Sino Grandness

[BlueDogMeow]

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.

What terrible results. No news on IPOD. No news on debt repayment whatsoever even after ~3 weeks.

Here are a few interesting red flags.
Cash burn was $122m RMB. Here is the breakdown:
Receivables rose $160m. Not a single reprieve in receivables since the IPO. Rose from 165 days in Q4 2014 to 198 days today. That is a 33 days in 6 months.
inventories rose $124m, albeit some will argue this ride is seasonal.
A good portion of the payables SinoG drew down was repaid. This shows SinoG has no leverage against its suppliers.
Even though the company recorded a 66m tax charge, the company paid 31.5m. This created a deferred tax liability line item. Will be interesting to see if this DTL will get paid down.
SG&A rose 65.2% against a 14.5% move in inventories.

I shorted some SinoG a day before the results because it was a highly asymmetric bet.

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

[boochap]

FY2Q2015
http://infopub.sgx.com/FileOpen/Half%20Y...eID=364423


Look at the cash level as of 30 June 2015. Look at the amount of convertible bond. Basically the company does not have or did not prepare for the coming due of bond redemption.

Are they trying their luck and having 'fun' that those bond holders will not ask for bond redemption and not sue the company.

I try not to elaborate too much. Just try to use common sense to think about it.

not vested

I have a read at the CB agreement again this morning to better understand the mechanism of redemption and conversion, just as another assurance at least for myself as a mini-shareholder, given the confusions and vested interest of so many shortists in this forum..

Conversion or extension of the CB is at the sole discretion of the bondholders. Upon maturity, if there was no IPO of GF, the bondholders will enjoy a redemption $value with 25% interest compounded over the entire duration of the respective bonds. i.e for CB1 every $100, they gets $250 in 4yrs.

Total redemption value for CB1and CB2 amount to 777.973M RMB (given in the latest Q2 results announcement) vs principle amount of 80+270M RMB for the respective CBs.

Given the CB has already expired a month ago without IPO, the bondholders must be so stupid to let it lapse without redemption. Sun Hung Kai and Goldman Sachs are among the bondholders…


CB1 and CB1 are both written with more or less the same terms and conditions, the CB1 agreement is available here for reference:

http://infopub.sgx.com/FileOpen/Proposed...eID=101604

Qoute -

Description of Issue and Maturity Date: Convertible bonds due on 19 October 2014 (unless extended in accordance with the Extension Right) which at any time and from time to time are convertible into Conversion Shares at the election of Bondholders.

“Extension Right” means the right of the Bondholders to direct the HK Issuer to extend the scheduled Maturity Date of 19 October 2014 to 30 June 2015 by delivery of an extension notice to the HK Issuer not less than thirty business days and not more than forty business days prior to 19 October 2014.


Conversion Right: The Convertible Bonds are convertible at the election of the Bondholders into Conversion Shares at any time during a Conversion Period (defined below) (the “Conversion Right”). The Conversion Right will be subject to the HK Subsidiary‟s right to elect to pay converting Bondholders cash in lieu of Conversion Shares, further details of which are set out under paragraph 11 of this Annex A.


Revised Redemption Amount: Notwithstanding other provisions contained in the Terms and Conditions:-
if:
(a) (i) the HK Issuer does not list its Shares on an Approved Exchange on or before the Maturity Date (unless such listing is impossible due to regulatory reasons beyond the control of the HK Issuer and the Guarantor; for the avoidance of doubt, a delayed response or no response from the relevant Approved Exchange by the Maturity Date shall not constitute a “regulatory reason” for the purposes of this Condition), or
(ii) the IPO Process is not completed on or before the date falling one month prior to the Maturity Date (unless it is not completed due to the occurrence, on or after the Closing Date, of changes in the rules and regulations of the relevant Approved Exchange applicable to the HK Issuer and/or the Guarantor),
the Convertible Bonds will be redeemed at their Revised Redemption Amount 1.

“Revised Redemption Amount 1” means an amount in RMB equal to the principal amount of each Bond multiplied by (1.25)^X, where X is the number of calendar days from and including the Issue Date to but excluding the Redemption Date divided by 365.

Unqoute.

[justinN]

I am truly disappointed, but for one, CB extension is confirmed - CB1 and CB2 holders prob getting a very good deal out of this extension. Details like length of the extension, how much is extended and how much is redeemed... will come very soon*.



If this short wait leads to better financing terms for the company, long term wise, it' s good for the company. I believe people are selling because of their frustration and lack of patience. Longer term investors should see something... very soon*.



Lastly, I don' t think the CB holders feel that their bonds are in danger of default.. if not, they will be running for the door and redeeming their bonds first instead of extending.

*very soon: my guess is 1-3 weeks time.

[GenS70]

Correct me if I am wrong, Sinograndness is trading at a PE of 2x?

[leeeta]

Bluedogmeow, you said

"If I shift all of my trade receivables to other receivables, does it mean the business is better? No...it is just a restatement. "

so you are alluding that Sino Grandness has done an improper thing especially when company has stated that "Trade receivables decreased by approximately RMB157.5 million from RMB1,110.2 million in FY2014 to
RMB952.7 million in HY2015. The decrease in trade receivables was a result of better credit management.
As at 30 June 2015, the Group does not have any trade receivables exceeding 120 days and the total
amount collected as at 31 July 2015 is approximately RMB319.6 million.
"

[Aldar]

FY2Q2015
http://infopub.sgx.com/FileOpen/Half%20Y...eID=364423


Look at the cash level as of 30 June 2015. Look at the amount of convertible bond. Basically the company does not have or did not prepare for the coming due of bond redemption.

