Sino Grandness

[leeeta]

http://infopub.sgx.com/Apps?A=COW_CorpAn...cement.pdf

How is the results... appreciate insights from buddies who tracked this co closely...

I don't know how to read this type of accounts... too confusing for me...

KayPoh Buddy
GG

GG, May I know whats so confusing?

http://www.valuebuddies.com/thread-3371-...#pid122294

I m not alone... des oso mention in his thread that its confusing with CBs...

For those buddies who can provide detailed analysis, your profounding views are greatly welcome...

I think being able to have a good view of a listed investment is important...

Buddies here are all for an open forum for thorough discussions... we have no intentions to put down anyone or any companies so long we can find acceptable reasons for what accounts are showing...

I have been reading accounts for close to 3 decades and perhaps I m really old and expired so I m merely humbly asking for directions.

Kaypoh Buddy
YMMV

GG,

As you are more experienced than all of us, can you help by pointing out which parts of the following notes in 2014 annual report are dubious:  

(Page 118) 

The valuations of the 2011 and 2012 Convertible Bonds in prior years had been computed on the basis that the IPO of the Company’s wholly-owned foreign subsidiary, Garden Fresh (HK) will be successful on or before the maturity of the convertible bonds to enable the conversion by bondholders and hence a fair value was not attributed to the conversion options and extension options which meets the definition of a derivative financial liability. The effect of the redemption returns was also not computed as part of the amortised cost of the convertible bonds as it was considered then not to be closely related to the host debt instrument in a compound instrument relationship.
In financial year 2013, in conjunction with the proposed IPO of Garden Fresh (HK), the Group carried out a reassessment of the fair values of the 2011 and 2012 Convertible Bonds. The fair value of the conversion option and extension option which is linked to and must be settled by delivery of unquoted equity instrument was deemed to be not reliably measurable as the probabilities of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, and the variability in the range of reasonable fair value estimates is considered to be significant. Consequently, the fair value of the conversion options was carried out at cost less allowance for impairment under FRS 39 for the financial year ended 31 December 2013.
During the current financial year, Garden Fresh (HK) had repurchased RMB 19.5 million or 19.5% of the 2011 RMB 100 million Convertible Bond at an agreed repurchase price of RMB 38.6 million with an implied interest cost which was close to the redemption return of 25% per annum compounded annually from the inception of the bond. In addition, the maturity of the remaining RMB 80.5 million 2011 Convertible Bond was extended to its Extended Maturity Date of 30 June 2015. In view of the above repurchase of the 2011 Convertible Bond and its Extended Maturity Date, and having regard to the maturity of the 2011 and 2012 Convertible Bonds which are due in June and July 2015 respectively, the Company in close consultation with its independent valuer have performed a reassessment of the fair values of the convertible bonds. The Company is of the view that the conversion options and extension options should have been fair valued notwithstanding the successful IPO assumption made in prior years and that the redemption returns should have been considered closely related to the host debt instrument being an amount that would have to be repaid as part of the amortised cost of the host debt instruments. Hence, a third statement of fi nancial position is presented.

(Page 92)

The amortised cost of the convertible bond was calculated using cash fl ows of the convertible bonds at their corresponding discount rates and the fair value of the option derivatives was calculated using the Binomial Option Pricing Model.

I will write to IR for clarification.

Thank you.

Hi Leeta,

Thanks for that. I will leave it to you. 

I m too old to look at things that is deemed too much for myself.

I m sorry if I may have caused any inconvenience here. I m truly sorry for this as you have put in your good share of effort into researching this co.

Honestly sometimes old man can no longer handle too much minute details and hence I tend to look at things top down.

Good Luck
GG

GG

i thought that as one gets older, one should get smarter especially matters related to investments. 

btw, the notes on Cb are quite standard.

Thank you.

[greengiraffe]

GG, May I know whats so confusing?

http://www.valuebuddies.com/thread-3371-...#pid122294

I m not alone... des oso mention in his thread that its confusing with CBs...

For those buddies who can provide detailed analysis, your profounding views are greatly welcome...

I think being able to have a good view of a listed investment is important...

