Sino Grandness

[Boon]

Boon,

Can you explain the changes in values for the liability component and option derivative over the last 7 quarters ?

Specifically
1) How did the valuers derive the numbers ?

2) Why did liability component dropped from RMB 647m to RMB 459m between Jun-15 and Sep-15 ? (Shouldn't the amount of money owed increase over time ?)

3) Why did option derivative fair value jumped from RMB 130m to RMB 374m between Jun-15 to Sep-15 ?

Some workings are appreciated.

Let me contribute, before Boon,
2) It may be due to the recent partial redemption of the bonds. I knew partial redemption was done last year.

(not vested)

Page 11 of 9M2015 results:
 
Note C : The convertible bonds have expired on 25 July 2015. Notwithstanding, as the Company is undergoing on-going discussions with the bond holders, it has computed the fair values of the convertible bonds as if the maturity dates of these bonds had been extended as at 30 September 2015.

that explains why !

[crubs]

Boon,

Can you explain the changes in values for the liability component and option derivative over the last 7 quarters ?

Specifically
1) How did the valuers derive the numbers ?

2) Why did liability component dropped from RMB 647m to RMB 459m between Jun-15 and Sep-15 ? (Shouldn't the amount of money owed increase over time ?)

3) Why did option derivative fair value jumped from RMB 130m to RMB 374m between Jun-15 to Sep-15 ?

Some workings are appreciated.

Let me contribute, before Boon,
2) It may be due to the recent partial redemption of the bonds. I knew partial redemption was done last year.

(not vested)

Page 11 of 9M2015 results:
 
Note C : The convertible bonds have expired on 25 July 2015. Notwithstanding, as the Company is undergoing on-going discussions with the bond holders, it has computed the fair values of the convertible bonds as if the maturity dates of these bonds had been extended as at 30 September 2015.

that explains why !

I'm referring to the liability component.
You said Fair Value only pertains to the option derivatives. So how ?
Do you understand that sentence ? I don't. Just quoting it alone doesn't explain anything. Can you show me how the extended maturity dates led to a nearly RMB 200m decline in the liability component ?

[Boon]

Boon

You seem to be so sure of your analysis. You are dead set that profit for 2014 is only Rmb117.3M, while some of us have tried to explain to you that the figure is Rmb334.9M (adjusted). Perhaps you should take up oldman9's suggestion and attend the Egm. Would do us a lot of good if you can explain to shareholders why profit is only Rmb117.3M. We might learn something from you.

Hi leeeta,
 
Page 12 of circular dated 05-Feb-2016 says Profit for the year/period for FY2014 was RMB 117.3 m
 
Do I have an obligation to explain to shareholders? Ha-ha!
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[leeeta]

Boon

You seem to be so sure of your analysis. You are dead set that profit for 2014 is only Rmb117.3M, while some of us have tried to explain to you that the figure is Rmb334.9M (adjusted). Perhaps you should take up oldman9's suggestion and attend the Egm. Would do us a lot of good if you can explain to shareholders why profit is only Rmb117.3M. We might learn something from you.

Hi leeeta,
 
Page 12 of circular dated 05-Feb-2016 says Profit for the year/period for FY2014 was RMB 117.3 m
 
Do I have an obligation to explain to shareholders? Ha-ha!
_____________________________________________________________________________________________________________________________________

Boon,

Great. We will see who is right after the EGM.

[Boon]

Boon

You seem to be so sure of your analysis. You are dead set that profit for 2014 is only Rmb117.3M, while some of us have tried to explain to you that the figure is Rmb334.9M (adjusted). Perhaps you should take up oldman9's suggestion and attend the Egm. Would do us a lot of good if you can explain to shareholders why profit is only Rmb117.3M. We might learn something from you.

Hi leeeta,
 
Page 12 of circular dated 05-Feb-2016 says Profit for the year/period for FY2014 was RMB 117.3 m
 
Do I have an obligation to explain to shareholders? Ha-ha!
_____________________________________________________________________________________________________________________________________

Boon,

Great. We will see who is right after the EGM.

