial statements may also consider recognising under 'Other Assets'. The financial statements template and way of presentation may differ from firm to firm but in general still complies with requirements of IFRS or GAAP

[BlueDogMeow]

As you said, a shift between trade and other receivables does not have an impact on the FCF amount. BUT, it does have an impact on the quality of FCF.

SinoG sales to capital ratio has been steadily declining for a long time. It was 1.00 in Q4 2011. it is 0.7 now. Might not seem like much...but it is, especially when you are talking about a high growth business like SinoG.

Hi. None taken. DTL is a misnomer. The point is the economic reality of cash outflow is being understated. Even though the number is already that bad.

I did not say the cash outflow does not complie with accounting standards, I am saying that, similar to the Noble case, accounting information rarely match economic reality, and the economic reality for SinoG is massive cash outflow for seemingly no reason.

If I shift all of my trade receivables to other receivables, does it mean the business is better? No...it is just a restatement. Of course I can't prove that trade receivables are being shifted due to poor disclosure but the empirical data certainly points towards that direction. Of course one can say that other trade receivables does not have trade receivables in them, but that requires leap of faith I am u wiling to take, especially for a management team that time and again fail to keep their promises.

On a valuation standpoint, mechanically wise, SinoG is a short regardless of the growth potential.

Hi BlueDogMeow,

I hope you don't mind if I state my humble opinion on your statement. No offence, please don't take it hard.

The deferred tax liability ("DTL") are not resultant due to difference between tax expense in the profit and loss as compared to tax paid. You may refer to FRS 12 paragraph 15 to 18. A copy of FRS 12 attached. Income tax expense recognised to profit and loss consisted of tax on the relevant period plus any adjustments in respect of prior periods plus deferred taxation (which will include any adjustments in respect of prior period). You may refer to EY specimen financial statements disclosure notes on the attached pdf file page 94/234 for an idea. There are other Big 4 specimen FS available online also which users may also refer to. (I not from nor advertising for EY).

Generally, when carrying value larger than tax base, it gives rise to a taxable temporary difference which is multiplied by the applicable tax rate to derive the deferred taxation. In this case, a DTL.

Various other websites to understand deferred taxation (list not exhaustive) as follows:-
https://en.wikipedia.org/wiki/Deferred_tax
http://www.iasplus.com/en/standards/ias/ias12

Hi Blue, sorry no offence,

Just hope you understand the fundamental concept that Deferred Taxation arises due to timing differences due to differences in accounting and tax treatments. Cash out flows paid for tax will be offset against the provision for taxation account. These are widely applied almost globally no matter IFRS or GAAP.

I can't understand what are the reasons for the statement that 'economic reality of cash outflow is being understated' as mentioned.

With regards to your other statement that the company shifted receivables from trade to others. I think this is groundless statement and without merit. I thought I have pointed out in yesterday post that the company made disclosures on the decrease and increase in trade and other receivables which I think you had overlooked. The reasons can be found in the exact same announcement.

There are no shifting of amounts between trade and other receivables my dear friend.

Also wish to point out, any cash flows impacts due to trade & other receivables will also not impact free cash flows

An increase in trade & other receivables would translate to an increase in current assets and hence an increase in working capital.

An increase in working capital is Free Cash Flow to Firm ("FCFF") negative.

Calculations:
FCFF = Net Operating Profit after tax [or EBIT * (1-tax rate)] - Capex - increase in net working capital + depreciation (and any other non-cash expenses)

Sorry and noted
What I am trying to tell Blue are that even if by what he mentioned the management shift trade rcv to other rcv, it have no impacts on FCF.

Anyway, thanks and thumbs up! cheers

[GenS70]

anyone attended SinoG's result briefing?

[weijian]

Regardless, I don't know why some people here are so concerned about me giving my opinions on this company. If you are truly in it for the long run, me "bashing" this company is good for you as you will be able to buy this company at a great discount to intrinsic value.