Buddies here are all for an open forum for thorough discussions... we have no intentions to put down anyone or any companies so long we can find acceptable reasons for what accounts are showing...

I have been reading accounts for close to 3 decades and perhaps I m really old and expired so I m merely humbly asking for directions.

Kaypoh Buddy
YMMV

GG,

As you are more experienced than all of us, can you help by pointing out which parts of the following notes in 2014 annual report are dubious:  

(Page 118) 

The valuations of the 2011 and 2012 Convertible Bonds in prior years had been computed on the basis that the IPO of the Company’s wholly-owned foreign subsidiary, Garden Fresh (HK) will be successful on or before the maturity of the convertible bonds to enable the conversion by bondholders and hence a fair value was not attributed to the conversion options and extension options which meets the definition of a derivative financial liability. The effect of the redemption returns was also not computed as part of the amortised cost of the convertible bonds as it was considered then not to be closely related to the host debt instrument in a compound instrument relationship.
In financial year 2013, in conjunction with the proposed IPO of Garden Fresh (HK), the Group carried out a reassessment of the fair values of the 2011 and 2012 Convertible Bonds. The fair value of the conversion option and extension option which is linked to and must be settled by delivery of unquoted equity instrument was deemed to be not reliably measurable as the probabilities of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, and the variability in the range of reasonable fair value estimates is considered to be significant. Consequently, the fair value of the conversion options was carried out at cost less allowance for impairment under FRS 39 for the financial year ended 31 December 2013.
During the current financial year, Garden Fresh (HK) had repurchased RMB 19.5 million or 19.5% of the 2011 RMB 100 million Convertible Bond at an agreed repurchase price of RMB 38.6 million with an implied interest cost which was close to the redemption return of 25% per annum compounded annually from the inception of the bond. In addition, the maturity of the remaining RMB 80.5 million 2011 Convertible Bond was extended to its Extended Maturity Date of 30 June 2015. In view of the above repurchase of the 2011 Convertible Bond and its Extended Maturity Date, and having regard to the maturity of the 2011 and 2012 Convertible Bonds which are due in June and July 2015 respectively, the Company in close consultation with its independent valuer have performed a reassessment of the fair values of the convertible bonds. The Company is of the view that the conversion options and extension options should have been fair valued notwithstanding the successful IPO assumption made in prior years and that the redemption returns should have been considered closely related to the host debt instrument being an amount that would have to be repaid as part of the amortised cost of the host debt instruments. Hence, a third statement of fi nancial position is presented.

(Page 92)

The amortised cost of the convertible bond was calculated using cash fl ows of the convertible bonds at their corresponding discount rates and the fair value of the option derivatives was calculated using the Binomial Option Pricing Model.

I will write to IR for clarification.

Thank you.

Hi Leeta,

Thanks for that. I will leave it to you. 

I m too old to look at things that is deemed too much for myself.

I m sorry if I may have caused any inconvenience here. I m truly sorry for this as you have put in your good share of effort into researching this co.

Honestly sometimes old man can no longer handle too much minute details and hence I tend to look at things top down.

Good Luck
GG

GG

i thought that as one gets older, one should get smarter especially matters related to investments. 

btw, the notes on Cb are quite standard.

Thank you.

Older, naggy and hopefully wiser... cannot keep going like a teenager can only and hopefully stay concentrated on stuff deemed judgementally ok.

YMMV
GG

[portuser]

I m not alone... des oso mention in his thread that its confusing with CBs...

For those buddies who can provide detailed analysis, your profounding views are greatly welcome...

I think being able to have a good view of a listed investment is important...

...............................

I have been reading accounts for close to 3 decades and perhaps I m really old and expired so I m merely humbly asking for directions.

Convertible bonds are complicated financial instruments. 

Phrase such as "fair value of the option derivatives calculated using the Binomial Option Pricing Model" is beyond many of us.

China Merchant Holdings, a company you are familiar with, has also issued CB.

Note 22 to the accounts in page 87 of its annual report for 2014 states the following:

"The fair value of the liability component, included in non-current interest-bearing liabilities, is calculated using a market interest rate for an equivalent non-convertible bond at the date of issue and are within Level 2 of the fair value hierarchy. The residual amount, representing the value of the equity conversion component, is included in shareholders’ equity in capital reserve (Note 25)."

