Sino Grandness

[Wildreamz]

It is good thing for issuer (esp CFO) is right, but not for shareholders when stake is diluted when converted, OTOH probably not positive either if share price don't move high enough to be converted. Company and shareholder can have diverse interest, and also diverse interest from management.

IIRC, these convertible bonds are not for Sino Grandness directly, but Garden Fresh. So there shouldn't be any dilutive effect (at least, on Sino Grandness shareholder directly). Correct me if I am wrong.

[felixleong]

Eh u guys got read up on the bond details? Its not meant to be converted to gain a stake in the company, goldman just wants a quick profit. The bonds are under the company that will eventually be ipo off, goldman will convert and sell their stakes off to the new ipo investors, thus locking a big gain. If the ipo fails to take off, sino parent company pays the hefty fine. Heads goldman wins, tails goldman wins.

[CY09]

So this means it is highly likely that Sino Grandness will list Garden Fresh in 2015 regardless Garden Fresh is successful in China. If the terms of the deal are like what you mentioned

[lvpierre]

Hi,

It can also be a win-win scenario. It need not be a case where goldman win and share holder lose..

Based on the progress, it seems likely that ipo of garden fresh will take place hence cb holders will likely convert. if they convert it means good news for sino as they are able to obtain interest free loan..

in the worst case scenario, even if cb holders redeemed, i dont see any issue in finding a new buyers for garden fresh...many are eyeing a pie of this...

i have uploaded 2 recent reports, for your leisure reading please.

[specuvestor]

It is good thing for issuer (esp CFO) is right, but not for shareholders when stake is diluted when converted, OTOH probably not positive either if share price don't move high enough to be converted. Company and shareholder can have diverse interest, and also diverse interest from management.

IIRC, these convertible bonds are not for Sino Grandness directly, but Garden Fresh. So there shouldn't be any dilutive effect (at least, on Sino Grandness shareholder directly). Correct me if I am wrong.

I was trying to explain to MrMsus that his perception of CB is not correct... sorry if I confused u guys.

Technically the GS bond, as felix pointed out, is not a CB, it is an exchangeable bond GURANTEED by SinoGrand. Either way shareholders of SinoGrand will be marginalised based on the strike price of the exchangeable bond. It is like a credit facility by GS in exchange for pre-IPO entry of Garden Fresh, which traditionally will be priced around like 10% of IPO price.

[MrMsus]

Yup, thanks for pointing that out, specusvestor. I guess the bottom line is that as value investors, it's important to understand what you're buying into.

TBH, I don't really get this whole CB thing, which is why I don't have that huge a position in Sino Grandness. Its cash position is another cause for concern, as from what I understand they are really quite tight on cash (but then again, its because their outflow is HUGE- this is understandable as they need this money to expand anyway, but I'd really like to see them generating more cash in the future through their sales rather than through borrowing/financing).

Nonetheless, this does seem like a good company with sound business so far, plus its current valuation at 6.9x PE is really very attractive. Markets could have priced in the risks, as suggested in one of the earlier posts, which could explain the current valuation.

However, I do believe the upside in earnings could negate/ offset this downside. In the months ahead, I will be on the lookout for events that could adversely affect Sino Grandness' listing process and share them here if possible.

EDIT: Just want to ask something. I read before that if a company changes CFO too often, one might want to be more cautious. I'm rather wary of the company's recent move to have a new CFO (see here: http://http://www.cfoinnovation.com/cont...khiang-cfo), although it could just be me, as I didn't look too much into it. What's the take on this?

[specuvestor]

If you look at it from an event driven point of view, Sino Grandness will have to dress up the financials for the IPO because otherwise they will have to pay the fine. That is the catalyst for the share price, both in terms of corporate action and financial reporting

It is said that when Taiwanese do a JV, they can don't care about the CEO or COO roles but they always want to be the CFO because only then they will be able to monitor the cashflows. How many CFOs have they changed?

[Stirling]

CFO was promoted within the company.

If there is no CB i.e. funding from Goldman Sach, then we will not have many discussion on this thread as their beverage business may not have take off. So dilution is part and parcel of the game but remember in the 2-3 years after utilization of CB the value of the company has since risen by 3-4 fold. I would like Goldman to make more profits which means that the overall entity would have worth much more.

This Company is still in early growth stage and therefore high capex is required to build more plants to support growth in market share. Once it reach mature stage, it will become cash cow.

As the brand of its product become more visible, you will see greater goodwill in the form of price gap between share price and NAV.

Check out SuperGroup, Petra, etc....

Yup, thanks for pointing that out, specusvestor. I guess the bottom line is that as value investors, it's important to understand what you're buying into.

TBH, I don't really get this whole CB thing, which is why I don't have that huge a position in Sino Grandness. Its cash position is another cause for concern, as from what I understand they are really quite tight on cash (but then again, its because their outflow is HUGE- this is understandable as they need this money to expand anyway, but I'd really like to see them generating more cash in the future through their sales rather than through borrowing/financing).

Nonetheless, this does seem like a good company with sound business so far, plus its current valuation at 6.9x PE is really very attractive. Markets could have priced in the risks, as suggested in one of the earlier posts, which could explain the current valuation.

However, I do believe the upside in earnings could negate/ offset this downside. In the months ahead, I will be on the lookout for events that could adversely affect Sino Grandness' listing process and share them here if possible.

EDIT: Just want to ask something. I read before that if a company changes CFO too often, one might want to be more cautious. I'm rather wary of the company's recent move to have a new CFO (see here: http://http://www.cfoinnovation.com/cont...khiang-cfo), although it could just be me, as I didn't look too much into it. What's the take on this?

[Wildreamz]

CFO was promoted within the company.

If there is no CB i.e. funding from Goldman Sach, then we will not have many discussion on this thread as their beverage business may not have take off. So dilution is part and parcel of the game but remember in the 2-3 years after utilization of CB the value of the company has since risen by 3-4 fold. I would like Goldman to make more profits which means that the overall entity would have worth much more.

This Company is still in early growth stage and therefore high capex is required to build more plants to support growth in market share. Once it reach mature stage, it will become cash cow.

As the brand of its product become more visible, you will see greater goodwill in the form of price gap between share price and NAV.

Check out SuperGroup, Petra, etc....

I always saw Goldman Sachs as a potential underwriter of Garden Fresh, instead of a potential source of dilution. Is it justified to say that?

[Investing Sidekick]

Unless I am missing something, the convertible bonds in principle work like

IPO happens: up to 49.9% of Garden Fresh is "lost" to the bonds converted

IPO doesn't happen: worst case scenario a payment of roughly 4 times the current carrying value of the bonds is payable. I dont see any way for them to fund that than through issuance of more debt, and if they cant raise it then who knows what will happen.

There is certainly an element of risk to this, but at the moment it is more of a 'what if' than something thats actually happening