Are they trying their luck and having 'fun' that those bond holders will not ask for bond redemption and not sue the company.

I try not to elaborate too much. Just try to use common sense to think about it.

not vested

In their 1Q2015 result, the balance sheet stated that the group has RMB420m. Why is the money 'sitting' in the bank and not used to pay off the bond. The interest payment on bond extension is not cheap. The company has ample time(the due dates of the bonds are known) and funds to redeem the bonds. That's why I said the company is not profit maximising but for FUN.

Theoretically the group has RMB420m as of 31 Mar 2015. THEORETICALLY........

As for the thai investor. Some investors based their faith on the thai investor. My suggestion is to invest in the thai company rather than Sino Grandness. Most probably you get to keep your shirt at the end of the fiasco......

Not vested

1. Most likely no IPO of Gardenfresh

2. CB holders will not force a redemption since SinoG does not have sufficient cash to redeem the bonds. If the holders were to force a redemption, most likely SinoG will become bankrupt. CB holders will thus be forced to accept a restructuring/ haircut on the CBs.

3. CB holders do not have a choice but to wait for SinoG to entice a greater fool to rescue the company and help SinoG redeem the CBs.

"The Company is currently in discussion with potential investors for funding on more favourable terms to further strengthen our financial position to support our business development and expansion."

[portuser]

I have a read at the CB agreement again this morning to better understand the mechanism of redemption and conversion, just as another assurance at least for myself as a mini-shareholder, given the confusions and vested interest of so many shortists in this forum..

Conversion or extension of the CB is at the sole discretion of the bondholders. Upon maturity, if there was no IPO of GF, the bondholders will enjoy a redemption $value with 25% interest compounded over the entire duration of the respective bonds. i.e for CB1 every $100, they gets $250 in 4yrs.

Total redemption value for CB1and CB2 amount to 777.973M RMB (given in the latest Q2 results announcement) vs principle amount of 80+270M RMB for the respective CBs.

Given the CB has already expired a month ago without IPO, the bondholders must be so stupid to let it lapse without redemption. Sun Hung Kai and Goldman Sachs are among the bondholders…

RMB 777.973m (given in 2Q 15 results announcement) comprises liability and option derivatives at fair value.

Liability (RMB 647.859m) corresponds to the total redemption value as at 30 June 2015.

Another source on redemption value is Q3 14 results announcement which states RMB 183.8m and RMB 466.6m as the redemption amounts of the two bonds on their respective due dates of 30 June 15 and 25 July 15, giving rise to a sum of RMB 650.4m:

"As announced by the Company on 8 October 2014 and 29 October 2014, holders of the 2011 Bonds, representing 80.5% of the principal amount of the 2011 Bonds had indicated to the Company that they intended to exercise their right to extend the maturity date of the 2011 Bonds from 19 October 2014 to 30 June 2015. And the remaining 19.5% of the 2011 Bonds had been entirely repurchased which reduces the outstanding principal amount of the 2011 Bonds from RMB100 million to RMB80.5 million. The Group paid RMB37.9 million to repurchase RMB19.5 million worth of the 2011 Bonds and the outstanding principal amount of the 2012 Bonds is RMB270 million. The maximum redemption payment of the outstanding 2011 Bond is RMB183.8 million at maturity on 30 June 2015. The maximum redemption payment of the outstanding 2012 Bonds is RMB466.6 million at maturity on 25 July 2015."

Sun Hung Kai redeemed RMB 19.5% of 2011 bonds in October 14, leaving KGI bank of Taiwan who holds the remaining 80.5%.

[BlueKelah]

The bond interest are quite high. As a rational businessman the first thing you do when you have the opportunity to redeem is to redeem it with a lower interest instrument and not extend it. That why's my initial posting said that the company is for fun....imagine how many loquat drinks they have to sell to earn the interest.

All these signs point to ....

Most probably my guess is the bond holders will have to accept partial payment and converting the bonds into shares. They will have to get their $$$ back thru the public by selling the shares.

And company has to find another 'smart' Thai to invest in the company......

not vested

charade can only go on for so long, this is another s-chip waiting to blow up, especially with interest rate rises coming up.

as a forummer on i3investor used to say

"BO CHAO SI Ahhhh!!!!"

-n v-

[Behappyalways]

The signs are there.....I am not vested. Just sharing my concerns.

If you are vested with just a few lots and just having fun trying your luck. Then it is ok. But if you think this is the next BIG thing and plunges everything in it......then you better re-read and reconsider......


not vested

[fattboy]

I think we should read closely in the report.

1. Regarding the progress of CB

2. I think many will perceive the 2 cb holder as being careless or need to recourse
Their Basic financial accounting modules in school

3. Everybody, please screenshot Bluedogmeows allegation that Sino Grandness "is trying to trick investors to thinking they are monetising their working capital".

We have to politely ask Mr Dog, what do you mean by Trick ?

A very strong word which will warrant another suspension / account ban for you. You have been banned from sharejunction my friend , let me remind u.




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