Sino Grandness

[Boon]

Boon wrote:

"The July 4 circular did not mention the use of “adjusted” net profit. If the “net profit” in Feb 5 circular were adopted, they did not meet bondholders’ net profit target in 2012 and 2013.

It is in the interests of the bondholders to use “unadjusted” net profit. That's obvious !
 
It is in the interests of the bond issuer to use “adjusted” net profit. That's obvious too !
 
The bond issuer and the bondholders could be disputing over this matter in a similar way you and I have been debating over it. Ha-ha!"




If 2012 profit were in fact RMB 103.4m (< RMB 140m), there will be no conversion of bonds into Garden Fresh shares, and no EGM will be held on 23 Feb.

Hi portuser,
 
Is there any clause in the document specifically saying if FY2012 “Reference Net Profit” {or  criteria (a)} was RMB103.4 million, the bondholders have no right to convert ?
 
The RMB 140 m is a “Performance Requirement” {or criteria (b)}.
 
(for the avoidance of doubt, both (a) and (b) must be satisfied)


Reference Net Profit < RMB 200 m 
 
(a) is not satisfied, therefore, no need to look at (b)
 
Therefore (iii) applies:
 
Aggregate Conversion Proportion shall be equal to :
Principal amount of all Bonds outstanding as at the date of delivery of the Conversion Notice
divided by
 
5 Times Valuation,
 
where “5 Times Valuation” = 5 * Reference Net Profit,
_____________________________________________________________________________

[portuser]

Boon 

You asked me:

"Is there any clause in the document specifically saying if FY2012 “Reference Net Profit” {or  criteria (a)} was RMB103.4 million, the bondholders have no right to convert ?"



You have got it all wrong.

There is no 2012 reference profit. Did you not read "Reference net profit is 2013 profit." highlighted in my post 1242?

You should read page 8 of circular dated 4 July 2012 in which reference profit is defined as follows:

"The Projected Net Profit (or if available, the Net Profit) for the financial year of the HK Issuer commencing on 1 January 2013, provided that such Projected Net Profit is as disclosed in the
prospectus relating to the QIPO or has been approved by an Extraordinary Resolution. For the avoidance of doubt, Reference Net Profit shall exclude any one time fees arising directly from the QIPO and any Fair Value Change"

[crubs]

Boon you wrote,

"The July 4 circular did not mention the use of “adjusted” net profit. If the “net profit” in Feb 5 circular were adopted, they did not meet bondholders’ net profit target in 2012 and 2013.

It is in the interests of the bondholders to use “unadjusted” net profit. That's obvious !

It is in the interests of the bond issuer to use “adjusted” net profit. That's obvious too !

The bond issuer and the bondholders could be disputing over this matter in a similar way you and I have been debating over it. Ha-ha!"



Refer to page 7 of the July 4th circular
“Reference Net Profit” : The Projected Net Profit (or if available, the Net Profit) for the financial year of the HK Issuer commencing on 1 January 2013, provided that such Projected Net Profit is as disclosed in the prospectus relating to the QIPO or has been approved by an Extraordinary Resolution. For the avoidance of doubt, Reference Net Profit shall exclude any one time fees arising directly from the QIPO and any Fair Value Change

Now refer to page 5 of the July 4th circular
“Fair Value Change” : In respect of Net Profit or Reference Net Profit, any change in fair value arising from the Convertible Bonds, as determined by an independent appraiser of international repute (acting as expert), selected and appointed by the HK Issuer, and the costs in respect of such appointment to be borne by the HK Issuer

Reference Net Profit EXCLUDES fair value changes from the CBs. There is no question about this.

The Net Profit in the EGM circular INCLUDED fair value changes of CB so it must be adjusted to find the Net Profit which the valuation will be based upon.

As portuser said, you got it all wrong. You used the wrong date AND wrong profit numbers. hahaha

[Young Investor]

Hi Mr Boon

I am surprised when you asked Portuser:

"Hi portuser,

Thanks but I couldn't find the circular dated 04 July 2012 on SGX website."

This shows that for many years, you were not aware that circulars are kept separately from announcements. You only knew, 2 days ago, when Portuser told you:

"Go to prospectus/circular (not announcement), click Sino Grandness on the drop-down list, the 4 July 2012 circular is there. Circulars/prospectus are separated from announcements."

Details of deals are spelled out in circulars and not announcements. How then did you do your research all these years?