In the case of Sino Grandness, option derivatives at fair value are liabilities instead of being part of equity. 

Do you know which features of China Merchant's CB lead to the more liberal treatment.

Thank you.

[greengiraffe]

I m not alone... des oso mention in his thread that its confusing with CBs...

For those buddies who can provide detailed analysis, your profounding views are greatly welcome...

I think being able to have a good view of a listed investment is important...

...............................

I have been reading accounts for close to 3 decades and perhaps I m really old and expired so I m merely humbly asking for directions.

Convertible bonds are complicated financial instruments. 

Phrase such as "fair value of the option derivatives calculated using the Binomial Option Pricing Model" is beyond many of us.

China Merchant Holdings, a company you are familiar with, has also issued CB.

Note 22 to the accounts in page 87 of its annual report for 2014 states the following:

"The fair value of the liability component, included in non-current interest-bearing liabilities, is calculated using a market interest rate for an equivalent non-convertible bond at the date of issue and are within Level 2 of the fair value hierarchy. The residual amount, representing the value of the equity conversion component, is included in shareholders’ equity in capital reserve (Note 25)."

In the case of Sino Grandness, option derivatives at fair value are liabilities instead of being part of equity. 

Do you know which features of China Merchant's CB lead to the more liberal treatment.

Thank you.

http://www.valuebuddies.com/thread-1756-...#pid121922

CMP has very powderful GODFathers... they are so BIG that they can forgo instant gains... so far how many buddies have come across mainland cos issuing CBs redeeming CBs when they are in the $?

How many of such cos have their CBs constantly converted and maintain and even itched up the dividends payout?

How many of such cos have an enhanced credit banked by DBS Bank?

How many of such cos that have investment bankers creating CBs and not offer to high net worth individuals or via their bank network when IIRC was issued to 20% premium to the then prevailing mkt price of CMP (@$0.70 with a highly attractive guided DPS of 7.86% yield) vs CMP CBs of 1.5%?

I m old school, expired, naggy and inquisitive but I like the famous GODFather movie of 70s.

Kaypoh Buddy
GG

[BlueDogMeow]

As per usual, the financial statement is showing signs of...to put it lightly..."unusual activities".

BDM, Can you spell out what are the "unusual activities"? Thanks.

AR days up to 216 days, from 198 days...in 1 quarter. Interesting how there is no commentary on CB at all. Look at CAPEX, jumps to 112.9m. Why? No commentary.

The account receivables comprise two parts, trade receivables and other receivables.

other receivables comprise VAT receivables and export tax refunds owed by government, as well as repayments to contractors and suppliers. 

This has been discussed here before.

The construction of the new Anhui factory is in progress, and is incurring capex.

Just because someone says something does not automatically make it true. Notice how revenue went down but receivables went up? Logically when revenue goes away, receivables will go down as new receivables<old receivables due to a stacking effect. Unfortunately this has not been the case. And this logic extends itself to other receivables too. 

The Anhui factory construction was not in progress for the last year or not at all in any other quarters? If I remember correctly, it has been in construction for quite sometime, or at least started a few quarters back. But yet CAPEX now is 13-15x normal period CAPEX. Hmm...just because somebody says something does not make it automatically true. 

I like how you guys gloss over the CB problem. Wasnt it supposed to be paid down...4 months ago??? How about the cost of capital problem. Many people have been saying...oh the CB are going to be paid down so WACC is going to go down. It looks like WACC is going up instead.

[BlueDogMeow]

As per usual, the financial statement is showing signs of...to put it lightly..."unusual activities".

BDM, Can you spell out what are the "unusual activities"? Thanks.

AR days up to 216 days, from 198 days...in 1 quarter. Interesting how there is no commentary on CB at all. Look at CAPEX, jumps to 112.9m. Why? No commentary.

The account receivables comprise two parts, trade receivables and other receivables.

other receivables comprise VAT receivables and export tax refunds owed by government, as well as repayments to contractors and suppliers. 

This has been discussed here before.

The construction of the new Anhui factory is in progress, and is incurring capex.

