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Foreland shareholders should spend some time to review Foreland's latest announcement (dated 13Mar11) - in response to SGX's queries on the Q1-FY11 results announcement (first released on 9May11) - closely....
http://info.sgx.com/webcoranncatth.nsf/V...F00282BF2/$file/Foreland-Reply_to_Queries_1Q2011-Announcement20110513.pdf?openelement
Quite obviously, the review officer and his boss in SGX - after so many bad surprise cases among PRC companies recently - didn't wish to just accept Foreland's solid Q1-FY11 results and decided to ask for a lot more details. I am indeed happy that this has happened, as through the response I can now know more about the characteristics of Foreland's growing and profitable business and better assess the quality of Foreland's management. Of course, the SGX query has also served to put Foreland's management and the entire BOD (including the IDs) on guard on keeping up - including the quality aspect - with the company's public disclosures to shareholders and the market.
From the response (which should be read together with the Q1-FY11 results announcement), we can now know and should take note of the following -
(1) Foreland now has and enjoys a strong niche market in supplying "high-grade umbrella fabrics" to 42 PRC-based umbrella manufacturers - including 10 new customers secured just before and during Q1-FY11. Based on the sales volume (measured by quantity) of 6.0m yards achieved in Q1-FY11, this fast-growing product and market/customer segment alone contributed to a large 48.9% of total sales volume of 12.3m yards. As the 10 new customers contributed only 12% of the total revenue from this product segment in Q1-FY11, it appears that there is still quite a lot of growth potential from this 'rising star' product/customer segment.
(2) The other 2 product segments of "functional fabric" and "normal fabric" - now supported by 129 customers, including 10 new customers secured in Q1-FY11 - also registered strong growth in sales volume and contributed to the remaining 51.1% of total sales volume (measured by quantity) in Q1-FY11. In total, Foreland's well-established business of producing different types of high-end functional fabrics is now supported by 151 customers, including 20 newer ones.
(3) In Q1-FY11, by achieving a sales volume of 12.3m yards, Foreland managed to run its total production capacity of 14.5m yards/quarter at a high utilization rate of 88.3%. This has enabled the business to achieve high efficiency (including lower unit production cost/COGS), which is fully reflected in the sharp rise in profitability and the high profit numbers at GP, PBT and NP levels. Such a state of operation would usually lead to a management response, to (a) maximize profits further by focussing on higher price/margin orders and other product/customer trade-off decisions; and (b) plan and invest in capacity increase, which in Foreland's case is already at an imminent stage.
http://info.sgx.com/webcoranncatth.nsf/V...F00282BF2/$file/Foreland-Reply_to_Queries_1Q2011-Announcement20110513.pdf?openelement
Quite obviously, the review officer and his boss in SGX - after so many bad surprise cases among PRC companies recently - didn't wish to just accept Foreland's solid Q1-FY11 results and decided to ask for a lot more details. I am indeed happy that this has happened, as through the response I can now know more about the characteristics of Foreland's growing and profitable business and better assess the quality of Foreland's management. Of course, the SGX query has also served to put Foreland's management and the entire BOD (including the IDs) on guard on keeping up - including the quality aspect - with the company's public disclosures to shareholders and the market.
From the response (which should be read together with the Q1-FY11 results announcement), we can now know and should take note of the following -
(1) Foreland now has and enjoys a strong niche market in supplying "high-grade umbrella fabrics" to 42 PRC-based umbrella manufacturers - including 10 new customers secured just before and during Q1-FY11. Based on the sales volume (measured by quantity) of 6.0m yards achieved in Q1-FY11, this fast-growing product and market/customer segment alone contributed to a large 48.9% of total sales volume of 12.3m yards. As the 10 new customers contributed only 12% of the total revenue from this product segment in Q1-FY11, it appears that there is still quite a lot of growth potential from this 'rising star' product/customer segment.
(2) The other 2 product segments of "functional fabric" and "normal fabric" - now supported by 129 customers, including 10 new customers secured in Q1-FY11 - also registered strong growth in sales volume and contributed to the remaining 51.1% of total sales volume (measured by quantity) in Q1-FY11. In total, Foreland's well-established business of producing different types of high-end functional fabrics is now supported by 151 customers, including 20 newer ones.
(3) In Q1-FY11, by achieving a sales volume of 12.3m yards, Foreland managed to run its total production capacity of 14.5m yards/quarter at a high utilization rate of 88.3%. This has enabled the business to achieve high efficiency (including lower unit production cost/COGS), which is fully reflected in the sharp rise in profitability and the high profit numbers at GP, PBT and NP levels. Such a state of operation would usually lead to a management response, to (a) maximize profits further by focussing on higher price/margin orders and other product/customer trade-off decisions; and (b) plan and invest in capacity increase, which in Foreland's case is already at an imminent stage.
