Sino Grandness

[Oldman9]

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Due to the recent extension of the 1st tranche bonds, there has been a lot of discussions in other forums and among friends concerning this topic. Some are saying that Sino Grandness has taken too much risk by subscribing to the two series of bonds without giving reasons why.

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The terms of the bonds are onerous and they pose risks to Sino Grandness.

Garden Fresh had to earn RMB 70m in 2011 and RMB 140m in 2012 as the initial conditions for bondholders to exchange the bonds for Garden Fresh shares.

How well Garden Fresh performed in 2013 would determine the extent of dilution of Sino's current 100% shareholding interest in Garden Fresh. If Garden Fresh earned at least RMB 250m, dilution would be the lowest, at 24.7%. A much lower profit would result in 49.9% being taken by bondholders.

As Garden Fresh was incorporated only in 2010, profits of RMB 70m, RMB 140m and RMB 250m were daunting numbers in comparison with the RMB 100m profit from Sino's established canning business. The possibility of losing a big chunk of Garden Fresh was unsettling.

Garden Fresh had sailed through, nevertheless. Bondholders are now entitled to 23.4% of Garden Fresh when it gets listed.

(In October 2014, bonds of principal amount of RMB 19.5m were redeemed, lowering bondholders' stakes to 23.4% from 24.7%.)

There have been suggestions of bondholders not paying much attention to the state of affairs in Garden Fresh. The contrary is more likely as bondholders are aware of the risk of ending up with lower stakes in an overvalued Garden Fresh.

On a related matter, Thoresen Thai Agencies' (TTA) decision to subscribe 60.6m Sino Grandness shares and lock up 47m for ten years was likely made after careful deliberations.

Discussions during AGM of TTA suggest that TTA wants to bring Sino Grandness to greater heights (see yesterday's post from Crubs).

TTA has classified Sino Grandness as its associated company (even though its 9% stake is way below the usual 20% threshold) on the basis that it has significant influence over Sino Grandness.

Hi Portuser

Thank you for the explanation. Will digest what this all means.

by the way, I got this info from my friend. - Garden Fresh at 7 eleven advertisement on Hin Sang's facebook. I am trying to learn how to paste. Pardon me if image does not come out right.

To admin: Admin , can you help to post image here from this link? Sorry I can't get it right. Thanks. https://scontent-hkg3-1.xx.fbcdn.net/hph...e=56197DBA

The posting was made on June 9th on https://www.facebook.com/hshclHK?ref=profile

cheers
oldman9

[cyclone]

Are you talking about this one?

[Image: garden_fresh_7_11.jpg]

[cracker]

I used to be a shareholder from way back when it was 20 cents (40 cents pre-split) but being based in China I was able to do my research and when I compare Garden Fresh with any of the other top brands given in the Euromonitor and AC Nielsen reports, they are all much easier to find than Garden Fresh. In fact, to date, I have yet to find any 鲜绿园 outside of Guangdong province. I'm sure they exist but it's much much harder to find that any of the top 10 brands given by Euromonitor and Nielsen. Also, many of those brands have been around for ages - Huiyuan, Tropicana by Pepsi, Vitasoy's Fruit Juice (excluding their soya bean), Nongfu 果园 etc. are pretty much ubiquitous and well known throughout China. Minute Maid by Coco Cola of course goes without saying. Could Garden Fresh have really propelled itself to be bigger than some of these brands in merely 3 years with very minimal advertising? I have my doubts.

But good luck to all shareholders if you decide to take the risk.

[Young Investor]

I do not think Garden Fresh has propelled itself to be bigger than some of the established brands in merely 3 years. Garden Fresh is still small as compare with others.

Garden Fresh 2014 revenue of RMB 1.8 billion was far behind Huiyuan's RMB 4.5 billion.

[cracker]

Garden Fresh's reported sales may still be smaller than Huiyuan but they are significantly larger than Pepsico's Tropicana (1.393 billion) and Vitasoy (1.245 billion) while being comparable to Nongfu Orchard (1.9 billion). From my experience, all of these, except for Garden Fresh, are household brands in China and very easy to find in any city, so it's hard for me to believe Garden Fresh has comparable sales to them.

Also, in 2013, Tingyi spent 3.1 billion rmb on advertising in China. UPC spent 2.1 billion, Coco Cola Spent 8.5 billion, while even Huiyuan spent 830 million RMB. Garden Fresh spent a mere 20 million rmb on advertising and promotion in 2013. Huiyuan spends 40 times what Garden Fresh does on A&P, to merely consolidate its position whereas Garden Fresh by spending 2.5% of what Huiyuan spent, can somehow propel itself to become one of the top 10, overtaking Pepsi, Vitasoy and being on par with Nongfu? I found it quite difficult to believe. I don't have the stats on how much Pepsi, Vitasoy and Nongfu spent on A&P but I suspect that they are all also much higher.

You should go to China too and do a market survey yourself. You will find it quite hard to believe that Garden Fresh is a top 10 fruit brand in China, considering how few places sell it and the level of brand awareness. That's why I felt very uncomfortable and sold. No doubt I was lucky and bought much earlier on, so I still made a profit.

I do not think Garden Fresh has propelled itself to be bigger than some of the established brands in merely 3 years. Garden Fresh is still small as compare with others.

Garden Fresh 2014 revenue of RMB 1.8 billion was far behind Huiyuan's RMB 4.5 billion.

[Young Investor]

There are also accounts of sightings of Garden Fresh in other provinces.

