Sino Grandness

[BlueDogMeow]

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%?

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.
[/quote]

How does the classification of the receivables affect the collection period? The point in my argument is...how is receivables going up just as revenue is going down. There is a re-stacking effect.

To use your example:

Year 1: If I sell a bottle of drink for 117 RMB, 17 RMB of which is VAT. I should collect that 17 RMB within the year, because it is classified as current asset. 
Year 2: I sell nothing. What should logically happen is my receivables go down because I collect upon last year's VAT receivables. 

In SinoG case, it is the opposite. Just as revenue goes down, receivables go up. And even if revenue went up, it doesnt matter anyway because aging comes into play...SinoG receivable age is over 200 days. And is likely higher because there is a revenue growth obfuscation and marginal impact going on. It is likely some of SinoG receivables are over 300-400 days old. I find it hard to believe that a company with such a "huge" dominance in a niche "popular" market that is able to achieve staggering GPM is unable to collect on their customers.

[BlueDogMeow]

I would like to point out that the company CAPEX of $113m this quarter is the 2nd largest ever, only superseded by Q4 2013, at the point in time when they are using only 50% of their capacity and debt is staggering.

http://www.nextinsight.net/index.php/sto...production

[BlueKelah]

Bdm, the capex does indeed seem like a red flag. But with so many things seemingly shrouded in mystery, it seems like a waste of time to analyse this stock to much.

Just sit back watch the show..

sent from my Galaxy Tab S

[portuser]

BlueDogMeow


Your two most recent posts read:

"How does the classification of the receivables affect the collection period? The point in my argument is...how is receivables going up just as revenue is going down. There is a re-stacking effect.

To use your example:

Year 1: If I sell a bottle of drink for 117 RMB, 17 RMB of which is VAT. I should collect that 17 RMB within the year, because it is classified as current asset. 
Year 2: I sell nothing. What should logically happen is my receivables go down because I collect upon last year's VAT receivables. 

In SinoG case, it is the opposite. Just as revenue goes down, receivables go up. And even if revenue went up, it doesnt matter anyway because aging comes into play...SinoG receivable age is over 200 days. And is likely higher because there is a revenue growth obfuscation and marginal impact going on. It is likely some of SinoG receivables are over 300-400 days old. I find it hard to believe that a company with such a "huge" dominance in a niche "popular" market that is able to achieve staggering GPM is unable to collect on their customers."

and 

"I would like to point out that the company CAPEX of $113m this quarter is the 2nd largest ever, only superseded by Q4 2013, at the point in time when they are using only 50% of their capacity and debt is staggering. 

http://www.nextinsight.net/index.php/sto...production"


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Other receivables are not related to sales. For example, do you know what is VAT receivables?

Trade receivables have not piled up:

...........................4Q 14......1Q 15....2Q 15.....3Q 15

Sales...............................504..........582..........925...........950
Trade receivables.....1,110.....1,133.......953......1,043

Sino's trade receivables are around 90 days, on average, in 2Q and 3Q.

You said that " it is likely some of SinoG receivables are over 300-400 days old".

Page 10 of Sino's 3Q announcement reads "as at 30 September 2015,  the Group does not have any trade receivables exceeding 120 days...".

The capex was for the new Anhui factory. 

The factory referred to in the Nextinsight article is Hubei factory.

[leeeta]

BDM ,
please read up what are export tax refund, VAT receivables and Sino's plan for anhui plant before commenting.. just wasting everybody's time. It would be good if you go to IRAS website to see how GST works in Singapore..this would help you understand how VAT works in China.

[BlueDogMeow]

As said before, just because someone say something doesnt make it true. What is stopping SinoG from hiding trade receivables under other receivables? if the other receivables is related to CAPEX, why is it under current asset? also, even if it isnt related to sales, it should be drawn down over time.

"The increase in other receivables was mainly attributable to deposit and prepayment for property, plant and equipment in Hubei and Anhui plants. " - From recent statements. How does this make sense at all? Maybe you can explain to me how other receivables went up 393m RMB from deposit and prepayment.

