Sino Grandness

[tiongkokgor]

Hi Bluedogmeow,

The % of completion method for accounting revenue is usually applied for long term contracts like those in the construction industries. As far as I am aware, this method has never been applied in the FMCG industry.

I am very skeptical of your posts now. Perhaps sharing something factual from Huiyuan, President, Ting Yi or Want Want financial statements/annual reports etc may be more convincing.

The quality of earnings takes into account of all factors, not just GAAP/IFRS earnings. Take for example two businesses which have long-dated contracts with their clients.

Company A book revenue on a percentage-of-completion basis while Company B book the entire contract on day 1.

While company B has higher profits, Company A has better earnings quality. Would you attach the same multiple, say 20x, to both company?

SinoG is similar. But more in the case of margins and cashflow.

Bluedogmeow,

Sino Grandness FY2013 and FY2014 profits were RMB 418 mil and RMB 467 mil respectively. 1QFY2015 profit was RMB 105 mil versus 1QFY2014 profit of RMB 73 mil.

Why do you say the company's business has very poor earnings quality?

Hey guys. Seems like my account on the forum, Sharejunction, was banned. And it seems my posts have been closely tracked and deleted, even on a new account. This forum is not as fun as you guys seem more...realistic.

In the other forum, someone said that SinoG has been paying millions in IPO fees since 2013. In my experience, spinoff doesn't usually take that long. Tribune Media spun off Tribune Publishing in less than 2 months. BHP spun off South32 within 1 year, and the same for Windstream and CSAL. It is a huge red flag that SinoG refuses to divulge the firm that will be helping the company spin off its beverage assets, even after two years and spending some much in fees.
Even if SinoG is legit, it sure as hell is a business with very poor earnings quality.

@ Leeta: I have never said anything about inventories, only accounts receivables. Also, competition is not local. It is global. What is stopping me from contracting the vegetable canning job to another country? The companies SinoG supplies to has thin margins. If I am Lidi and have the choice between buying canned vegetables @$1.50 versus one from Myanmar or India @$1.20, I will definitely take the India alternative. Vegetable canning is not rocket science...and assuming a $2 selling price, I just increase my gross profit per can from $0.50 to $0.80.

Also, it seems some people have been saying that I am a high school student. If that is so, I am pretty impressed by myself. Running a fund below 18.

Regards,
poopfeast420

[Oldman9]

Definitely not millions.

I did not approach SinoG management, I don't think it is necessary. I tend to look for no-brainers. SinoG is a no brainer. It is 1.5% of my position at the moment.

I agree with you that some people are probably more familiar with SinoG than I am, but it makes it all the sadder. It is akin to looking at the trees and ignoring the woods. By stripping out VAT receivables and tax refunds, growth in A/R is more ludicrous.

I think the Q2 & especially Q3 results will be instructive as it would push SinoG to the point where it has to harvest its working capital. Failure to do so will put the balance sheet into question.

Hi Bluedogmeow

Just want to check with you. Is your 1.5% long or short position? and what is the cash value of your position?

Cheers
oldman9

It is short. It is probably closer to 1.3% now, due to appreciation of my portfolio and devaluation of SinoG.

Hi Bluedogmeow,

Is it in hundreds of thousands or million dollars? And what price did you short it at? Thanks.

Cheers
Oldman9.

Hi Bluedogmeow

thanks. Just saw the posts by HHL on SJ. He mentioned you posted your portfolio before it was deleted and your shorts are somewhere between 20k - 50k.

Anyway thanks.

cheers
Oldman9

[BlueDogMeow]

...It was merely an example of the difference between quantity of earnings, and quality of earnings...which you were alluding to in your FY13/14 reference.

Hi Bluedogmeow,

The % of completion method for accounting revenue is usually applied for long term contracts like those in the construction industries. As far as I am aware, this method has never been applied in the FMCG industry.

I am very skeptical of your posts now. Perhaps sharing something factual from Huiyuan, President, Ting Yi or Want Want financial statements/annual reports etc may be more convincing.

The quality of earnings takes into account of all factors, not just GAAP/IFRS earnings. Take for example two businesses which have long-dated contracts with their clients.

Company A book revenue on a percentage-of-completion basis while Company B book the entire contract on day 1.

