Sino Grandness

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(14-04-2016, 05:57 PM)crubs Wrote: specuvestor,

On page 23 of the 2012 CB, it states


So long as any Convertible Bond remains outstanding, save with the approval of an Extraordinary Resolution, the HK Issuer and/or any of its subsidiaries (and in the case of (i) and (xii) below, the Company):
(iv) will not make any Capital Distributions (as defi ned below) to the holders of its equity or debt securities;

On page 26, "Capital Distribution" is defined as
“Capital Distribution ” means any dividend or distribution (whether of cash or assets in specie) or other property (whenever paid or made and however described) (and for these purposes a distribution of assets in specie includes without limitation an issue of shares or other securities credited as fully or partly paid) by way of capitalisation of reserves and including any Scrip Dividend to the extent of the Relevant Cash Dividend.

Since Garden Fresh is a separate entity with separate accounts, the only way Grandness would receive cash would be by dividends. As long as the CBs are in effect, no profits made by GF are allowed to be distributed. This was also why dividends to shareholders in 2015 comes from the profits of Grandness alone.

CB holders are invested only in GF, so it is in their interest to prevent the management from using GF profits for other purposes.

The new bond agreement made no mention of this clause, therefore it is assumed to be status quo.

On page 51 of the 2015 Annual Report the company states that as a group as at 29th Feb 2016,

1) They have cash balance of RMB233.1m
2) Untapped banking facilities of approximately RMB273.6m

Of the cash balance and banking facilities, we do not know how much of it belongs to GF and Grandness respectively. It would be helpful to clarify with the management.

On top of that Grandness would have capex requirements for its Anhui Plant under the company Grandness (Anhui) Foods Co. Ltd.
If sales is picking up, additional funds will be needed for working capital and advertising expense
Lastly, the CB redemption. (I do not know whether GF or Grandness is responsible for the 31st May payment)

I do not have the cashflow forecast for Grandness but if sales are doing well, the company might genuinely need the funds.

Crubs

I think this is one of your finer posts: reasonable and concise. If I don't know better I would think it is 2 persons behind this ID Smile

Fair enough to say that the EB require them to have special resolution. Do you think that is easier or EGM with personal guarantee is easier?

Secondly this EB restriction would not have applied till this day if it has been redeemed. Like I always tell my children: you can choose your actions; but you cannot choose your consequences. It's a baggage of the past that haunts today.

If I remember correctly the SB1 is borne by the new GF entity hence the "restructuring"

It's a good suggestion to ask management this AGM why Grandness can't tap the lines and if it has been profitable, it should have internal reserves for expansion since it didn't pay dividend until this year.


(14-04-2016, 03:01 PM)chan99 Wrote:
(14-04-2016, 02:00 PM)specuvestor Wrote: Err yes so your point is that GF shouldn't pay dividends to shareholder?

So you are saying GF has the ability to pay $20 Mln in dividends? I thought you were doubting the fundamentals of SinoG in the first place! Confused

GF is a growing company & it needs cash to fund its own growth. I am sure it will take some sort of financing, whether from a bank or otherwise to fund its own growth in the first place. That being the case I don't foresee GF paying high dividends to SH's. Moreover we are talking about $20 Mln here for the growth of the canned business which it needs now. A dividend one year later is of no use in any case.

If GF can pay the $20m dividend, that doesn't take one year, which on the books looks like they can... then all doubts on SB1 is cleared. Actually bottomline is simply show us the money and I would be the first to shut up. Fund raising obviously doesn't count as internally generated cashflow.

You are new in the forum but I have been saying in the past (not this thread) there is a difference between a company that does capital return say $10m and then rights issue $30m versus another that simply does rights issue $20m. Textbook wise it might be the same but cashflow wise it is very different because at the minimum it has shown us it has $10m cash to pay out. That's how we look at the structure and cashflow. Ezra is a good example of a high profit (before recent crisis which we also warned) low cashflow company.
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Think Asset-Business-Structure (ABS)
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Can someone help me to understand the difference.

Perennial's recent bonds was at 4.65% p.a.
SF's bond is 12% p.a.

Both are listed here and doing business in China so why the big difference.
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(14-04-2016, 07:17 PM)edragon Wrote: Can someone help me to understand the difference.

Perennial's recent bonds was at 4.65% p.a.
SF's bond is 12% p.a.

Both are listed here and doing business in China so why the big difference.

High risk high return. Simple as that.
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Thanks, desmondxyz.
It seems so simple when you put it perfectly in four words.

I remember one HK billionaire who made his fortune in real estate.
He said "Show me a property that gives me a yield of 14% p.a. and I will buy it up immediately".
And, here we have 12% for the lender so how much must the borrower make. Food for thoughts.
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(14-04-2016, 04:58 PM)weijian Wrote:
(14-04-2016, 07:54 AM)specuvestor Wrote: Definitely vendor sale to meet the SB1 and maybe SB2 payments. If they have to get this loan my guess is IPO not happening before 31 May in time for SB1

These are very specific cashflow catalysts. Otherwise I'm wrong. IMHO opinion it will be most interesting if this synthetic CB fails

That would be what I thought (to pay the SB payments) although the PR mainly says otherwise (for non-beverages CAPEX instead). If it is truly the latter, it probably means either Chairman doesn't really have good planning skills on HIS cashflow to come up with this 'bridging loan' OR he is simply shrewd enough to squeeze more capital commitments from TTA as share price goes higher?

Looking at the double digit interest rate and discount to last trading price, it doesn't seem like Chairman negotiated this loan from a position of strength. Things are starting to look suspiciously similar to here:
http://www.valuebuddies.com/thread-1167-...l#pid87156

Of course! I could be totally wrong!
Many private companies in China are experiencing cash crunch in this challenging economic period.  Some companies could not even raise any funds at all.  For those who can raise funds, the funding cost is as high as 24% p.a.
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24% p.a interest rates!!! gosh, what kind of biz can generate such high returns?!!! casino biz????!!! Big Grin Big Grin Tongue
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR! 
4) In BULL, SELL-SELL-SELL! 
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(16-04-2016, 10:54 AM)brattzz Wrote: 24% p.a interest rates!!! gosh, what kind of biz can generate such high returns?!!! casino biz????!!! Big Grin Big Grin[emoji14]
Ponzi biz lah, plenty of those in china. Especially their developers.

The 24% return to cover the interest rate gives a good indication of the risk involved.

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There are 24% pa loans in China for businesses, however they are of short duration ranging up to 1 year max.

<not vested in SFIG, and just highlighting something i observe>
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(16-04-2016, 11:38 AM)CY09 Wrote: There are 24% pa loans in China for businesses, however they are of short duration ranging up to 1 year max.

<not vested in SFIG, and just highlighting something i observe>

any tips on what type of biz actually borrows at 24%??!! :O just like ah-long rates sia! Tongue
besides developers, Tongue
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR! 
4) In BULL, SELL-SELL-SELL! 
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Typical small companies with not very strong credit rating from steel to manufacturing.

However, such loans at these high interest does reflect the risk one has to take when lending to such companies. Of course, for most companies in China, the ability to borrow from banks should not be more than 12%, it is rare for banks to charge you more than prime+8 as interest.
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