1) isnt deposit and prepayment supposed to be under prepaid expense?
2) I like how CAPEX< deposit and prepayment.

When talking about CAPEX, what i was saying is...the company is operating at 50% utilization. Why do they need to ramp up CAPEX, especially at a point in time where capital is essential. One can always conjure up justifications for SinoG, but the proverbial writing is all on the wall.

1. IPO perpetually delayed
2. CB unpaid
3. Blackholes (A/R, CAPEX)

And even if everything is legitimate and whatnot, this is still a bad business. The multiples might be low, but multiples dont exist in a vacuum. You have to compare it against something like ROE. Using CapitalIQ data, which is probably flawed but i am too lazy, sinoG ROE is probably south of 20%. How about the cost of equity? Well the CB had a 25% interest expense, and is likely higher today, say CoE is 30%.

Looking at the recent quarterly statement shows growth have slowed. But say growth is able to continue at 5% in perpetuity, which is an absurd notion in itself..but why not right.

It means SinoG should trade closer to 0.6x TBV using gordon growth. Interestingly, SinoG is trading at 0.6x TBV. So even with aggressive assumptions, and assuming the company is legitimate, SinoG is at best fairly valued.

[BlueDogMeow]

BDM ,
please read up what are export tax refund, VAT receivables and Sino's plan for anhui plant before commenting.. just wasting everybody's time. It would be good if you go to  IRAS website to see how GST works in Singapore..this would help you understand how VAT works in China.

why dont you walk me through the nearly 400m rise in other receivables in 1 quarter.

[BlueDogMeow]

the main question is...how does it flow through the 3 statement.

[BlueDogMeow]

BlueDogMeow


Your two most recent posts read:

"How does the classification of the receivables affect the collection period? The point in my argument is...how is receivables going up just as revenue is going down. There is a re-stacking effect.

To use your example:

Year 1: If I sell a bottle of drink for 117 RMB, 17 RMB of which is VAT. I should collect that 17 RMB within the year, because it is classified as current asset. 
Year 2: I sell nothing. What should logically happen is my receivables go down because I collect upon last year's VAT receivables. 

In SinoG case, it is the opposite. Just as revenue goes down, receivables go up. And even if revenue went up, it doesnt matter anyway because aging comes into play...SinoG receivable age is over 200 days. And is likely higher because there is a revenue growth obfuscation and marginal impact going on. It is likely some of SinoG receivables are over 300-400 days old. I find it hard to believe that a company with such a "huge" dominance in a niche "popular" market that is able to achieve staggering GPM is unable to collect on their customers."

and 

"I would like to point out that the company CAPEX of $113m this quarter is the 2nd largest ever, only superseded by Q4 2013, at the point in time when they are using only 50% of their capacity and debt is staggering. 

http://www.nextinsight.net/index.php/sto...production"


------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other receivables are not related to sales. For example, do you know what is VAT receivables?

Trade receivables have not piled up:

...........................4Q 14......1Q 15....2Q 15.....3Q 15

Sales...............................504..........582..........925...........950
Trade receivables.....1,110.....1,133.......953......1,043

Sino's trade receivables are around 90 days, on average, in 2Q and 3Q.

You said that " it is likely some of SinoG receivables are over 300-400 days old".

Page 10 of Sino's 3Q announcement reads "as at 30 September 2015,  the Group does not have any trade receivables exceeding 120 days...".

The capex was for the new Anhui factory. 

The factory referred to in the Nextinsight article is Hubei factory.

By the way, my explanation on the re-stacking effect is based of YOUR premise of what other receivables are. Obviously a look into financial reports show otherwise. Is is a wonder how receivables, which is an item linked to revenue, goes up when prepayment and deposits goes up.

[BlueDogMeow]

Regardless, as said by BlueKelah, this is just a show for me. I have covered my shorts, except for my PA which is purely for entertainment, and have been focusing my time in other areas. You guys might want to take a look at Japfa. I had a short post on Japfa and I believe it is worth SG$0.60 to $0.70. I had a post when it was at $0.30. I think the upside is still substantial. SUNE is also another interesting name because of the related complexity.