Sino Grandness

[crubs]

Hi weijian,

To comment on your points 

- They are in expansion mode and the cash was needed to fund working capital and build factories
- dividend payments were stopped because cash was needed to grow Garden Fresh
- Shareholders got the biggest bite of the pie. Revenue has grown 6x and adjusted profit even more since IPO. Share price has also more than doubled during that period.

hi crubs,
Thanks for the reply. Some of my comments:

- My point is more towards the 'coincidence' rather than the reason/s (which have been repeated in every single quarterly report I believe). For those who study Accounting 101, knows that the top2 items in the 'Use of Cash' pareto are frequently abused by shenanigans. This table looks amazingly similar to a short attack report I read recently (clue: the silverlake axis thread). Of course, this could be purely a coincidence and there is some confirmation bias at work here.
- I believe Chairman is a shrewd businessman. Garden Fresh would not have been conceived in just 1 year. So it is kinda puzzling that 2 years of dividends (FY09/10) was paid before a subsequent U-Turn to start to conserve cash for Garden Fresh from 2010 onwards. Nonetheless, maybe its explosive growth even surprised Chairman Huang, or he started hiring consultants....?
- Both Boon and I are referring to cash flow. Let's try to take share price out of the picture for a more unbiased view of matters. It would be great for IPO shareholders for en-cash their 'put option' at the expense of ending their love affair with SFG, a 15% annualized gain. Of course, when trees start growing higher and higher, people will believe that it can grow to the sky.

Hi Weijian,

thanks for your reply.

It does seem that Huang is a shrewd businessman. One can only speculate on the reasons for his u-turn on dividends. It is very possible that he himself did not expect Garden Fresh to do so well. If you take a look at page 11 of the 2011 CB circular, the conversion rates into Garden Fresh shares depend on its 2013 profit numbers.

If 2013 profit exceeds RMB 250m

If 2013 profit is between RMB 200m - RMB 250m

If 2013 profit is below RMB 200m

The profit targets might imply that these are the "Best", "Base" and "Worst" case scenarios expected and negotiated between Sino Grandness and CB1 holders at that point of time. Based on 2013, 2014 and soon 2015 results, we can see that Garden Fresh has hit and exceed its "Best" case scenario. In short, did Garden Fresh exceed Huang's expectations ? Probable.

Regarding your point about shareholder getting a bite of the pie, looking at dividends alone might be inaccurate. 2 examples to illustrate
1) Warren Buffett's Berkshire does not pay a dividend. Does this mean that investors got nothing ?
2) Eratat paid dividends yearly. Does this mean that investors were rewarded ?
Share price should be included because it is reflective of business fundamentals in the long term, which shareholders own a part of. This together with dividends show a better picture of how shareholders benefit.

[Boon]

Hi weijian,

To comment on your points 

- They are in expansion mode and the cash was needed to fund working capital and build factories
- dividend payments were stopped because cash was needed to grow Garden Fresh
- Shareholders got the biggest bite of the pie. Revenue has grown 6x and adjusted profit even more since IPO. Share price has also more than doubled during that period.

hi crubs,
Thanks for the reply. Some of my comments:

- My point is more towards the 'coincidence' rather than the reason/s (which have been repeated in every single quarterly report I believe). For those who study Accounting 101, knows that the top2 items in the 'Use of Cash' pareto are frequently abused by shenanigans. This table looks amazingly similar to a short attack report I read recently (clue: the silverlake axis thread). Of course, this could be purely a coincidence and there is some confirmation bias at work here.
- I believe Chairman is a shrewd businessman. Garden Fresh would not have been conceived in just 1 year. So it is kinda puzzling that 2 years of dividends (FY09/10) was paid before a subsequent U-Turn to start to conserve cash for Garden Fresh from 2010 onwards. Nonetheless, maybe its explosive growth even surprised Chairman Huang, or he started hiring consultants....?
- Both Boon and I are referring to cash flow. Let's try to take share price out of the picture for a more unbiased view of matters. It would be great for IPO shareholders for en-cash their 'put option' at the expense of ending their love affair with SFG, a 15% annualized gain. Of course, when trees start growing higher and higher, people will believe that it can grow to the sky.

Hi Weijian,

thanks for your reply.

It does seem that Huang is a shrewd businessman. One can only speculate on the reasons for his u-turn on dividends. It is very possible that he himself did not expect Garden Fresh to do so well. If you take a look at page 11 of the 2011 CB circular, the conversion rates into Garden Fresh shares depend on its 2013 profit numbers.

If 2013 profit exceeds RMB 250m

If 2013 profit is between RMB 200m - RMB 250m

If 2013 profit is below RMB 200m

The profit targets might imply that these are the "Best", "Base" and "Worst" case scenarios expected and negotiated between Sino Grandness and CB1 holders at that point of time. Based on 2013, 2014 and soon 2015 results, we can see that Garden Fresh has hit and exceed its "Best" case scenario. In short, did Garden Fresh exceed Huang's expectations ? Probable.

