Sino Grandness

[portuser]

Huiyuan IPO in 2007

In February 2007, Huiyuan raised RMB 2.36 billion, based on 45.6 times 2006 estimated attributable profit of not less than RMB 200m. 

http://www.bloomberg.com/newhttp://www.b...po-correct

Huiyuan 2005 attributable profit was RMB 107m on sales of RMB 1,3 billion.

Garden Fresh's 2015 profit was RMB 385m on sales of RMB 2,319m.

Majority of Fund Managers have heard of Huiyuan when it IPOed and if I recall correctly Coca Cola was also interested to acquire it before it even IPO.

Huiyuan's 2015 profit is RMB211.8m (excluding CB cost and options) and on sales of RMB5.682b

Yes, Huiyuan was well-known back in 2007, when it launched its IPO. In fact, Danone, French F&B giant, had a big stake in Huiyuan before IPO, but sold off after Coca-cola's offer to buy over Huiyuan was rejected by the government.

As indicated by Bloomberg, Huiyuan's 45.6 times 2006 forward profit was excessive. Garden Fresh can never expect anything near.

With its strong 2015 profit of RMB 385m, Garden Fresh will still be able to fetch a good valuation -- 15 times of this historical profit will be RMB 5,775m. 

Sino Grandness' residual stake of 64% (after sale of vendor shares) will then be worth RMB 3,696m or $769m, which is much higher than Sino's $ 484m current market capitalisation. 

Moreover, sale proceeds of vendor shares (6.5% of the enlarged capital of Garden Fresh) amounting to RMB 375m (or $78m) will translate into a special dividend of 11c per Sino shares.

Huiyuan's 2015 adjusted profit of RMB 212m pales in comparison with Garden Fresh's RMB 385m for the same year. 

Garden Fresh's gross profit margin of 44% in 2015 far exceeded Huiyuan's 38%, even though the former was reliant on external juice factories whereas Huiyuan's products were all produced internally. The orange juice sector is more competitive, whereas Garden Fresh had 86% share of the loquat juice market. 

[crubs]

Many skeptics have questioned several operational aspects of Garden Fresh including their receivables, distribution and inventory management. The prospectus has shed light on their inner workings and dispelled many doubts.

- Distribution (refer to page 138 - 141)
Garden Fresh adopts a flat distribution network. Their distributors sell directly to retailers instead of selling to other 2nd and 3rd tier sub distributors. This results in greater control and monitoring of their products. In addition, they have sales teams in different provinces to personally supervise the distributors. On top of that, distributors are required to employ certain individuals selected by Garden Fresh to ensure that their interest is protected. This section also touched on many smaller aspects of distribution management and how Garden Fresh establishes a long term working relationship with them.

- Receivables Management (page 239)
Those who have wondered how Garden Fresh managed to collect every cent of receivables and have only RMB 15,000 overdue as of end 2015 would be surprised to learn that Huang himself personally supervises the collection of bad debt. Any amount over RMB 1m that is overdue for over 90 days but within 120 days, an approval from Huang is required for the finance department to grant an extension. If the grant is not approved, the finance department would immediately issue a "Overdue Payment Collection Notice". It is comforting to know that Huang is personally overseeing receivables collection and it has resulted in zero bad debts.

Also, baseless accusations of channel stuffing by skeptics have been discredited. Receivables of Garden Fresh is RMB 595.3m, 25% of their FY2015 revenue, which translates to 3 months, in line with their 90 day credit policy. If there was channel stuffing, receivables as a % of revenue would have been skyrocketing and/or millions of RMB in bad debts would have been written off.

- Inventory Management (page 156)
Garden Fresh keeps a very lean inventory. They only keep 60 days of loquat puree, seven days of other raw and packaging materials and two days of finished products in their self produced factories.