Hi leeeta,

As an input in determining aggregate conversion proportion of bondholders, the FY2014 profit figure was “out of scope”, according to “portuser”.
 
As a “selling point” in search of a “more clever” Mr. Market who is willing to pay the highest price for Listco, relatively speaking, in terms of profit growth number for FY2015, a lower FY2014 profit number would make the FY2015 profit growth number looks better, and conversely, a higher FY2014 profit number would make the FY2015  profit growth number looks worse off.
 
You seemed particularly more concern on the FY2014 number, why ?
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[Boon]

So, what are the upsides and downsides ?

[Image: 29ghb9g.jpg]

Restrictions on disposal of the ListCo Shares
Immediately following the Proposed Listing, the Company will own not less than 51% of the enlarged issued and paid-up share capital of the ListCo. Pursuant to the requirements of the HKSE Rules and to demonstrate its commitment to the ListCo, the Company, being the controlling shareholder of the ListCo shall not:

The intent is to have at least 51% shareholding in Listco.
 
In theory, if it falls below 50.1%, the mitigation measures or control mechanism is to top up with cash. Under such scenario, value per SG share of its 51% stake would have to be adjusted accordingly   
 
Value per SG share of 51% stake in Listco = {MV (100% Listco) x 51%  LESS “Cash Top-up”} / ( 673,344,828 x 4.65 ).
 _________________________________________________________________________________________
 
Page 44 of 04-July-2012 Circular with respect to CB1:
 
Notwithstanding anything contained above, if the Conversion Right in respect of one or more Bonds is exercised pursuant to the condition set out under paragraph 9 of this Annex A such that the Shares to be issued on such conversion would otherwise represent greater than 19.9 per cent. of the issued share capital of the HK Issuer (taking into account the share capital issued upon listing of the Qualifying IPO, if applicable), the number of such Shares to be issued in respect thereof shall be calculated by the HK Issuer on the basis that such Shares will be issued to each converting Bondholder (on a pro rata basis) in such number such that they shall represent no more than 19.9 per cent. of the issued share capital of the HK Issuer (taking into account the share capital issued upon listing of the Qualifying IPO, if applicable), rounded down to the nearest whole number of Shares. In such event, the HK Issuer will upon conversion of such Bonds pay in cash (in Renminbi by means of a Renminbi cheque drawn on a bank in Hong Kong) a sum equal to (1) such portion of the Principal Amount of the Convertible Bonds (the “Cash Portion”) evidenced by the Certificate deposited in connection with the exercise of Conversion Rights, aggregated as provided in the condition set out under paragraph 9 of this Annex A, as corresponds to the number of Shares not issued as a result of such issuance representing greater than 19.9 per cent. of the issued share capital of the HK Issuer (taking into account the share capital issued upon listing of the Qualifying IPO, if applicable) and (2) the product of the Upside Amount multiplied by the Cash Portion determined pursuant to (1).
“Upside Amount” means (1.25)^X, where X is the number of calendar days from and including the Issue Date to but excluding the Redemption Date divided by 365
_________________________________________________________

Page 22 of 04-July-2012 Circular dated 04-July-2012 with respect to CB2:
 