Regarding your point about shareholder getting a bite of the pie, looking at dividends alone might be inaccurate. 2 examples to illustrate
1) Warren Buffett's Berkshire does not pay a dividend. Does this mean that investors got nothing ?
2) Eratat paid dividends yearly. Does this mean that investors were rewarded ?
Share price should be included because it is reflective of business fundamentals in the long term, which shareholders own a part of. This together with dividends show a better picture of how shareholders benefit.

Why doesn't Berkshire Hathaway pay a dividend? By Investopedia
 
Berkshire Hathaway does not pay a dividend because its chairman and CEO, Warren Buffett, believes it is more auspicious to allocate the company's earnings in other ways. In particular, Buffett prefers to reinvest profits in things that allow his company to improve its efficiency; expand its reach; create new products and services and improve existing ones; and further separate itself from competitors. Buffett, like many business leaders, feels that investing back into his business provides more long-term value to shareholders than paying them directly because the company's financial success rewards shareholders with higher stock values. Additionally, Berkshire Hathaway maintains an aggressive stock buyback policy that puts cash directly into shareholders' pockets.

Despite the company having billions of dollars of cash on hand, the prospect of a Berkshire Hathaway dividend is dim as long as Buffett is in charge. The company has paid only one dividend during his reign, in 1967, and Buffett later joked he must have been in the bathroom when the decision was made. Nevertheless, statistics give credence to Buffett's stance that using profits to buttress the company's financial position results in greater wealth for shareholders than paying dividends. Berkshire Hathaway's stock price increased by almost 700,000% between 1964 and 2014. Someone who invested $1,000 in the company's stock in 1980 is a millionaire in 2014.

Although it does not pay a dividend, Berkshire Hathaway distributes money directly to shareholders though its generous stock buybacks. The company pays up to 120% of book value when it repurchases stock from shareholders. This benefits investors in two ways. It allows them to cash in some or all of their company stock at a premium they would not receive on the open market. Remaining shareholders also increase their ownership stake as stock buybacks reduce the total number of outstanding shares.

http://www.investopedia.com/ask/answers/...vidend.asp
________________________________________________________________________________________________________ 
Hi crubs,

Is SG aspiring to become the next BH? Is this one of its business objective ?

BH has billions of dollars of CASH to pay dividend (if WB decides to make a u-turn), to buy back share and to reinvest.
How much cash does SG has ? Net debt !
Does SG has cash to buy back share generously ?

Two different world we are talking about, mate !

Not advisable to become the next Eratat, that's for sure.
________________________________________________________________________________________________________________________________

[crubs]

Hi weijian,

To comment on your points 

- They are in expansion mode and the cash was needed to fund working capital and build factories
- dividend payments were stopped because cash was needed to grow Garden Fresh
- Shareholders got the biggest bite of the pie. Revenue has grown 6x and adjusted profit even more since IPO. Share price has also more than doubled during that period.

hi crubs,
Thanks for the reply. Some of my comments:

- My point is more towards the 'coincidence' rather than the reason/s (which have been repeated in every single quarterly report I believe). For those who study Accounting 101, knows that the top2 items in the 'Use of Cash' pareto are frequently abused by shenanigans. This table looks amazingly similar to a short attack report I read recently (clue: the silverlake axis thread). Of course, this could be purely a coincidence and there is some confirmation bias at work here.
- I believe Chairman is a shrewd businessman. Garden Fresh would not have been conceived in just 1 year. So it is kinda puzzling that 2 years of dividends (FY09/10) was paid before a subsequent U-Turn to start to conserve cash for Garden Fresh from 2010 onwards. Nonetheless, maybe its explosive growth even surprised Chairman Huang, or he started hiring consultants....?
- Both Boon and I are referring to cash flow. Let's try to take share price out of the picture for a more unbiased view of matters. It would be great for IPO shareholders for en-cash their 'put option' at the expense of ending their love affair with SFG, a 15% annualized gain. Of course, when trees start growing higher and higher, people will believe that it can grow to the sky.

Hi Weijian,

thanks for your reply.

It does seem that Huang is a shrewd businessman. One can only speculate on the reasons for his u-turn on dividends. It is very possible that he himself did not expect Garden Fresh to do so well. If you take a look at page 11 of the 2011 CB circular, the conversion rates into Garden Fresh shares depend on its 2013 profit numbers.

If 2013 profit exceeds RMB 250m

If 2013 profit is between RMB 200m - RMB 250m

If 2013 profit is below RMB 200m

The profit targets might imply that these are the "Best", "Base" and "Worst" case scenarios expected and negotiated between Sino Grandness and CB1 holders at that point of time. Based on 2013, 2014 and soon 2015 results, we can see that Garden Fresh has hit and exceed its "Best" case scenario. In short, did Garden Fresh exceed Huang's expectations ? Probable.

