Golden Resources Development (0677)

[bchang]

Hi, I am new here. Wonder if anyone has any thoughts on this company.

This company has a market cap of HKD778m, and a net cash (including short term financial assets) position of HKD688m.

Their website is http://www.rice.com.hk/corporate/eng_faq.htm

The company has a dividend yield of 5.2% at current share price and has paid the same amount of dividends per share (at least HKD0.024 per share) for the last 15 years.

The company's core business is rice importer, wholesaler and distributor in Hong Kong where the company has a leading position in the retail market. It owns the Golden Elephant Brand - the number one seller in Hong Kong. From its 1H2014 interim report, its segmental results show that the core rice operations generated an EBIT of HKD59m for the half year. Compared to the implied enterprise value, looks very low on an EV/EBIT basis.

The company is also building a convenience store chain in Vietnam, where it has the Circle K master franchise and has been growing organically since they started in 2008. The company recently opened their 100th Circle K store in Vietnam and are among the top 3 chains in Vietnam (its 2 main competitors each have around 100 shops open). Still early days, but could potentially become a valuable business. Some relevant readings below:
http://www.wordhanoi.com/opinion/the-per...ence-store
http://www.amchamvietnam.com/30443067/vi...-2020-bcg/

What do you guys think?

[banker]

The Rice Business is very thin margin and may not able to grow very far. The Circle K is still a budding business and a loss making one. We have to wait to see if this Circle K can fly high.

The cash generated in the operating business is not or just sufficient to pay the dividends. The company's investments are doing OK and they are able to achieve well returns through capital gains. So far they are doing ok on the investments and I decide to hold my small holdings..

[theasiareport]

From the footnotes:

Ownership:
1. Yuen Loong International Limited (“Yuen Loong”) 548,052,026 32.48% (Note 2)
2. Chelsey Developments Ltd. (“Chelsey”) 252,240,000 14.95% (Note 2)

Notes:
1. These shares represent long positions.

2. Mr. Alvin Leslie LAM Kwing Wai, a Director of the Company, is a beneficiary of a discretionary trust which is interested in approximately 24% of the issued share capital of each of Yuen Loong and Chelsey.

Mr. Laurent LAM Kwing Chee, a Director of the Company, is interested in approximately 15% of the issued share capital of each of Yuen Loong and Chelsey.

Madam LAM Kit Woo, a Director of the Company, is interested in approximately 10% of the issued share capital of each of Yuen Loong and Chelsey.

Mr. Anthony LAM Sai Ho, a Director of the Company, is interested in 40% of the issued share capital of Marvel City Holdings Limited which in turn is interested in approximately 24% of the issued share capital of each of Yuen Loong and Chelsey.

I haven't studied the company in great detail... but the business interests of most of the Directors look to be aligned with shareholders with them owning a significant amount of the shares.

[bchang]

Hi banker thanks for your astute observations. Am new to this so pls correct me if I am wrong, the company pays ard hkd40m of dividends historically, but looking at segmental reports the rice business looks like it generates ebit of more than double that? some of this is used to subsidize the loss making circle k.

[opmi]

^^ sound like a good idea.

[banker]

Cashflow:

Year..................2010......2011......2012......2013......2014
From Operations...23.77....-46.15....-12.33.....40.16.....24.04

Free Cash.........12.52.....-54.73.....-18.83....28.42....-0.48

Dividend.........-32.63....-37.15...-39.66...-40.49.......-40.49

Their associates and investments gains are generally ok... Recently divested Dragon Fortune for a nice gain... Other associates includes a Rice and Agri Product company in Thailand and some property companies in HK

[bchang]

Hi Banker, thanks again for listing this down. When looking at cashflow from operations for this company, think will need to adjust the operating cashflow number provided in their cashflow statement for movements in financial assets. This is because cash generated from the operations is often redeployed into financial assets. So if looking strictly at cash, it looks lower, but if u add back the amt deployed into financial assets, the number becomes much more respectable.

[opmi]

FYI only. Breakout on very high volume today.
In HK, price actions usually precede corporate anncs.