Notwithstanding anything contained above, if the Conversion Right in respect of one or more Bonds is exercised or deemed to have been exercised pursuant to Condition 7.1(a) of the Terms and Conditions such that the Shares to be issued on either such conversion would otherwise represent greater than 30 per cent. of the issued share capital of the HK Issuer (taking into account the share capital issued upon listing of the QIPO, if applicable), the number of such Shares to be issued in respect thereof shall be calculated by the HK Issuer on the basis that such Shares will be issued to each converting Bondholder (on a pro rata basis) in such number such that they shall represent no more than 30 per cent of the issued share capital of the HK Issuer (taking into account the share capital issued upon listing of the QIPO, if applicable), rounded down to the nearest whole number of Shares. In such event, the HK Issuer will upon conversion of such Convertible Bonds pay in cash (in USD by means of a wire transfer to the registered account of the Bondholder) a sum equal to (1) such portion of the Principal Amount of the Convertible Bond or Convertible Bonds (the “Cash Portion”) evidenced by the bond certificate deposited in connection with the exercise of Conversion Rights, aggregated as provided in Condition 7.1(a) of the Terms and Conditions, as corresponds to the number of Shares not issued as a result of such issuance representing greater than 30 per cent of the issued share capital of the HK Issuer (taking into account the share capital issued upon listing of the QIPO, if applicable) and (2) the product of the Upside Amount multiplied by the Cash Portion determined pursuant to (1). Any such sum shall be due and payable on the date the Shares are delivered pursuant to Condition 7.2© of the Terms and Conditions.
“Upside Amount” means (1.25)^X, where X is the number of calendar days from and including the Issue Date to but excluding the Redemption Date divided by 365.
Notwithstanding the above, if within the relevant conversion period (i) the HK Issuer shall default in making payment in full in respect of any Convertible Bond which shall have been called for redemption on the date fixed for redemption thereof, (ii) any Convertible Bond has become due and payable prior to the Maturity Date by reason of the occurrence of any of the events under Condition 11 of the Terms and Conditions or (iii) any Convertible Bond is not redeemed on the Maturity Date in accordance with Condition 8.1 of the Terms and Conditions, the Conversion Right attaching to such Convertible Bond will revive and/or will continue to be exercisable up to, and including, the close of business (at the place where the bond certificate evidencing such Convertible Bond is deposited for conversion) on the date upon which the full amount of the moneys payable in respect of such Convertible Bond has been duly received by the Bondholders and, notwithstanding the provisions of Condition 7.1(a) of the Terms and Conditions, any Convertible Bond in respect of which the bond certificate and Conversion Notice are deposited for conversion prior to such date shall be converted on the relevant Conversion Date notwithstanding that the full amount of the moneys payable in respect of such Convertible Bond shall have been received by the Bondholders before such Conversion Date or that a relevant conversion period may have expired before the date on which the relevant bond certificate and Conversion Notice are so deposited. 
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[Oldman9]

Boon

You seem to be so sure of your analysis. You are dead set that profit for 2014 is only Rmb117.3M, while some of us have tried to explain to you that the figure is Rmb334.9M (adjusted). Perhaps you should take up oldman9's suggestion and attend the Egm. Would do us a lot of good if you can explain to shareholders why profit is only Rmb117.3M. We might learn something from you.

Hi leeeta,
 
Page 12 of circular dated 05-Feb-2016 says Profit for the year/period for FY2014 was RMB 117.3 m
 
Do I have an obligation to explain to shareholders? Ha-ha!
_____________________________________________________________________________________________________________________________________

Hi Boon,

I am confused. Need your expertise. Is the FY2014 profit RMb 334.9m or Rmb117.3m?

cheers
Oldman9

[Oldman9]

Hi Boon

No need to argue. Don't think we can progress anywhere.

As you have an interest in this counter long or short, just attend the EGM and find out for  yourself.  By  the way, it's stated clearly in the circular that Cb1&Cb2 will hold 23.4%.

How do i identify you? Will you be wearing a cap? Its very easy to identify me..I am oldman. hahaha.

cheers
oldman9

Hi crubs,
 
If you were trying to look through the numbers for an answer to explain what constitutes “Fair Value”, you will never find it there.
 
Explanation to changes in values as you have observed are separate issue.
________________________________________________________________________________________________________

Hi oldman9,
 
I wish you were right !
 
CB1 and CB2 have been working “overtime” with little or no overtime pay, do you think their owners would be happy without being fairly and adequately compensated for it? It would be nice if the bondholders were happy to provide “free lunch”.
 
I will be wearing a black cap if I decide to go. By the way, do you think there will be free lunch available in the EGM?
______________________________________________________________________________________________________________________________________

Hi Boon

Ya, I wish I am right.

Don't worry. Lunch on me if its not provided by Huang. So you are coming right?

haha

cheers
oldman9

[crubs]

Boon,

In post #1256, you said "The circulars did not say non-cash interest expenses of CB should be added back => hence it should be deducted."