Regarding your point about shareholder getting a bite of the pie, looking at dividends alone might be inaccurate. 2 examples to illustrate
1) Warren Buffett's Berkshire does not pay a dividend. Does this mean that investors got nothing ?
2) Eratat paid dividends yearly. Does this mean that investors were rewarded ?
Share price should be included because it is reflective of business fundamentals in the long term, which shareholders own a part of. This together with dividends show a better picture of how shareholders benefit.

Why doesn't Berkshire Hathaway pay a dividend? By Investopedia
 
Berkshire Hathaway does not pay a dividend because its chairman and CEO, Warren Buffett, believes it is more auspicious to allocate the company's earnings in other ways. In particular, Buffett prefers to reinvest profits in things that allow his company to improve its efficiency; expand its reach; create new products and services and improve existing ones; and further separate itself from competitors. Buffett, like many business leaders, feels that investing back into his business provides more long-term value to shareholders than paying them directly because the company's financial success rewards shareholders with higher stock values. Additionally, Berkshire Hathaway maintains an aggressive stock buyback policy that puts cash directly into shareholders' pockets.

Despite the company having billions of dollars of cash on hand, the prospect of a Berkshire Hathaway dividend is dim as long as Buffett is in charge. The company has paid only one dividend during his reign, in 1967, and Buffett later joked he must have been in the bathroom when the decision was made. Nevertheless, statistics give credence to Buffett's stance that using profits to buttress the company's financial position results in greater wealth for shareholders than paying dividends. Berkshire Hathaway's stock price increased by almost 700,000% between 1964 and 2014. Someone who invested $1,000 in the company's stock in 1980 is a millionaire in 2014.

Although it does not pay a dividend, Berkshire Hathaway distributes money directly to shareholders though its generous stock buybacks. The company pays up to 120% of book value when it repurchases stock from shareholders. This benefits investors in two ways. It allows them to cash in some or all of their company stock at a premium they would not receive on the open market. Remaining shareholders also increase their ownership stake as stock buybacks reduce the total number of outstanding shares.

http://www.investopedia.com/ask/answers/...vidend.asp
________________________________________________________________________________________________________ 
Hi crubs,

Is SG aspiring to become the next BH? Is this one of its business objective ?

BH has billions of dollars of CASH to pay dividend (if BW decides to make a u-turn), to buy back share and to reinvest.
How much cash does SG has ? Net debt !
Does SG has cash to buy back share generously ?

Two different world we are talking about, mate !

Not advisable to become the next Eratat, that's for sure.
________________________________________________________________________________________________________________________________

Hi Boon,

I raised BH as an example to point out that principles of capital allocation are the same. Therefore, share price and dividends should be included when counting shareholder return instead of just dividends as weijian have stated.

Capital allocation decisions are universal. Cash is generated to either re-invest, pay down debt, or return to shareholders via buyback/dividend.

Sino Grandness and BH face the same capital allocation decisions and Sino Grandness chose to reinvest its cashflow into new factories and working capital to grow the business, which increases the value of its business. BH chooses the to reinvest and buy businesses. Both company have increased in value which in the long run is reflected by its share price.

I used BH as an example because it has never given out dividend, in response to weijian's implication that dividends is the only way to see how shareholders are "rewarded"

FYI: BH only started share buybacks in the last 5 years. Prior to that, no dividends no buybacks. And they only did it because they ran out of investment opportunities.

It is important for everyone to be in the same page as to what constitutes "shareholder reward" before we analyse how Sino Grandness has rewarded shareholders.

[Boon]

Hi weijian,

To comment on your points 

- They are in expansion mode and the cash was needed to fund working capital and build factories
- dividend payments were stopped because cash was needed to grow Garden Fresh
- Shareholders got the biggest bite of the pie. Revenue has grown 6x and adjusted profit even more since IPO. Share price has also more than doubled during that period.

hi crubs,
Thanks for the reply. Some of my comments:

- My point is more towards the 'coincidence' rather than the reason/s (which have been repeated in every single quarterly report I believe). For those who study Accounting 101, knows that the top2 items in the 'Use of Cash' pareto are frequently abused by shenanigans. This table looks amazingly similar to a short attack report I read recently (clue: the silverlake axis thread). Of course, this could be purely a coincidence and there is some confirmation bias at work here.
- I believe Chairman is a shrewd businessman. Garden Fresh would not have been conceived in just 1 year. So it is kinda puzzling that 2 years of dividends (FY09/10) was paid before a subsequent U-Turn to start to conserve cash for Garden Fresh from 2010 onwards. Nonetheless, maybe its explosive growth even surprised Chairman Huang, or he started hiring consultants....?
- Both Boon and I are referring to cash flow. Let's try to take share price out of the picture for a more unbiased view of matters. It would be great for IPO shareholders for en-cash their 'put option' at the expense of ending their love affair with SFG, a 15% annualized gain. Of course, when trees start growing higher and higher, people will believe that it can grow to the sky.

