Foreland Fabrictech

[CY09]

Did a comparsion by looking under the industry of "Preparation and spinning of textile fibres"

I realised among the S-chip textile Foreland has one of the highest NPM
Year 2011 2010 2009 2008 2007

Taisan 9.02% 18.57% 12.81% 21.35% 22.53%
Foreland 18.59% 13.03% 11.58% 23.20% 24.04%
Li Heng 3.42% 8.16% 6.52% 22.01% 32.81%
Fibretech 5.43% 20.24% 18.58% 25.37% 24.84%
China sky 4.05% -16.66% 18.64% 28.47% 27.47%

Comparing against their HKSE/china listed peers, our s-chip textile firms look even better. Any1 could help explain the differences?

WeiQiao 1.61% 9.10% 6.23% 3.62% 10.05%
TongKun 5.57% 7.43% 3.55% 1.13%

[dydx]

I thought yesterday (4Sep12) evening's announcement could be interpreted as a piece of mildly good news.....
http://info.sgx.com/webcoranncatth.nsf/V...90037F2B1/$file/Foreland_Factory_update_4Sept2012.pdf?openelement

At least, we now know that Foreland can proceed with the expansion project in Andong and, based on the group's huge cash reserve, there should be no problem in funding and completing the project.

With this uncertainty factor taken out from the group's operating and financing plans, I hope that Foreland's BOD will consider resuming dividend payment in the FY12 full-year result announcement due by end-Feb13.

[Behappyalways]

Isn't it strange when director sell shares at a cheap price? He could have done a special cash distribution if he needs cash hence maintaining his stake.


http://info.sgx.com/webcorannc.nsf/Annou...endocument

[yeokiwi]

Isn't it strange when director sell shares at a cheap price? He could have done a special cash distribution if he needs cash hence maintaining his stake.


http://info.sgx.com/webcorannc.nsf/Annou...endocument

To improve liquidity mah.
I am also quite impressed that he can actually find a buyer to buy the shares at 5.8cts.

But.. if the buyer is a shortie.......

[MrValue]

How could any business owner of sound mind agree to sell the not insignificant stake at 1 times PE and at less than half of it's cash at bank?
What could be the only logical explaination?

[cif5000]

One trick that works well for me is to first forget about what shares you hold, and then try to think rationally on whether or not you would buy the "target" shares based on the existing facts and at the current price. Don't allow baggages to cloud your judgement...

[d.o.g.]

How could any business owner of sound mind agree to sell the not insignificant stake at 1 times PE and at less than half of it's cash at bank?
What could be the only logical explaination?

This reminds me of Dapai f.k.a. China Zaino, when they did a share placement at less than book value despite holding a ton of cash and negligible debt.

EDIT: the closest analogy is actually Qingmei, whose owner Su Qingyuan sold shares in February this year at $0.16-$0.17 (RMB 0.85) despite Qingmei reporting a book value on 31 Dec 2011 of RMB 1.66, cash on hand of RMB 0.64, no debt. It earned RMB 0.41 in the year ended 30 Jun 2011, and for the 6 months ended 31 Dec 2011 it earned RMB 0.25. So he sold at below 2x PE and about 0.5x P/B. I made the point in the Qingmei thread that Mr Su was either an idiot, a fraudster or both.

Subsequently Qingmei's results took a turn for the worse, with profit plunging 81% for the quarter ended 31 Mar 2012. and it reported a heavy loss for the quarter ended 30 Jun 2012. It now looks like Mr Su had some good timing to sell ahead of the price decline, whether it was intentional or not.

Mr Tsoi's selling appears similar to Mr Su's in terms of the extremely low valuations as implied by the accounts and historical earnings. It remains to be seen whether the subsequent corporate developments at Foreland will resemble Qingmei.

/EDIT

But here the valuations involved are even more ridiculous. Some possible explanations:

1. Mr Tsoi is a complete and utter moron who has no idea how to value the business he founded and currently runs;

2. Mr Tsoi has run into sudden financial difficulties and he is somehow unable to have the company temporarily lend him some money or declare a special dividend; or

3. The accounts are a complete sham and the company is actually in financial difficulties, requiring a loan from Mr Tsoi who in turn can only raise the money by selling his now-worthless shares.

More imaginative readers may have other explanations in mind.

Occam's Razor states that the simplest answer is usually the correct one. Based on my past experience looking at (and unfortunately investing in a few) S-chips, I vote for #3.

As usual, YMMV.

[dzwm87]

Investors who had followed Mr Tsoi's "trading activities" will have probably suspected something:

**All info had been retrieved from SGX announcements.

On 31 May 2008, Mr Tsoi acquired 2,055,277 entitled shares at 21c, from a Management Scheme.

On 29 July 2008, Mr Tsoi bought 190,000 from the open market at 20c each.

On 29 June 2009, Mr Tsoi subscribe for 9,234,957 shares as dividend scrip.

On 17 June 2011, Mr Tsoi sold 30,800,000 shares at 16c each in a Sale & Purchase Agreement - citing the buyer to be one of its top 10 customers. A few days later, on 27 June 2011, his stake increased via 9,028,046 new shares being issued as dividend scrip subscription. Overall? Still a net seller.

On 2 October 2011, Mr Tsoi subscribe for another 13,710,869 shares as dividend scrip.

The only time he did a open market purchase was on 2 March & 6 March 2012, buying a total of 300,000 shares at 10c each (total = S$30,000)

On 26 June 2012, Mr Tsoi subscribe for another 9,768,242 shares as dividend scrip.

On 7 September 2012, Mr Tsoi went into an off-market sale to sell away 53,000,000 shares at 6c each.

--
His pledge to adopt shares instead of cash dividend may not be a reinforcement of confidence in his business. Guess he has been cashing it out in other areas which minority investors are unable to.

[dydx]

Quite obviously Tsoi's latest sale of 53.0m Foreland shares at only $0.058/share to 3 parties.....
http://info.sgx.com/webcorannc.nsf/Annou...endocument
does not appear to be a rational decision, as (a) the sale has lowered his stake in Foreland from a majority 53.95%, to now 44.18%; and (b) the sale price at $0.058/share - though higher than the last done price at $0.052 - is at a substantial discount to the latest NAV/share of RMB1.28 (equivalent to approx. $0.25), which itself is indicative of its corresponding intrinsic value based on Foreland's manufacturing assets, positive working capital position, plus a RMB307.7m net cash reserve (as at 30Jun12).

IMHO, the most logical explanation for Tsoi's latest sale is that the man needed money to the tune of $3.0m in a hurry.

[RBM]

As I understand it, Foreland's management claims to be sitting on ~ S$ 54 Million of cash in Company coffers - in other words something like twice the current market cap of the Company. Recent developments vis-a-vis the majority shareholder's equity dilution and the BoD's sustained disinclination to apply this cash to a healthy share buy-back campaign must raise serious question marks as to whether the (claimed) cash pile is encumbered or liened in any manner. I say this politely. Can not shareholders ask a "show me the money" question?

Not vested ...........but I have been considering a punt if Foreland's share price went below S$ 0.05 ............ that was until the announcement of the significant equity dilution by the majority shareholder. In my humble and personal view ............ something isn't right.