[specuvestor]

^^ i assume u are aware who audits the numbers that u are quoting? It's not BDO

Huiyuan IPO in 2007

In February 2007, Huiyuan raised RMB 2.36 billion, based on 45.6 times 2006 estimated attributable profit of not less than RMB 200m. 

http://www.bloomberg.com/newhttp://www.b...po-correct

Huiyuan 2005 attributable profit was RMB 107m on sales of RMB 1,3 billion.

Garden Fresh's 2015 profit was RMB 385m on sales of RMB 2,319m.

Majority of Fund Managers have heard of Huiyuan when it IPOed and if I recall correctly Coca Cola was also interested to acquire it before it even IPO.

Huiyuan's 2015 profit is RMB211.8m (excluding CB cost and options) and on sales of RMB5.682b

Yes, Huiyuan was well-known back in 2007, when it launched its IPO. In fact, Danone, French F&B giant, had a big stake in Huiyuan before IPO, but sold off after Coca-cola's offer to buy over Huiyuan was rejected by the government.

Actually it's the other way round. Coke had its eyes on huiyuan before IPO as they lacked a chinese juice business and Danone was kind of a quasi- white knight pre-IPO. These are stuff not in wiki  but those who followed huiyuan IPO would know cause Wahaha fell out with Danone around the same time

[butcher]

Let's be fair, the audit opinion is given by a Chartered Accountant and should have been conducted in accordance to the relevant auditing standards, be it SSA or ISA.

Audit have been commoditised, with the exception of audit of banks, mid tier firms have the capacity and ability to carry out audit and serve the same clientele as big four.

To be very frank, alot of big fours never spotted frauds despite the consecutive years of auditing the same clients. For e.g. Renci, NKF (These 2 now with RSM). It is good to be skeptical, as an audit ultimately only provides 'REASONABLE" assurance & not "ABSOLUTE" assurance, we must always take things with a pinch of salt.

However, let's give Sino G auditors be it Foo Kon Tan and/or BDO the benefit of doubt. Also, these firms are subjected to regular review by the regulatory bodies like ACRA in Singapore. If stakeholders feels that there are numerous doubts and the audit was not carried out properly, we may report to the ACRA and/or SGX if listed company also and let them conduct their assessment and investigation.

It is good to be skeptical but not to the extent of nitpicking or paranoid.

Please take no offence. Just some five cents worth of thought.

[crubs]

specuvestor

your statement "^^ i assume u are aware who audits the numbers that u are quoting? It's not BDO" is meaningless and unconstructive. 

[ksir]

Haha, it is very meaningful to me. Ohh and this is of course meaningless & unconstructive as well.

[piaopiao]

As reporting accountant, bdo would have reviewed the work of qual-mark hk, yida shenzhen, tiancheng hubei, sanhe sichuan and wanbang sichuan and form an opinion. If bdo is uncomfortable, it would not have accepted the appointment as reporting accountant.

Yida shenzhen is  a member firm of Kreston International uk cpa firm.

The integrity of the management is more important than the auditors.

So far the things that management mentioned in the past like ipo, bond redemption, materialised but they took a long long time.

[Young Investor]

It is interesting to know that during the EGM on 23 Feb, it was announced that Sinograndnes will own 51% of Garden Fresh upon completion of listing. After the restructuring of the Convertible Bonds on 1 Mar, Sinograndnes will directly own 63.96% of Garden Fresh instead after IPO.

Isn't this a good new to shareholders?

[CityFarmer]

specuvestor

your statement "^^ i assume u are aware who audits the numbers that u are quoting? It's not BDO" is meaningless and unconstructive. 

Well, it is as meaningful as rotating auditor for listed companies. It is not on assumption of fraud, but on different audit opinion, which is subjective at time. 

[piaopiao]

It is interesting to know that during the EGM on 23 Feb, it was announced that Sinograndnes will own 51% of Garden Fresh upon completion of listing. After the restructuring of the Convertible Bonds on 1 Mar, Sinograndnes will directly own  63.96% of Garden Fresh instead after IPO.

Isn't this a good new to shareholders?

How is the 63.96% calculated?