Hi Weijian,

thanks for your reply.

It does seem that Huang is a shrewd businessman. One can only speculate on the reasons for his u-turn on dividends. It is very possible that he himself did not expect Garden Fresh to do so well. If you take a look at page 11 of the 2011 CB circular, the conversion rates into Garden Fresh shares depend on its 2013 profit numbers.

If 2013 profit exceeds RMB 250m

If 2013 profit is between RMB 200m - RMB 250m

If 2013 profit is below RMB 200m

The profit targets might imply that these are the "Best", "Base" and "Worst" case scenarios expected and negotiated between Sino Grandness and CB1 holders at that point of time. Based on 2013, 2014 and soon 2015 results, we can see that Garden Fresh has hit and exceed its "Best" case scenario. In short, did Garden Fresh exceed Huang's expectations ? Probable.

Regarding your point about shareholder getting a bite of the pie, looking at dividends alone might be inaccurate. 2 examples to illustrate
1) Warren Buffett's Berkshire does not pay a dividend. Does this mean that investors got nothing ?
2) Eratat paid dividends yearly. Does this mean that investors were rewarded ?
Share price should be included because it is reflective of business fundamentals in the long term, which shareholders own a part of. This together with dividends show a better picture of how shareholders benefit.

Why doesn't Berkshire Hathaway pay a dividend? By Investopedia
 
Berkshire Hathaway does not pay a dividend because its chairman and CEO, Warren Buffett, believes it is more auspicious to allocate the company's earnings in other ways. In particular, Buffett prefers to reinvest profits in things that allow his company to improve its efficiency; expand its reach; create new products and services and improve existing ones; and further separate itself from competitors. Buffett, like many business leaders, feels that investing back into his business provides more long-term value to shareholders than paying them directly because the company's financial success rewards shareholders with higher stock values. Additionally, Berkshire Hathaway maintains an aggressive stock buyback policy that puts cash directly into shareholders' pockets.

Despite the company having billions of dollars of cash on hand, the prospect of a Berkshire Hathaway dividend is dim as long as Buffett is in charge. The company has paid only one dividend during his reign, in 1967, and Buffett later joked he must have been in the bathroom when the decision was made. Nevertheless, statistics give credence to Buffett's stance that using profits to buttress the company's financial position results in greater wealth for shareholders than paying dividends. Berkshire Hathaway's stock price increased by almost 700,000% between 1964 and 2014. Someone who invested $1,000 in the company's stock in 1980 is a millionaire in 2014.

Although it does not pay a dividend, Berkshire Hathaway distributes money directly to shareholders though its generous stock buybacks. The company pays up to 120% of book value when it repurchases stock from shareholders. This benefits investors in two ways. It allows them to cash in some or all of their company stock at a premium they would not receive on the open market. Remaining shareholders also increase their ownership stake as stock buybacks reduce the total number of outstanding shares.

http://www.investopedia.com/ask/answers/...vidend.asp
________________________________________________________________________________________________________ 
Hi crubs,

Is SG aspiring to become the next BH? Is this one of its business objective ?

BH has billions of dollars of CASH to pay dividend (if BW decides to make a u-turn), to buy back share and to reinvest.
How much cash does SG has ? Net debt !
Does SG has cash to buy back share generously ?

Two different world we are talking about, mate !

Not advisable to become the next Eratat, that's for sure.
________________________________________________________________________________________________________________________________

Hi Boon,

I raised BH as an example to point out that principles of capital allocation are the same. Therefore, share price and dividends should be included when counting shareholder return instead of just dividends as weijian have stated.

Capital allocation decisions are universal. Cash is generated to either re-invest, pay down debt, or return to shareholders via buyback/dividend.

Sino Grandness and BH face the same capital allocation decisions and Sino Grandness chose to reinvest its cashflow into new factories and working capital to grow the business, which increases the value of its business. BH chooses the to reinvest and buy businesses. Both company have increased in value which in the long run is reflected by its share price.

I used BH as an example because it has never given out dividend, in response to weijian's implication that dividends is the only way to see how shareholders are "rewarded"

FYI: BH only started share buybacks in the last 5 years. Prior to that, no dividends no buybacks. And they only did it because they ran out of investment opportunities.

It is important for everyone to be in the same page as to what constitutes "shareholder reward" before we analyse how Sino Grandness has rewarded shareholders.

Hi crubs,

“Capital allocation decisions are universal. Cash is generated to either re-invest, pay down debt, or return to shareholders via buyback/dividend.”
 