BDM's comments are not going to move the market (Let's face it - He is not 1 of the big boys). This brings to the conundrum as to why are long-vested parties so agitated to his comments? Rationally speaking, there shouldn't be any need to react or put much inputs to his comments, even if they conflict with one's own belief systems. My guess is that SFI investors are superbly adverse to suffering from cognitive dissonance. But then again, isn't that what happened to either a certain Michael Burry when his CDS buying was about to reap a profit soon or the clueless investor who insists of putting in more good money after bad into that 12% annual return ostrich farm?

I find the debate between Trade receivables vs other receivables pretty futile. The prudent investor should consider both sets of receivables as a sum into his calculations/consideration. It is well known how accounting shenigans can take advantage and flirt on the edge of accounting rules (and stay perfectly legal), and the best the average retail guy (who is the outsider) should do to protect their own hard earned $, is to stay open and sceptical. It also doesn't harm if one has a temperament to receive pot shots, suffer from cognitive dissonance and truly internalise that the Market is a weighing machine in the long term.

[GenS70]

I am with Weijian, shd this forum not embrace diversity? and if any things that is against forum policy shd we not report to moderators and let them decide, instead of becoming personal, let's make this forum a even better place to be

[CityFarmer]

I am with Weijian, shd this forum not embrace diversity? and if any things that is against forum policy shd we not report to moderators and let them decide, instead of becoming personal, let's make this forum a even better place to be

Yes, please. Please do a moderator report, if you found any post is violating posting guideline.

I have removed a post to refocus the thread back to company related topic. No further moderation action will be carried out.

Thank

Regards
Moderator

[BlueDogMeow]

Exactly. SinoG price is just the bloodless verdict of the market.

Regardless, I don't know why some people here are so concerned about me giving my opinions on this company. If you are truly in it for the long run, me "bashing" this company is good for you as you will be able to buy this company at a great discount to intrinsic value.

BDM's comments are not going to move the market (Let's face it - He is not 1 of the big boys). This brings to the conundrum as to why are long-vested parties so agitated to his comments? Rationally speaking, there shouldn't be any need to react or put much inputs to his comments, even if they conflict with one's own belief systems. My guess is that SFI investors are superbly adverse to suffering from cognitive dissonance. But then again, isn't that what happened to either a certain Michael Burry when his CDS buying was about to reap a profit soon or the clueless investor who insists of putting in more good money after bad into that 12% annual return ostrich farm?

I find the debate between Trade receivables vs other receivables pretty futile. The prudent investor should consider both sets of receivables as a sum into his calculations/consideration. It is well known how accounting shenigans can take advantage and flirt on the edge of accounting rules (and stay perfectly legal), and the best the average retail guy (who is the outsider) should do to protect their own hard earned $, is to stay open and sceptical. It also doesn't harm if one has a temperament to receive pot shots, suffer from cognitive dissonance and truly internalise that the Market is a weighing machine in the long term.

[Oldman9]

Hi Bluedogmeow,

Quoting your post "SinoG sales to capital ratio has been steadily declining for a long time. It was 1.00 in Q4 2011. it is 0.7 now. Might not seem like much...but it is, especially when you are talking about a high growth business like SinoG. "

Can you explain how did you get the ratio of 1 in 4Q 11 and 0.7 in 2Q 15?
4Q 11 sales were RMB 285m, and 2Q 15 sales were RMB 925m.

thanks
Oldman9

[BlueDogMeow]

Sales divided by total capital? What I am saying is capital is growing at a much faster pace than sales.

Hi Bluedogmeow,

Quoting your post "SinoG sales to capital ratio has been steadily declining for a long time. It was 1.00 in Q4 2011. it is 0.7 now. Might not seem like much...but it is, especially when you are talking about a high growth business like SinoG. "

Can you explain how did you get the ratio of 1 in 4Q 11 and 0.7 in 2Q 15?
4Q 11 sales were RMB 285m, and 2Q 15 sales were RMB 925m.

thanks
Oldman9