While company B has higher profits, Company A has better earnings quality. Would you attach the same multiple, say 20x, to both company?

SinoG is similar. But more in the case of margins and cashflow.

Bluedogmeow,

Sino Grandness FY2013 and FY2014 profits were RMB 418 mil and RMB 467 mil respectively. 1QFY2015 profit was RMB 105 mil versus 1QFY2014 profit of RMB 73 mil.

Why do you say the company's business has very poor earnings quality?

Hey guys. Seems like my account on the forum, Sharejunction, was banned. And it seems my posts have been closely tracked and deleted, even on a new account. This forum is not as fun as you guys seem more...realistic.

In the other forum, someone said that SinoG has been paying millions in IPO fees since 2013. In my experience, spinoff doesn't usually take that long. Tribune Media spun off Tribune Publishing in less than 2 months. BHP spun off South32 within 1 year, and the same for Windstream and CSAL. It is a huge red flag that SinoG refuses to divulge the firm that will be helping the company spin off its beverage assets, even after two years and spending some much in fees.
Even if SinoG is legit, it sure as hell is a business with very poor earnings quality.

@ Leeta: I have never said anything about inventories, only accounts receivables. Also, competition is not local. It is global. What is stopping me from contracting the vegetable canning job to another country? The companies SinoG supplies to has thin margins. If I am Lidi and have the choice between buying canned vegetables @$1.50 versus one from Myanmar or India @$1.20, I will definitely take the India alternative. Vegetable canning is not rocket science...and assuming a $2 selling price, I just increase my gross profit per can from $0.50 to $0.80.

Also, it seems some people have been saying that I am a high school student. If that is so, I am pretty impressed by myself. Running a fund below 18.

Regards,
poopfeast420

[leeeta]

In the other forum, someone said that SinoG has been paying millions in IPO fees since 2013. In my experience, spinoff doesn't usually take that long. Tribune Media spun off Tribune Publishing in less than 2 months. BHP spun off South32 within 1 year, and the same for Windstream and CSAL. It is a huge red flag that SinoG refuses to divulge the firm that will be helping the company spin off its beverage assets, even after two years and spending some much in fees.
Even if SinoG is legit, it sure as hell is a business with very poor earnings quality.

@ Leeta: I have never said anything about inventories, only accounts receivables. Also, competition is not local. It is global. What is stopping me from contracting the vegetable canning job to another country? The companies SinoG supplies to has thin margins. If I am Lidi and have the choice between buying canned vegetables @$1.50 versus one from Myanmar or India @$1.20, I will definitely take the India alternative. Vegetable canning is not rocket science...and assuming a $2 selling price, I just increase my gross profit per can from $0.50 to $0.80.

1) Allegations that the IPO process is fake have been around for a long time.
It is highly unlikely that auditors had not verified the RMB 13m payments to IPO professionals. Had the Thai strategic investors not bother to establish whether the IPO is work-in-progress? By the way HHL has already explained on Sharejunction why the IPO process takes time.

2) Sino Grandness came into being after Mr Huang bought over the state-own company that produced canned asparagus for Lidl to sell in its supermarkets in Germany. Import requirements for food are stringent in Germany. As the canned products are sold under the its house brand, Lidl has to assure itself that growing of asparagus and canning are carried out satisfactorily.

China is the leading exporting country of fresh and processed asparagus followed by Peru. You may refer to Sino's IPO prospectus if you are so keen on Sino.

The explanation on why the IPO process is so long is weak at best. For one, you don't need to verify every single distributor. In addition, in my experience, channel checking is quick easy and can be easily outsourced. I have done it once before with great efficacy.

Regarding Lidl, it is a poor explanation. Vegetable canning, no matter how one spins it (quality control, import requirements, etc), is a commoditized service. Anyone can do it, anywhere. A potential comparable is Hanover Foods. It does vegetable canning too. GPM is ~15% in the latest reported financial data, and AR % Rev is less than 10%. SinoG, on the other hand, has a 33% GPM and AR % Rev of 38%.

You claim that you have done channel checking before..how do we know?
Are you also familiar with the new IPO process in HK?

You said anyone can do manufacturing/vegetable canning anywhere to sell to Lidl. I say No. Do you know that for export to Germany you must have HACCP certification and satisfy "Green Barrier" requirements? Are you familiar with the food industry?