For companies that are not capable of generating FCF, the issue of "re-investment decision making” would not even arise in the first place.
 
How much FCF had SG generated over the past 6.75 years and how much of it had been "re-invested?
_____________________________________________________________________________________________________________________________________

[crubs]

hi crubs,
Thanks for the reply. Some of my comments:

- My point is more towards the 'coincidence' rather than the reason/s (which have been repeated in every single quarterly report I believe). For those who study Accounting 101, knows that the top2 items in the 'Use of Cash' pareto are frequently abused by shenanigans. This table looks amazingly similar to a short attack report I read recently (clue: the silverlake axis thread). Of course, this could be purely a coincidence and there is some confirmation bias at work here.
- I believe Chairman is a shrewd businessman. Garden Fresh would not have been conceived in just 1 year. So it is kinda puzzling that 2 years of dividends (FY09/10) was paid before a subsequent U-Turn to start to conserve cash for Garden Fresh from 2010 onwards. Nonetheless, maybe its explosive growth even surprised Chairman Huang, or he started hiring consultants....?
- Both Boon and I are referring to cash flow. Let's try to take share price out of the picture for a more unbiased view of matters. It would be great for IPO shareholders for en-cash their 'put option' at the expense of ending their love affair with SFG, a 15% annualized gain. Of course, when trees start growing higher and higher, people will believe that it can grow to the sky.

Hi Weijian,

thanks for your reply.

It does seem that Huang is a shrewd businessman. One can only speculate on the reasons for his u-turn on dividends. It is very possible that he himself did not expect Garden Fresh to do so well. If you take a look at page 11 of the 2011 CB circular, the conversion rates into Garden Fresh shares depend on its 2013 profit numbers.

If 2013 profit exceeds RMB 250m

If 2013 profit is between RMB 200m - RMB 250m

If 2013 profit is below RMB 200m

The profit targets might imply that these are the "Best", "Base" and "Worst" case scenarios expected and negotiated between Sino Grandness and CB1 holders at that point of time. Based on 2013, 2014 and soon 2015 results, we can see that Garden Fresh has hit and exceed its "Best" case scenario. In short, did Garden Fresh exceed Huang's expectations ? Probable.

Regarding your point about shareholder getting a bite of the pie, looking at dividends alone might be inaccurate. 2 examples to illustrate
1) Warren Buffett's Berkshire does not pay a dividend. Does this mean that investors got nothing ?
2) Eratat paid dividends yearly. Does this mean that investors were rewarded ?
Share price should be included because it is reflective of business fundamentals in the long term, which shareholders own a part of. This together with dividends show a better picture of how shareholders benefit.

Why doesn't Berkshire Hathaway pay a dividend? By Investopedia
 
Berkshire Hathaway does not pay a dividend because its chairman and CEO, Warren Buffett, believes it is more auspicious to allocate the company's earnings in other ways. In particular, Buffett prefers to reinvest profits in things that allow his company to improve its efficiency; expand its reach; create new products and services and improve existing ones; and further separate itself from competitors. Buffett, like many business leaders, feels that investing back into his business provides more long-term value to shareholders than paying them directly because the company's financial success rewards shareholders with higher stock values. Additionally, Berkshire Hathaway maintains an aggressive stock buyback policy that puts cash directly into shareholders' pockets.

Despite the company having billions of dollars of cash on hand, the prospect of a Berkshire Hathaway dividend is dim as long as Buffett is in charge. The company has paid only one dividend during his reign, in 1967, and Buffett later joked he must have been in the bathroom when the decision was made. Nevertheless, statistics give credence to Buffett's stance that using profits to buttress the company's financial position results in greater wealth for shareholders than paying dividends. Berkshire Hathaway's stock price increased by almost 700,000% between 1964 and 2014. Someone who invested $1,000 in the company's stock in 1980 is a millionaire in 2014.

Although it does not pay a dividend, Berkshire Hathaway distributes money directly to shareholders though its generous stock buybacks. The company pays up to 120% of book value when it repurchases stock from shareholders. This benefits investors in two ways. It allows them to cash in some or all of their company stock at a premium they would not receive on the open market. Remaining shareholders also increase their ownership stake as stock buybacks reduce the total number of outstanding shares.

http://www.investopedia.com/ask/answers/...vidend.asp
________________________________________________________________________________________________________ 
Hi crubs,

Is SG aspiring to become the next BH? Is this one of its business objective ?

BH has billions of dollars of CASH to pay dividend (if BW decides to make a u-turn), to buy back share and to reinvest.
How much cash does SG has ? Net debt !
Does SG has cash to buy back share generously ?

Two different world we are talking about, mate !

Not advisable to become the next Eratat, that's for sure.
________________________________________________________________________________________________________________________________

Hi Boon,

I raised BH as an example to point out that principles of capital allocation are the same. Therefore, share price and dividends should be included when counting shareholder return instead of just dividends as weijian have stated.