If Garden Fresh has been overstating sales, the CEO would have dug his own grave by getting Euromonitor to conduct another market survey after Frost Sullivan reported earlier a market share of around 76% of the loquat juice segment.

[butcher]

IMHO, Sino Grandness is more of a growth company stocks. Its sales and financial results are not there in the league with the big boys yet and also there are scepticism of the company which exists due to various issues surrounding s-chips which results in the current valuations. If everything is legitimate and under good corporate stewardship, give it 5 to 10 years for the mgmt. to steer it to greater heights and valuations will follow suit. Very simple case

[fattboy]

IMHO, Sino Grandness is more of a growth company stocks. Its sales and financial results are not there in the league with the big boys yet and also there are scepticism of the company which exists due to various issues surrounding s-chips which results in the current valuations. If everything is legitimate and under good corporate stewardship, give it 5 to 10 years for the mgmt. to steer it to greater heights and valuations will follow suit. Very simple case

So much auditing had been done. So much visit to china, hk. I think longist will strive. It is time to accumulate slowly for the long.

I believe if figures and multiple audit reports still couldnt satisfy some, i think there is no more better arguement than to keep silent and patience will prevail.

[cracker]

As I said, I'm sure Garden Fresh does exist in the other provinces but from my experience I've yet to find any despite numerous supermarket and convenience store visits in Sichuan, Fujian, Zhejiang and Shanghai. While I'm sure they do exist, the difficulty in finding them shows that they are few and far between. On the contrary, brands like Vitasoy, Tropicana and Nongfu Orchard are very easily found, more befitting of a top 10 Chinese fruit juice brand in China.

You know it's funny, I remember attending a company briefing where they responded to some of the Newman9 allegations. Newman9 had criticized Company for using Frost & Sullivan, and cited the recent example of Tianhe Chemicals using Frost & Sullivan, then later proving to be a fraud. Company responded by citing a couple of examples in which HK and US listed Chinese companies had used Euromonitor and then later turned out to have accounting issues as well. Their stance at that time was "why attack Frost & Sullivan when Euromonitor has faced similar issues as well?" So now all of a sudden now that they have gotten Euromonitor, Euromonitor is now infallible?

In fact I would like to quote something interesting from the Newman9 report. "A criticism of Euromonitor data is that it is somewhat subjective and relies heavily on conversations with industry participants as well as company furnished information. However, the work done by Euromonitor is further corroborated by Nielsen, which uses objective scanner data. Garden Fresh is not found in the top 13, which is as far as Nielsen breaks out the data. Nielsen shows the #13 company, Beiqi, had estimated retail sales value of RMB 135 million." If this is true, this means that Nielsen is the only one out of the 3 that uses objective scanner data from supermarkets and stores to measure sales, which needless to say, would be as close to the truth as you can get.

Ultimately, what this teaches you is to never outsource your research and due diligence to third parties. That is just laziness in my opinion. Whatever the brand name, however rich they may be, they all are humans too, and humans get things wrong from time to time. Furthermore, to them this is an almost negligible percentage of their overall portfolios. They can afford the risk. Can we? In the end, they are not responsible for your money and own investment - you are. My own research in China makes me very uncomfortable about the Company. My only advice to you, is to go to China if possible, and do your own objective research first, then make your own decision.

[Oldman9]

As I said, I'm sure Garden Fresh does exist in the other provinces but from my experience I've yet to find any despite numerous supermarket and convenience store visits in Sichuan, Fujian, Zhejiang and Shanghai. While I'm sure they do exist, the difficulty in finding them shows that they are few and far between. On the contrary, brands like Vitasoy, Tropicana and Nongfu Orchard are very easily found, more befitting of a top 10 Chinese fruit juice brand in China.

You know it's funny, I remember attending a company briefing where they responded to some of the Newman9 allegations. Newman9 had criticized Company for using Frost & Sullivan, and cited the recent example of Tianhe Chemicals using Frost & Sullivan, then later proving to be a fraud. Company responded by citing a couple of examples in which HK and US listed Chinese companies had used Euromonitor and then later turned out to have accounting issues as well. Their stance at that time was "why attack Frost & Sullivan when Euromonitor has faced similar issues as well?" So now all of a sudden now that they have gotten Euromonitor, Euromonitor is now infallible?

In fact I would like to quote something interesting from the Newman9 report. "A criticism of Euromonitor data is that it is somewhat subjective and relies heavily on conversations with industry participants as well as company furnished information. However, the work done by Euromonitor is further corroborated by Nielsen, which uses objective scanner data. Garden Fresh is not found in the top 13, which is as far as Nielsen breaks out the data. Nielsen shows the #13 company, Beiqi, had estimated retail sales value of RMB 135 million." If this is true, this means that Nielsen is the only one out of the 3 that uses objective scanner data from supermarkets and stores to measure sales, which needless to say, would be as close to the truth as you can get.

Ultimately, what this teaches you is to never outsource your research and due diligence to third parties. That is just laziness in my opinion. Whatever the brand name, however rich they may be, they all are humans too, and humans get things wrong from time to time. Furthermore, to them this is an almost negligible percentage of their overall portfolios. They can afford the risk. Can we? In the end, they are not responsible for your money and own investment - you are. My own research in China makes me very uncomfortable about the Company. My only advice to you, is to go to China if possible, and do your own objective research first, then make your own decision.

Hi Cracker

thank you for your input.

can i know where you check ? pop n mom shops?
and what price are these outlet selling the drinks?

thanks
oldman9