Just because someone says something does not automatically make it true. Notice how revenue went down but receivables went up? Logically when revenue goes away, receivables will go down as new receivables<old receivables due to a stacking effect. Unfortunately this has not been the case. And this logic extends itself to other receivables too. 

The Anhui factory construction was not in progress for the last year or not at all in any other quarters? If I remember correctly, it has been in construction for quite sometime, or at least started a few quarters back. But yet CAPEX now is 13-15x normal period CAPEX. Hmm...just because somebody says something does not make it automatically true. 

I like how you guys gloss over the CB problem. Wasnt it supposed to be paid down...4 months ago??? How about the cost of capital problem. Many people have been saying...oh the CB are going to be paid down so WACC is going to go down. It looks like WACC is going up instead.

They are investing in CAPEX at a point in time when their CB has long been due and is compounding at 25%?

[portuser]

http://www.valuebuddies.com/thread-1756-...#pid121922

CMP has very powderful GODFathers... they are so BIG that they can forgo instant gains... so far how many buddies have come across mainland cos issuing CBs redeeming CBs when they are in the $?

How many of such cos have their CBs constantly converted and maintain and even itched up the dividends payout?

How many of such cos have an enhanced credit banked by DBS Bank?

How many of such cos that have investment bankers creating CBs and not offer to high net worth individuals or via their bank network when IIRC was issued to 20% premium to the then prevailing mkt price of CMP (@$0.70 with a highly attractive guided DPS of 7.86% yield) vs CMP CBs of 1.5%?

I m old school, expired, naggy and inquisitive but I like the famous GODFather movie of 70s.

Kaypoh Buddy
GG

Thank you for telling us that China Merchant is a safe bet. Many of us know this

You have asked for a discussion on CBs. I joined this thread thinking that with the experience of reading accounts over three decades, you will be able to shed some light on the CB issued by China Merchant. Analyzing how CBs are treated differently by companies will help.

[greengiraffe]

http://www.valuebuddies.com/thread-1756-...#pid121922

CMP has very powderful GODFathers... they are so BIG that they can forgo instant gains... so far how many buddies have come across mainland cos issuing CBs redeeming CBs when they are in the $?

How many of such cos have their CBs constantly converted and maintain and even itched up the dividends payout?

How many of such cos have an enhanced credit banked by DBS Bank?

How many of such cos that have investment bankers creating CBs and not offer to high net worth individuals or via their bank network when IIRC was issued to 20% premium to the then prevailing mkt price of CMP (@$0.70 with a highly attractive guided DPS of 7.86% yield) vs CMP CBs of 1.5%?

I m old school, expired, naggy and inquisitive but I like the famous GODFather movie of 70s.

Kaypoh Buddy
GG

Thank you for telling us that China Merchant is a safe bet. Many of us know this

You have asked for a discussion on CBs. I joined this thread thinking that with the experience of reading accounts over three decades, you will be able to shed some light on the CB issued by China Merchant. Analyzing how CBs are treated differently by companies will help.

I only mgt top 2 in book keeping at A levels. Unfortunately, I don't have an accounting degree. I only got a business degree and didn't even get my CFA...

Luckily, I have many GODFathers and GODBuddies that are kind enough to educate me with their business and life experience.

I would like to thank VB for the opportunities to retain my sanity amongst the never ending daily con-stories...

Thanks for your education on CBs, I will try to simplify them in my old giraffe context.

GG

[greengiraffe]

http://www.valuebuddies.com/thread-1756-...#pid121922

CMP has very powderful GODFathers... they are so BIG that they can forgo instant gains... so far how many buddies have come across mainland cos issuing CBs redeeming CBs when they are in the $?

How many of such cos have their CBs constantly converted and maintain and even itched up the dividends payout?

How many of such cos have an enhanced credit banked by DBS Bank?

How many of such cos that have investment bankers creating CBs and not offer to high net worth individuals or via their bank network when IIRC was issued to 20% premium to the then prevailing mkt price of CMP (@$0.70 with a highly attractive guided DPS of 7.86% yield) vs CMP CBs of 1.5%?

I m old school, expired, naggy and inquisitive but I like the famous GODFather movie of 70s.