Capital allocation decisions are universal. Cash is generated to either re-invest, pay down debt, or return to shareholders via buyback/dividend.

Sino Grandness and BH face the same capital allocation decisions and Sino Grandness chose to reinvest its cashflow into new factories and working capital to grow the business, which increases the value of its business. BH chooses the to reinvest and buy businesses. Both company have increased in value which in the long run is reflected by its share price.

I used BH as an example because it has never given out dividend, in response to weijian's implication that dividends is the only way to see how shareholders are "rewarded"

FYI: BH only started share buybacks in the last 5 years. Prior to that, no dividends no buybacks. And they only did it because they ran out of investment opportunities.

It is important for everyone to be in the same page as to what constitutes "shareholder reward" before we analyse how Sino Grandness has rewarded shareholders.

Hi crubs,

“Capital allocation decisions are universal. Cash is generated to either re-invest, pay down debt, or return to shareholders via buyback/dividend.”
 
For companies that are not capable of generating FCF, the issue of "re-investment decision making” would not even arise in the first place.
 
How much FCF had SG generated over the past 6.75 years and how much of it had been "re-invested?
_____________________________________________________________________________________________________________________________________

Hi Boon,

FCF is generated when a company has no immediate re-investment options.

Sino Grandness reinvested it's operating cashflow into capex because its business is expanding. That is a form of reinvestment, that's why there's an "investing cashflow" segment in the cashflow statement in the first place.

Berkshire has idle cash partly due to company policy and partly due to lack of re-investment options.

All these are secondary as my purpose of raising this issue is to prove that share price AND dividend should be considered when assessing shareholder return, which was in response to you suggesting that shareholders got the least because you only assessed dividends and not share price.

[leeeta]

Huang"s Cny ang pao http://infopub.sgx.com/Apps?A=COW_CorpAn...9690a87bd9.

[Boon]

Hi Weijian,

thanks for your reply.

It does seem that Huang is a shrewd businessman. One can only speculate on the reasons for his u-turn on dividends. It is very possible that he himself did not expect Garden Fresh to do so well. If you take a look at page 11 of the 2011 CB circular, the conversion rates into Garden Fresh shares depend on its 2013 profit numbers.

If 2013 profit exceeds RMB 250m

If 2013 profit is between RMB 200m - RMB 250m

If 2013 profit is below RMB 200m

The profit targets might imply that these are the "Best", "Base" and "Worst" case scenarios expected and negotiated between Sino Grandness and CB1 holders at that point of time. Based on 2013, 2014 and soon 2015 results, we can see that Garden Fresh has hit and exceed its "Best" case scenario. In short, did Garden Fresh exceed Huang's expectations ? Probable.

Regarding your point about shareholder getting a bite of the pie, looking at dividends alone might be inaccurate. 2 examples to illustrate
1) Warren Buffett's Berkshire does not pay a dividend. Does this mean that investors got nothing ?
2) Eratat paid dividends yearly. Does this mean that investors were rewarded ?
Share price should be included because it is reflective of business fundamentals in the long term, which shareholders own a part of. This together with dividends show a better picture of how shareholders benefit.

Why doesn't Berkshire Hathaway pay a dividend? By Investopedia
 
Berkshire Hathaway does not pay a dividend because its chairman and CEO, Warren Buffett, believes it is more auspicious to allocate the company's earnings in other ways. In particular, Buffett prefers to reinvest profits in things that allow his company to improve its efficiency; expand its reach; create new products and services and improve existing ones; and further separate itself from competitors. Buffett, like many business leaders, feels that investing back into his business provides more long-term value to shareholders than paying them directly because the company's financial success rewards shareholders with higher stock values. Additionally, Berkshire Hathaway maintains an aggressive stock buyback policy that puts cash directly into shareholders' pockets.

Despite the company having billions of dollars of cash on hand, the prospect of a Berkshire Hathaway dividend is dim as long as Buffett is in charge. The company has paid only one dividend during his reign, in 1967, and Buffett later joked he must have been in the bathroom when the decision was made. Nevertheless, statistics give credence to Buffett's stance that using profits to buttress the company's financial position results in greater wealth for shareholders than paying dividends. Berkshire Hathaway's stock price increased by almost 700,000% between 1964 and 2014. Someone who invested $1,000 in the company's stock in 1980 is a millionaire in 2014.

Although it does not pay a dividend, Berkshire Hathaway distributes money directly to shareholders though its generous stock buybacks. The company pays up to 120% of book value when it repurchases stock from shareholders. This benefits investors in two ways. It allows them to cash in some or all of their company stock at a premium they would not receive on the open market. Remaining shareholders also increase their ownership stake as stock buybacks reduce the total number of outstanding shares.

http://www.investopedia.com/ask/answers/...vidend.asp
________________________________________________________________________________________________________ 
Hi crubs,

Is SG aspiring to become the next BH? Is this one of its business objective ?

