Sino Grandness

[leeeta]

Try again

Trade show info/photos.

Day 1
Day 2
Day 3 & here..

[butcher]

Terima Kasih Ibu Leeeta.

Saw the pictures of the new launch drinks also. Looks good.

[kye_lin]

SinoG in ST today:
http://www.straitstimes.com/business/com...erage-unit

[piaopiao]

Noted fr yesterday Straits Times article that Sino Grandness's share price has doubled in last 2 months.

Why?

Is it due to the potential ipo of its subsidiary?

From the financial statements of beverage companies with majority of revenue from China listed in HK, their recent results are far from decent.

[portuser]

Reserving my comments until 31 May 2016*.

SFIG has to prepare an IPO before then and the question at what valuation too

Concern that Garden Fresh may not repay RMB 107m on 31 May 2016 stems from the fact that earlier both 2011 Bonds and 2012 Bonds were not redeemed on maturity.

The author of Nextinsight article (http://www.nextinsight.net/index.php/sto...t-on-bonds) thought otherwise when he wrote:

"... the total amount due on 31 May 2016 is RMB 106.9m (RMB 30.1m + RMB 76.8m). 
This amount is manageable for Sino Grandness given that its net cash generated from operating activities in 1Q 2015 alone was RMB 230m.  Even though cash on hand as at end-2015 was RMB 143m, the company has 5 months in FY2016 to generate the required amount."

Garden Fresh could have redeemed both Bonds earlier had it not expanded its beverage production capacity. 

Page 50 of Sino Grandness 2014 annual report spelt out the measures to deal with bond redemption. They included borrowing from banks, slowing down the building of the Anhui factory, and partial redemption. 

It transpired that borrowing and slowing down were not resorted to. The arrangement (as announced on 1 March 16) to redeem 40% of the bonds, in two installments, will give Garden Fresh enough time to repay, and allow Sino Grandness to retain a bigger chunk of Garden Fresh -- 85.3% instead of 76.6% if bondholders exercise full conversion.  

It seems that in hammering out the arrangement on 40% redemption, bondholders and Sino Grandness gave priority to growth to enable Garden Fresh to show its investment merits for the planned IPO. Bondholders stand to gain more from converting their bonds into Garden Fresh shares than redeeming them.  

The 1 March announcement does not show an interesting point -- when 40% of Bonds were restructured into SB1 and SB2 on 1 March 16, bondholders waived RMB 13.2m in accrued interests as shown below:

.............................................RMB m as at 1 March 2016

...................Principal amount......SB1.....SB2.....SB1 + SB2....interest waived 
.................+ accrued interest 

40% of  
2011 Bonds....................85.3......28.5.....50.3...............78.8.....................6.5

40% of 
2012 Bonds...................208.3.....73.3...128.3..............201.6.....................6.7


It is a reasonable assumption that Sino Grandness had worked its sums carefully before concluding the partial redemption arrangement. Missing the repayment on 31 May will be embarrassing when IPO is work-in-progress. 

[specuvestor]

Hi portuser

If you look at page 6 & 7 of the 1 March announcements, there are a few salient points:

For example in column 2 of CDIB bonds, we can see the original principal is RMB2.25m but the principal of the SB1 bond that it is converted to is RMB4.0725m which includes the accrued interest. Converting to straight bonds and calling the roll-over amount the "prinipal" has legal implications.

In Column 3 it shows the total amount to be repaid in May on maturity, which in this case is RMB4,264,019. What is immediately obvious is why there is no corresponding column 7 for the SB2 bonds, which in the following notes we know that it is 10% p.a. interest cost going forward, but up to us to guess if there is interest being waived.

Hence I am not sure if there is interest actually being waived. As per my previous post, my observation is that the redemption amount of SB1 is very close to the cash holding reported.

[portuser]

Specuvestor

CDIB was issued with bonds in principal amount of RMB 2.25M on 25 July 2012. On 1 March 2016, the bonds had been outstanding for 3 years and 220 days. 

The principal plus accrued interest (20% per annum) was RMB 4,339,622, but column 3 gave RMB 4,072,500 as the redemption price.

What prompted me not to take RMB 4,072,500 as given, but proceed to calculate the actual redemption price based on 20% per annum for the duration?

According to the two tables in page 6 and 7 of the announcement, 40% of 2011 and 2012 Bonds were restructured into SB1 and SB2 resulting in an aggregate amount of RMB 280,373,500:

40% of 2012 Bonds restructured into SB1....73,305,000
40% of 2012 Bonds restructured into SB2..128,250,000
40% of 2011 Bonds restructured into SB1....28,497,000
40% of 2011 Bonds restructured into SB2....50,321,500

Full redemption of 2011 and 2012 Bonds on 1 March 2016 therefore cost RMB 700,933,750 ( = 280,373,500 * [100 / 40] ).

However, page 13 of full-year results announcement gave RMB 703,125,000 (higher than RMB 700,933,750) as the redemption amount on 31 Dec 2015. 

Clearly, redemption amount on 1 March 16 should be higher than the amount on 31 Dec 2015.

But the reverse was the case, and this was due to interest waivers by bondholders. 

[specuvestor]

Thanks for showing the working. To prove that I read it carefully as well the figure for 40% of 2011 SB2 bond should be 50,312,500 so full redemption should be RMB700,911,250.

So we can agree that the interest waiver is probably around RMB2.2m in total (about 0.3% of total) and not RMB13.2m

PS and I think I can answer my own question of why there is no column 7... the issue date for SB2 is not fixed hence the maturity date which is 12 months after issue date is not fixed.

[portuser]

Specuvestor

Thank you for pointing out my transposition error -- RMB 50,321,500 should have been RMB 50,312,500.

It follows that full redemption on 1 March 16, based on the restructuring agreement, should have been RMB 700,911,250 instead of RMB 700,933,750 -- the small difference of RMB 22,500 does not matter much.

Based on the original bond agreements, full redemption on 31 Dec 2015 was RMB 703,125,000 (page 13 of 2015 results announcement). On the same basis, full redemption rose to RMB 734,066,000 (213,311,000 for 2011 Bonds + 520,755,000 for 2012 Bonds) on 1 March 2016; and 40% of which was RMB 293,626,000.

The difference between RMB 293,626,000 and RMB 280,365,000 (the sum of SB1 and SB2 based on the restructuring agreement as at 1 March 2016) is RMB 13.2m; which is 9% (not insignificant) of the accrued interests. 

Interest waiver is not RMB 2.2m. RMB 2.2m is the difference between RMB 703,125,000 (full redemption on 31 Dec 15) and RMB 700,911,250 (sum of SB1 and SB2 on 1 March 16 adjusted for full redemption). The two figures are for dates two months apart and for full redemption. Interest waiver should be on 40% of Bonds and computed on 1 March 2016.

[specuvestor]

Not pointing out your minor error per se but pointing out that I'm reading ernestly

The original principle of SB1 is RMB12,075,000+40,500,000= RMB52,575,000 and SB2 is RMB20,125,000+67,500,000= RMB87,625,000

If we use 25% interest for the total amount for 60 days interest, it is roughly RMB5.75m. If we use 25%/10% for the 60 days interest it is RMB3.59m. I'm using the computation based on the original principal rather than the outstanding principal+interest. In future the computation will be based on the new principal.

The issue is of course not so simple as restructuring is a give-and-take process. Fact that SB2 is 10% interest is good sign but that also takes into account it has been converted to a straight bond and revised principal amount.

Fact is also the auditors overestimated the liability since they don't seemed to be aware of the impending restructuring even to the last minute.