Kaypoh Buddy
GG

Thank you for telling us that China Merchant is a safe bet. Many of us know this

You have asked for a discussion on CBs. I joined this thread thinking that with the experience of reading accounts over three decades, you will be able to shed some light on the CB issued by China Merchant. Analyzing how CBs are treated differently by companies will help.

I only mgt top 2 in book keeping at A levels. Unfortunately, I don't have an accounting degree. I only got a business degree and didn't even get my CFA...

Luckily, I have many GODFathers and GODBuddies that are kind enough to educate me with their business and life experience.

I would like to thank VB for the opportunities to retain my sanity amongst the never ending daily con-stories...

Thanks for your education on CBs, I will try to simplify them in my old giraffe context.

GG

[portuser]

[quote pid='122366' dateline='1447424014']


Just because someone says something does not automatically make it true. Notice how revenue went down but receivables went up? Logically when revenue goes away, receivables will go down as new receivables<old receivables due to a stacking effect. Unfortunately this has not been the case. And this logic extends itself to other receivables too. 

The Anhui factory construction was not in progress for the last year or not at all in any other quarters? If I remember correctly, it has been in construction for quite sometime, or at least started a few quarters back. But yet CAPEX now is 13-15x normal period CAPEX. Hmm...just because somebody says something does not make it automatically true. 

I like how you guys gloss over the CB problem. Wasnt it supposed to be paid down...4 months ago??? How about the cost of capital problem. Many people have been saying...oh the CB are going to be paid down so WACC is going to go down. It looks like WACC is going up instead.

They are investing in CAPEX at a point in time when their CB has long been due and is compounding at 25%?
[/quote]



Your question on receivables was answered in my post dated 13 Aug:

http://www.valuebuddies.com/thread-3371-page-89.html

Let me do an update taking into account 3Q results:

.................................................RMB m

.............................3Q 15......2Q 15......1Q 15........4Q 14
Sales.............................. 950.............925............582................504
Trade receivables.....1,043..........953......1,133..........1,110
Other receivables........710..........698........356.............317
Total......................1,753.......1,651......1,499..........1,427

Are there signs that trade receivables (ie what distributors owe to Sino Grandness) are piling up?

By the way, you may want to refer to accounts of other beverage companies to see how they have been faring in debt collection.

One may also note that local sales in China attract 17% value-added tax (just as the 7% GST in Singapore). When Sino charges a local distributor RMB 100, the invoice carries the amount of RMB 117, which includes the RMB 17 VAT.

The transaction results in Sino reporting a sale of RMB 100, as well as the higher amount of RMB 117 owed by the distributors.

As local sales make up 80% of overall sales, the RMB 1,043m trade receivables likely include RMB 125m VAT. Distributors therefore owed Sino RMB 918m as sales revenue, which is lower than the quarterly sales of RMB 950m.

I have explained in my earlier post that other receivables comprise VAT receivables, export tax refunds, deposit and prepayments. 

The first two items are owed by government and carry no risk. As for advances to suppliers and contractors, there is a slight risk of non-fulfillment of contracts.

Export tax refunds arise because food companies receive from the Chinese government a sum pegged to 15% of the export value. 2014 annual report shows that as at 31 December 14, Sino had yet to receive RMB 48m from the state.

Several friends invested in Sino in the belief that the company would not dare faking documents on transactions with government agencies.

They feel assured because Sino has been paying large sums of tax (RMB 494m between 2011 and 2014, and RMB 133m in the first nine months of this year).

TTA's presence has boosted their confidence. They reckon that the Thais must have do their homework before giving the undertaking to lock up 47m Sino shares for ten years. They also believe that TTA's decision to classify Sino as an associated company must have been made after careful considerations. Otherwise, TTA will have to write off its investment in Sino as well as reverse all past Sino profits it has already recognised, if Sino is found out later to be what it is not. Mr Prayudh can certainly do without such humiliation.  

You are wondering why Sino is still adding capacity when bond redemption is looming.

Those keeping faith with the company believe that this is so because the company is confident. Otherwise, the company would have stinged on every penny to stave off loan default.

Anyhow, the truth will be out sooner or later.