BH has billions of dollars of CASH to pay dividend (if BW decides to make a u-turn), to buy back share and to reinvest.
How much cash does SG has ? Net debt !
Does SG has cash to buy back share generously ?

Two different world we are talking about, mate !

Not advisable to become the next Eratat, that's for sure.
________________________________________________________________________________________________________________________________

Hi Boon,

I raised BH as an example to point out that principles of capital allocation are the same. Therefore, share price and dividends should be included when counting shareholder return instead of just dividends as weijian have stated.

Capital allocation decisions are universal. Cash is generated to either re-invest, pay down debt, or return to shareholders via buyback/dividend.

Sino Grandness and BH face the same capital allocation decisions and Sino Grandness chose to reinvest its cashflow into new factories and working capital to grow the business, which increases the value of its business. BH chooses the to reinvest and buy businesses. Both company have increased in value which in the long run is reflected by its share price.

I used BH as an example because it has never given out dividend, in response to weijian's implication that dividends is the only way to see how shareholders are "rewarded"

FYI: BH only started share buybacks in the last 5 years. Prior to that, no dividends no buybacks. And they only did it because they ran out of investment opportunities.

It is important for everyone to be in the same page as to what constitutes "shareholder reward" before we analyse how Sino Grandness has rewarded shareholders.

Hi crubs,

“Capital allocation decisions are universal. Cash is generated to either re-invest, pay down debt, or return to shareholders via buyback/dividend.”
 
For companies that are not capable of generating FCF, the issue of "re-investment decision making” would not even arise in the first place.
 
How much FCF had SG generated over the past 6.75 years and how much of it had been "re-invested?
_____________________________________________________________________________________________________________________________________

Hi Boon,

FCF is generated when a company has no immediate re-investment options.

Sino Grandness reinvested it's operating cashflow into capex because its business is expanding. That is a form of reinvestment, that's why there's an "investing cashflow" segment in the cashflow statement in the first place.

Berkshire has idle cash partly due to company policy and partly due to lack of re-investment options.

All these are secondary as my purpose of raising this issue is to prove that share price AND dividend should be considered when assessing shareholder return, which was in response to you suggesting that shareholders got the least because you only assessed dividends and not share price.

Hi crubs,
 
I did not say share price should be excluded in assessing shareholder return.
 
In 2009: IPO share price = SGD 29 cents
Today 2016: share price = SGD 34 cents  
 
Low or no dividend should be compensated by high appreciation in share price, but this doesn’t seem to be the case.
 
WHY?
_______________________________________________________________________________________ 

Your statement: “FCF is generated when a company has no immediate re-investment options.”
 
implies:
 
“when a company has immediate re-investment options, FCF is not generated”
 
In another words, “ a company’s ability to generate FCF is dependent on the immediate re-investment options available to it – which is externally determined”.  Does it make sense?
 
Do you mean “idle cash” instead of FCF ?
 _______________________________________________________________________________________

The “investing cashflow segment” does not segregate investments into “reinvestment”, new investment, maintenance capex, growth capex etc.
 
“Maintenance capex” is not reinvestment IMO.

FCF and re-investment returns are not secondary issues. 
_________________________________________________________________________________________ 

[crubs]

Why doesn't Berkshire Hathaway pay a dividend? By Investopedia
 
Berkshire Hathaway does not pay a dividend because its chairman and CEO, Warren Buffett, believes it is more auspicious to allocate the company's earnings in other ways. In particular, Buffett prefers to reinvest profits in things that allow his company to improve its efficiency; expand its reach; create new products and services and improve existing ones; and further separate itself from competitors. Buffett, like many business leaders, feels that investing back into his business provides more long-term value to shareholders than paying them directly because the company's financial success rewards shareholders with higher stock values. Additionally, Berkshire Hathaway maintains an aggressive stock buyback policy that puts cash directly into shareholders' pockets.

Despite the company having billions of dollars of cash on hand, the prospect of a Berkshire Hathaway dividend is dim as long as Buffett is in charge. The company has paid only one dividend during his reign, in 1967, and Buffett later joked he must have been in the bathroom when the decision was made. Nevertheless, statistics give credence to Buffett's stance that using profits to buttress the company's financial position results in greater wealth for shareholders than paying dividends. Berkshire Hathaway's stock price increased by almost 700,000% between 1964 and 2014. Someone who invested $1,000 in the company's stock in 1980 is a millionaire in 2014.