Lidl is big supermarket chain with 3300 outlets in Germany and 9800 across Europe. Sino has been serving Lidl since 1998. Sino's published accounts are accessible by all its customers. If the accounts shows that Sino has overcharged Lidl to get a fat margin, Lidl would have terminated Sino's service. Fyi, Ceo Huang has indicated that Lidl sources their house brand canned asparagus from China and Peru. Why do you think Lidl continues to be a customer of Sino?

Your reference to Hanover food is of little relevance. As a fund manager you should know that companies in different countries have different cost structures.

This idea that SinoG has cost advantages over companies such as Seneca Foods because it satisfies HACCP or the Green Barrier requirements is laughable. It took me great effort to find that Seneca Foods do satisfy the requirements. It seems that it is so obvious that these companies, obviously, satisfy the requirements that they don't find the need to disclose it as material information.

You are right in saying that different countries have different cost structure. That is why I reference Gross Profit Margins, and a balance sheet comparable method, so as to ignore OPEX differences.

Where did I give you the idea that HACCP certifications and meeting Green Barrier requirements provided Sino Grandness a cost advantage? These are basic requirements for entry into Germany. Cost advantage enjoyed by Sino is completely a different factor. Please do not twist and turn like you did in Sharejunction.

You said that Sino Grandness cannot have higher margin than Hanover Food and Seneca Food. If we adopt your logic then you are saying that all companies should converge to a common GPM..but the reality is that this cannot be the case. There will be some doing better than others for various reasons. Again, if you adopt this same logic, you will never invest in any good company that displays a better GPM.

[Moderated by Admin : I surmise the post has been deleted in other forum, so no need to post the screenshot here. Thanks.]

[cyclone]

The thread is closed for the time being to avoid degraded.postings. Thanks.

[CityFarmer]

As suggestion by cyclone, let's have a cool-down period, to ready for a more productive discussion later.

Thanks

Regards
Moderator CF

[CityFarmer]

A recent disclosure on the company. Let's focus on new development. I will re-open the thread for discussion. Thank you

Regards
Moderator

----------
Further to the announcement dated 8 October 2014, the Board of Directors of Sino
Grandness Food Industry Group Limited (the “Company”) wishes to announce that
Bondholders holding RMB80,500,000 in principal amount of the Convertible Bonds have
notified the Company of their intention to extend the Maturity Date of the Convertible
Bonds from 30 June 2015 to 25 July 2015.
http://infopub.sgx.com/FileOpen/Sino_Gra...eID=357624

[Oldman9]

A recent disclosure on the company. Let's focus on new development. I will re-open the thread for discussion. Thank you

Regards
Moderator

----------
Further to the announcement dated 8 October 2014, the Board of Directors of Sino
Grandness Food Industry Group Limited (the “Company”) wishes to announce that
Bondholders holding RMB80,500,000 in principal amount of the Convertible Bonds have
notified the Company of their intention to extend the Maturity Date of the Convertible
Bonds from 30 June 2015 to 25 July 2015.
http://infopub.sgx.com/FileOpen/Sino_Gra...eID=357624

Hi Cityfarmer

thanks.

Hi All,


With regards to the recent announcement of bondholders requesting for extension, do the members here have any views?

Cb1 bondholder could have requested for partial repayment or full repayment but they did not, instead they requested for full extension until 25th July 2015. Does this mean that they know that IPO is coming?

Oldman here knows that if Huang is to pay them off partially without the form submission he would have to pay at higher cost. Not only he has to deal with CB1 , there is also Cb2 to deal with come 25th July. So will he be allowing CB1 to extend and then submit the form before both maturities and then redeem full or partially?

Any views/comments to enligthen oldman.

Cheers

Oldman9

[newborn1000]

All these are red flags for me though.......which bondholder doesnt want to get paid........

Not vested

[Oldman9]

All these are red flags for me though.......which bondholder doesnt want to get paid........

Not vested

Hi Newborn1000

thanks for the reply.
If CB1 bondholders wants to get paid, they would not have notified Sino on the extension but request for payment (inclusive of the hefty penalty), right?

did I read wrongly?... hmmm

oldman9