Are you sure the circular did not say that ?

In post #1258, you said "Non-cash interest expenses of CB falls under amortization." which was wrong and quoted the definition "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"

In post #1286, you referred me to "Page 44 of 04-July-2012 Circular with respect to CB1"

Since you have read until page 44, you MUST have read something on that page and the page before that contradicted what you said in post #1258 and post #1256. Why did you not point out and clarify your error in the interest of the forumers ?

What am I referring to ?

Page 44 : “Projected Net Profit” means, 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. For the avoidance of doubt, costs and expenses incurred in connection with the Qualifying IPO and any extraordinary items shall not be taken into account in determining “Projected Net Profit”.

Page 43 : “Net Profit” means, 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. For the avoidance of doubt, costs and expenses incurred in connection with the Qualifying IPO and any extraordinary items shall not be taken into account in determining “Net Profit”.

For the avoidance of doubt, costs and expenses incurred in connection with the Qualifying IPO and any extraordinary items shall not be taken into account in determining “Net Profit”.

Is the CB an extraordinary event ? YES
Are "Fair Value" AND "Non-cash interest expense" extraordinary items relating to the CBs ? YES
Should those 2 items be excluded from determining "Net Profit" ? YES

It has been stated clearly in black & white all along. Why did you omit that ?

[Boon]

Boon,

In post #1256, you said "The circulars did not say non-cash interest expenses of CB should be added back => hence it should be deducted."

Are you sure the circular did not say that ?

In post #1258, you said "Non-cash interest expenses of CB falls under amortization." which was wrong and quoted the definition "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"

In post #1286, you referred me to "Page 44 of 04-July-2012 Circular with respect to CB1"

Since you have read until page 44, you MUST have read something on that page and the page before that contradicted what you said in post #1258 and post #1256. Why did you not point out and clarify your error in the interest of the forumers ?

What am I referring to ?

Page 44 : “Projected Net Profit” means, 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. For the avoidance of doubt, costs and expenses incurred in connection with the Qualifying IPO and any extraordinary items shall not be taken into account in determining “Projected Net Profit”.

Page 43 : “Net Profit” means, 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. For the avoidance of doubt, costs and expenses incurred in connection with the Qualifying IPO and any extraordinary items shall not be taken into account in determining “Net Profit”.

For the avoidance of doubt, costs and expenses incurred in connection with the Qualifying IPO and any extraordinary items shall not be taken into account in determining “Net Profit”.

Is the CB an extraordinary event ? YES
Are "Fair Value" AND "Non-cash interest expense" extraordinary items relating to the CBs ? YES
Should those 2 items be excluded from determining "Net Profit" ? YES

It has been stated clearly in black & white all along. Why did you omit that ?

Hi crubs,
 
Ha-ha! No wonder oldman9 is confused. Confusion is part of the learning process.
 
Are you implying that had I not reached page 44, you wouldn’t have reached there either and you would have been “misled” forever?
 
Your underlying assumptions are:
 
1) Those who have read page 44 would have drawn the same conclusion as you.
2) Those who have drawn a different conclusion would have been branded as not acting in the interests of the forumers.
 
Is the CB an extraordinary item?
 
Did the circular say CB is an extraordinary item? No. 
 
IFRS do not use the concept of an extraordinary item at all.
 
Is “non-cash interest expense” an “extraordinary item” and hence be excluded? No.
 
“Non-cash interest expense” still falls under “amortization”
 
Change in fair value of CB should be excluded? Yes and agreed. Apology for the mistake in my application.
 
So back to Group (not Listco) FY2013 number:
 
Reference net profit (Group, not Listco) = 287.7 + 43.6 = 331.3 m
 
So, what is your interpretation of the FY2013 profit figure of 153.5 m for Listco as presented in the 05-Feb-2016 circular?

I once told a buddy on this forum these:
 
If you were to agree with me, it doesn’t mean I am right, as we could both be wrong.
 
If I were to agree with you, it doesn’t mean you are right, as we could both be wrong.
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