Although it does not pay a dividend, Berkshire Hathaway distributes money directly to shareholders though its generous stock buybacks. The company pays up to 120% of book value when it repurchases stock from shareholders. This benefits investors in two ways. It allows them to cash in some or all of their company stock at a premium they would not receive on the open market. Remaining shareholders also increase their ownership stake as stock buybacks reduce the total number of outstanding shares.

http://www.investopedia.com/ask/answers/...vidend.asp
________________________________________________________________________________________________________ 
Hi crubs,

Is SG aspiring to become the next BH? Is this one of its business objective ?

BH has billions of dollars of CASH to pay dividend (if BW decides to make a u-turn), to buy back share and to reinvest.
How much cash does SG has ? Net debt !
Does SG has cash to buy back share generously ?

Two different world we are talking about, mate !

Not advisable to become the next Eratat, that's for sure.
________________________________________________________________________________________________________________________________

Hi Boon,

I raised BH as an example to point out that principles of capital allocation are the same. Therefore, share price and dividends should be included when counting shareholder return instead of just dividends as weijian have stated.

Capital allocation decisions are universal. Cash is generated to either re-invest, pay down debt, or return to shareholders via buyback/dividend.

Sino Grandness and BH face the same capital allocation decisions and Sino Grandness chose to reinvest its cashflow into new factories and working capital to grow the business, which increases the value of its business. BH chooses the to reinvest and buy businesses. Both company have increased in value which in the long run is reflected by its share price.

I used BH as an example because it has never given out dividend, in response to weijian's implication that dividends is the only way to see how shareholders are "rewarded"

FYI: BH only started share buybacks in the last 5 years. Prior to that, no dividends no buybacks. And they only did it because they ran out of investment opportunities.

It is important for everyone to be in the same page as to what constitutes "shareholder reward" before we analyse how Sino Grandness has rewarded shareholders.

Hi crubs,

“Capital allocation decisions are universal. Cash is generated to either re-invest, pay down debt, or return to shareholders via buyback/dividend.”
 
For companies that are not capable of generating FCF, the issue of "re-investment decision making” would not even arise in the first place.
 
How much FCF had SG generated over the past 6.75 years and how much of it had been "re-invested?
_____________________________________________________________________________________________________________________________________

Hi Boon,

FCF is generated when a company has no immediate re-investment options.

Sino Grandness reinvested it's operating cashflow into capex because its business is expanding. That is a form of reinvestment, that's why there's an "investing cashflow" segment in the cashflow statement in the first place.

Berkshire has idle cash partly due to company policy and partly due to lack of re-investment options.

All these are secondary as my purpose of raising this issue is to prove that share price AND dividend should be considered when assessing shareholder return, which was in response to you suggesting that shareholders got the least because you only assessed dividends and not share price.

Hi crubs,
 
I did not say share price should be excluded in assessing shareholder return.
 
In 2009: IPO share price = SGD 29 cents
Today 2016: share price = SGD 34 cents  
 
Low or no dividend should be compensated by high appreciation in share price, but this doesn’t seem to be the case.
 
WHY?
_______________________________________________________________________________________ 

Your statement: “FCF is generated when a company has no immediate re-investment options.”
 
implies:
 
“when a company has immediate re-investment options, FCF is not generated”
 
In another words, “ a company’s ability to generate FCF is dependent on the immediate re-investment options available to it – which is externally determined”.  Does it make sense?
 
Do you mean “idle cash” instead of FCF ?
 _______________________________________________________________________________________

The “investing cashflow segment” does not segregate investments into “reinvestment”, new investment, maintenance capex, growth capex etc.
 
“Maintenance capex” is not reinvestment IMO.

FCF and re-investment returns are not secondary issues. 
_________________________________________________________________________________________ 

Hi Boon,

Haha, Sino Grandness did a 2 for 1 split in 2013 and it's IPO price adjusted for split is 0.145. Current price is 0.34, a 134% increase.

I suggest you get your facts right before entering a debate.

[crubs]

Huang"s Cny ang pao http://infopub.sgx.com/Apps?A=COW_CorpAn...9690a87bd9.

Thanks leeeta for the news ! I remember during the last briefing, Huang said that there will be news about the CB/IPO before the next briefing. Looks like he has stuck to his word. A boost to his credibility.

[tiongkokgor]

Some shareholders and unvested investors were very afraid of Garden Fresh not able to redeem its convertible bonds and were very skeptical about the launch of the IPO of Garden Fresh which Sino Grandness announced the intent more than 2 years ago. With the IPO, the liability from the convertible bonds will distinguish and Garden Fresh's cash hoard will also increase significantly.

I congratulate those with strong convictions in Sino Grandness and thanks the forummers who had unselfishly shared the investment merits of this counter.

乌云遮不住太阳，真金不怕火炼

Huang"s Cny ang pao http://infopub.sgx.com/Apps?A=COW_CorpAn...9690a87bd9.

Thanks leeeta for the news ! I remember during the last briefing, Huang said that there will be news about the CB/IPO before the next briefing. Looks like he has stuck to his word. A boost to his credibility.