[CityFarmer]

For those posts, targeting on person, rather than on company related topics, are noises to the thread.

Noises will be removed after this reminder

Thank you

Regards
Moderator

[Boon]

Boon you wrote,

"The July 4 circular did not mention the use of “adjusted” net profit. If the “net profit” in Feb 5 circular were adopted, they did not meet bondholders’ net profit target in 2012 and 2013.

It is in the interests of the bondholders to use “unadjusted” net profit. That's obvious !

It is in the interests of the bond issuer to use “adjusted” net profit. That's obvious too !

The bond issuer and the bondholders could be disputing over this matter in a similar way you and I have been debating over it. Ha-ha!"



Refer to page 7 of the July 4th circular
“Reference Net Profit” : The Projected Net Profit (or if available, the Net Profit) for the financial year of the HK Issuer commencing on 1 January 2013, provided that such Projected Net Profit is as disclosed in the prospectus relating to the QIPO or has been approved by an Extraordinary Resolution. For the avoidance of doubt, Reference Net Profit shall exclude any one time fees arising directly from the QIPO and any Fair Value Change

Now refer to page 5 of the July 4th circular
“Fair Value Change” : In respect of Net Profit or Reference Net Profit, any change in fair value arising from the Convertible Bonds, as determined by an independent appraiser of international repute (acting as expert), selected and appointed by the HK Issuer, and the costs in respect of such appointment to be borne by the HK Issuer

Reference Net Profit EXCLUDES fair value changes from the CBs. There is no question about this.

The Net Profit in the EGM circular INCLUDED fair value changes of CB so it must be adjusted to find the Net Profit which the valuation will be based upon.

As portuser said, you got it all wrong. You used the wrong date AND wrong profit numbers. hahaha

Hi crubs,
 
For argument sake, let’s use the Group’s FY2013 numbers as an example:
 
FY2013: (these are Group numbers , not Listco)
Adjusted Earning =  418.2 m
Net Profit = 287.7 m
Non-cash interest expenses of CB = 86.9 m
Change in fair value = 43.6 m
 
**Adjusted earnings = Net profit attributable to shareholders + non-cash interest expenses of convertible bonds + changes in fair value of the option derivatives in relation to convertible bonds
 
Reference Net Profit shall exclude any one time fees arising directly from the QIPO and any Fair Value Change

=> hence, change in fair value of 43.6 m should be deducted or excluded.
 
The circulars did not say non-cash interest expenses of CB should be added back => hence it should be deducted. 
 
So what should be the Reference Net Profit of the Group in 2013 in accordance to the circulars? Isn’t 287.7 m the right number?

Reference Net Profit = unadjusted earning
 
Hahaha!
 
So what is your interpretation of RMB 153.5 million in FY2013 for ListCo as listed on circular dated 05-Feb-2014?  
________________________________________________________________________________________________________ 

[alex]

Not sure why non-cash expense should be included in coming up with net profit? It should be considered as non-recurring. All non-recurring items will be adjusted for during valuation. It is a win-win for both shareholders and CB holders since they are converting as well. It is everyone's interest to get the maximum valuation.

That's my opinion.

[Boon]

Non-cash interest expenses of CB falls under amortization.
___________________________________________________________
“Reference Net Profit” :
The Projected Net Profit (or if available, the Net Profit) for the financial year of the HK Issuer commencing on 1 January 2013, provided that such Projected Net Profit is as disclosed in the prospectus relating to the QIPO or has been approved by an Extraordinary Resolution. For the avoidance of doubt, Reference Net Profit shall exclude any one time fees arising directly from the QIPO and any Fair Value Change

“Projected Net Profit”:
With respect to a financial year of the HK Issuer, the consolidated projected net profits of the HK Issuer and its subsidiaries after taxation, interest, depreciation and amortisation with respect to such financial year, as determined by the HK Issuer acting in good faith and a commercially reasonable manner

Net Profit :
With respect to a financial quarter or a financial year of the HK Issuer, the consolidated net profits of the HK Issuer and its subsidiaries after taxation, interest, depreciation and amortisation with respect to such financial quarter or year, as applicable, as confirmed by the audited accounts of the HK Issuer 

[alex]

Hi Boon,

Thanks for the information. Let's see what is the reference profit when it is launched. By the way, are you short on SG? Just curious since you are so actively against it. If you are not, please do short to prove that you have faith in your analysis.

[Lich]

Would the current price for Sino Grandness be considered undervalued?