Fujian Zhenyun

[touzi]

FJZY's AGM was held last week. The company was granted special permission by SGX to hold its AGM later than the 4 month after FY end rule set by SGX. Since it avoided the end April madness, the turnout was quite good for a small S-chip. Among the attendees are names that appear in the top 20 list ( slightly more than 300,000 shares will send you into that list, so be careful if you are publicity shy ).

The AGM lasted almost 2 hours. Discussion in English were handled by the local directors of the board and the CFO. The chairman did not make it for the meeting, but the rest of mainland chinese of the board took turns to answer questions posed in mandarin (or was translated). Personally I find them confident and forthcoming. The shareholders (many appear to be retirees) while probing were always polite.

A few highlights:

The top non majority shareholder tried his luck and asked that the company be privatized at $0.80 since cash per share is about $0.71.The board told shareholders that they did consider delisting from Singapore and relist in another market. However due to the unfavorable market conditions they did not proceed.

Besides the usual reason of maintaining bank relationship in China, another reason for the bank loans ( despite being cash rich ) is that the company is in discussion on projects that will require more cash. These projects will allow the company to participate in implementation instead of just as a supplier of pipes. The company is also looking at prospects overseas.

There were suggestion from shareholders on bonus issue, share split etc. The board inform shareholders FJZY (the actual entity listed in Singapore) is a china incorporated company. This makes bonus issues and splits difficult because of mainland regulation. Apparently there are only 3 S-chips that are structured in this way ( Tianjin Pharm and another that i did not catch). This btw, was the reason that SGX granted them extra time to hold the AGM.

I am glad I took time off from work to attend this AGM and I believe I speak for many of the attendees as well. At $0.14 current price, the company appeared grossly undervalued. However with this year's dividend of only RMB1.5 cents, it will definitely not appeal to most investors (Though it must be noted that the company pays dividend every year).

[valuebuddies]

This company has been always the top 3 when I conduct regular screening with different type of criteria. But I have never seriously take a close look at the company due to only 1 reason - "too good to be true". Another "true good to be true" S-chip is Eratat which is currently suspended for trading.

[ghchua]

Junma Tyre Cord is another S-chip that is a china incorporated company. I don't see any reason why Fujian Zhenyun cannot do bonus issue. Tianjin Pharm did it before, Junma Tyre Cord also consolidated their shares before.

TIANJIN ZHONG XIN PHARM GROUP BONUS 30 Jun 2010 02 Jul 2010 OFFER OF 10 FOR 10

[touzi]

Junma Tyre Cord is another S-chip that is a china incorporated company. I don't see any reason why Fujian Zhenyun cannot do bonus issue. Tianjin Pharm did it before, Junma Tyre Cord also consolidated their shares before.

TIANJIN ZHONG XIN PHARM GROUP BONUS 30 Jun 2010 02 Jul 2010 OFFER OF 10 FOR 10

They did not say that it cannot be done, but that it is difficult. There is something about the par value of RMB1 that I didn't quite catch. Maybe PRC law does not allow shares to be issued below par value.

[CY09]

http://www.nextinsight.net/index.php/sto...an-zhenyun-

FZJY has floated the idea of going into pipe installation projects where they control the whole process. This was talked about 2 yrs ago but from the looks of it "talks are still ongoing".

Reminds me of Universal Resources (formerly known as Sky China Petroleum), mgmt. talks about the company heading to a new direction which requires more cash, till now the MOU is re-extended which I suspect will go on indefinitely

[touzi]

http://infopub.sgx.com/FileOpen/HY2014%2...eID=308626

Profit guidance for 1H 2014 performance. Still expect to be profitable though.

[weijian]

Junma Tyre Cord is another S-chip that is a china incorporated company. I don't see any reason why Fujian Zhenyun cannot do bonus issue. Tianjin Pharm did it before, Junma Tyre Cord also consolidated their shares before.

TIANJIN ZHONG XIN PHARM GROUP BONUS 30 Jun 2010 02 Jul 2010 OFFER OF 10 FOR 10

They did not say that it cannot be done, but that it is difficult. There is something about the par value of RMB1 that I didn't quite catch. Maybe PRC law does not allow shares to be issued below par value.

As far as i understanding, bonus stock issues in China are treated as dividends. As such, a 10% or 20% tax is either withheld and/or paid to the Gov --> This has frequently been used as an excuse for not paying dividends though.

http://webb-site.com/articles/minsheng.asp

Excerpt from the article
When a PRC company transfers part of its reserves from the "retained profit" account to the "share capital" account in the balance sheet, this is deemed to be a "distribution" of profits to shareholders, equivalent to the par value (normally RMB 1) for each bonus share issued, even though shareholders aren't actually receiving any value

[touzi]

As far as i understanding, bonus stock issues in China are treated as dividends. As such, a 10% or 20% tax is either withheld and/or paid to the Gov --> This has frequently been used as an excuse for not paying dividends though.

http://webb-site.com/articles/minsheng.asp

Excerpt from the article
When a PRC company transfers part of its reserves from the "retained profit" account to the "share capital" account in the balance sheet, this is deemed to be a "distribution" of profits to shareholders, equivalent to the par value (normally RMB 1) for each bonus share issued, even though shareholders aren't actually receiving any value

Looks like things are things are more complicated in China ! Thanks for the info.

[touzi]

Half year result is out. Profit dropped by almost half. Despite that, the Receivable actually increased slightly from RMB 171 Mil to 179 Mil. The company reported the Receivable turnover increased from 191 to 244 days ! That sounds very long to me . Company does not think that collection will be an issue though they are monitoring.

The announcement was also accompanied by a review report by the accountant. http://infopub.sgx.com/FileOpen/Appendix...eID=310181. Is this normal?

[touzi]

http://infopub.sgx.com/FileOpen/Customer...eID=317162

Customer demanding refund and compensation. The amount is about 4.8% of 2013 revenue. Negotiation is still ongoing.This is a new customer, but potentially a big one based on the information from their website http://www.cggc.cc/.

The loss to FJZY will not be just this particular sales but the impact on its reputation which will affect futures sales. Looks like things will get worse (before it gets better?) for FJZY.

Announcement came after market closed on Friday. Share price should be affected when market reopened next week.