China Minzhong Food Corporation

[CityFarmer]

Like many of you here, I too have been hit by a few of these S-chips. I too bought into CMZ but sold off last year at a loss of a five digit sum and never look back. Most recently, it was Sinopipe. The loss is even bigger. And this is why I do concur very much with Temperament's signature, which is a constant reminder.

Having paid such big lesson fees, I think it is important that we at least pick up a thing or two. Thanks to all who so willingly shared your experiences here. It really makes the learning curve shorter for anyone who who wants to learn.

Would I shun S-chips? Maybe, maybe not. My emotions, based on my experience, tells me yes, I should avoid ALL that starts with China-something or Sino-something. However, stepping back and asking myself: what do I know about these companies, I realise it is not these companies that we should be blaming (though in my heart, I will be cursing the CEOs, SGX and whoever I can think of), Like what Jared Seah said, I have only got myself to blame. Just look at what Glaucus Research dig out, though they didn't do much, as what weijian and d.o.g. said. On hindsight, they looked so obvious.

And some of us set rules as a protection against our investment, as Cityfarmer had earlier mentioned. I too did that, except that I always break those rules. Time to get back and do these so called 2nd level thinking.....

Yes, be discipline is important, as important as patience, if not more.

I borrow the question, Would I shun S-chips? Well, a blanket "No" to all S-Chips might not be a good idea, with the opportunities exist out there, IMO. But a more caution approach, and higher MOS might be necessary.

[sgd]

I believe many of us here had went through the pain of involving in a bad trade / investment.

Me not excluded, as I had bought Fibrechem in early 2008. I had lost make a paper loss of 5 figures amount, likelihood to become realized loss sometime in futures, as Fibrechem had been in trading halt for many years until today.

Lesson Learnt: Never make a buy decision just because some analyst put a buy call to a stock. History had shown too many time that the buy call could keep being downward adjusted over and over again by the same analyst or broker house when the price move downward.

I had since write off my investment in Fibrechem, but keep the track record as a reminder.

That's where you and many people got it wrong. I don't know whether you noticed that MAS will not let a company go under. over the years have seen many companies in the red eventually halted and placed under a judicial manager and eventually things got better from there.

I like to use Mediastream, it is the only company that has the best "worst case" scenario. Before it was halted and placed under jm it went thru a series of reverse takeovers from at least 2 different suitors and then it still lost money, it was negative capital for sometime and eventually halted and placed under JM who cleaned up, found and brought in the current owners.

Yongnam also same thing, was in trouble placed a judicial manager who managed to clean up and turn things around.

I put money investing in these 2 cigar butts and made money after several years. Since then I'm always on the look out for cigar butts to put money in.

... fiberchem huh I'll bear that in mind.

You could be right..

If the company did turn around, it will still be a good surprises for me, since it mean that I will be able to reinstate some $$ from the investment that I had written off.

Anyway, I don't really put a high hope on it as it is a S-Chip after all, where the jurisdiction is hard to reach.

It's not MAS.... Found something about JM at a law firm site which explains briefly on JM. Refer to page 6.

I have the "experience" of being invested in stocks that went into JM... Unfortunately, not thro' choice but due to poor stocks selection ie. Buy @ High, hit by fraud / poor management, see prices plunge and then halted... It'll usually take many years if there's any hope of JM... Prices will more likely than not, plunge further if not halted. In the best case (just holding to original stake), the money I got back is only a tiny % of original invested amount...

If you wish to focus on such Special Situations, it'd be safer to enter only when there's more certainty or better still, only when JM is already in place. Prices don't often shoot to the sky immediately, unless the positive effects of JM can be seen and usually, after several quarters of results....

PS. Some of my mistakes which went into JM,

Amcol (fraud) -> AFP -> Sinarmas + Golden Agri + Bund Centre
MediaStream (mismanagement) -> Memstar

it is officially goverment and also unofficially pulling strings from behind, in the case of DBS minibonds I remember the bank when it repaid investors, it itself took a write down for it and laid off a few people. Who does that?

There have been companies trading halted when they were in trouble, does anybody recall ever seeing a gone cased company having negative capital forcefully removed from the stock exchange by officials? yes no ??

I think Other than Pan-Electric Industries collapse in the 80's which was so severe and it caused recession in Singapore.

[Ray168]

What is common about Olam and CMZ?

Both kena Shorted by Hedge Fund.

Both company SSH is GIC.

So, next target is company that has GIC as SSH?

[Dividend Warrior]

(12-17-2012 08:30 PM)d.o.g. Wrote:

"My own limited shortlist of "problem Chinese companies" already way exceeds 13:

Beauty China
Cacola
Celestial Nutrifoods
China Essence
China Fibretech
China Gaoxian
China Hongxing
China Milk
China Printing & Dyeing
China Sky Chemical Fibre
China Sports
China Sun Bio-Chem
Dapai
Eratat
Ferrochina
Fibrechem
Foreland Fabrictech
Hongwei
Oceanus
Oriental Century
Qingmei
Sino-Environment
Sino Techfibre
Synear
United Food

That's 25 right there. If we count China Paper that makes 26."


I m sure by now, that list has grown longer sadly.

The above comment was posted by d.o.g. Last year. Ever since I started my investment journey in 2009, I had been telling myself not to buy S-chips, even those so-called 'good' ones. The temptation is there though. I almost bought some CMZ too. Fortunately, d.o.g's comment reinforced my investment rule. Thanks d.o.g.!

With so many examples of fraud and serious mismanagement, S-Chips are simply not worth the risk and trouble.

For me, I will never ever touch S-Chips. I may look at its financials for research purposes. But in terms of investment, definite No.

I do understand that there are people who do short term trading on S-Chips and made profits. That's a different story for another day.

---

Yes. I learnt a lot. Liquidated all my S-Chips position at a substantial loss. A few Days ago, I'm still sitting at a healthy gain.

Whatever, life goes on

Time to do some value hunting.

Hi wildreamz, I am not good at consoling people. So, I will share a video with you. Whenever I feel down or facing obstacles, I will watch this video. Hope it helps.

[wsreader]

Post deleted as promised, but alas, kopiKat has already quoted me in post #376.

I am consoled that through this unfortunate saga, fellow buddies have derived insights and enhanced their investing knowledge.

KopiKat, you have the ability to somehow link things to investing

[yeokiwi]

Yes, be discipline is important, as important as patience, if not more.

I borrow the question, Would I shun S-chips? Well, a blanket "No" to all S-Chips might not be a good idea, with the opportunities exist out there, IMO. But a more caution approach, and higher MOS might be necessary.

Currently, the law is not at our side.
The financial accounts of S-chips are doubtful. I am not sure how can I trust the financial statements. Are they real?
So, there isn't any margin of safety to talk about.

There are some s-chips selling at PE 2. The MOS is already so big but is it enough?

[KopiKat]

Originally, I did not intend to write a post in this thread during this time as many buddies have commented on this saga much better than I ever can.

However, I cannot resist to issue a friendly reminder when I read the following :

...I showed the prospectus to my gf. She looked at the cover page, and declared, no, don't buy into this company. So I didn't look through further.

Her sixth sense saved me a number of times lol.
...
Moral of the story: My gf's sixth sense is more powerful than any of my analysis or thoughts.

CMZ IPO at around Apr 2010. It is Aug 2013 now. The best thing in the world is right in front. Hope you understand this friendly message from a kaypoh uncle.
(No reply necessary and I will remove this post later.)

I wanted to post something similar, but, refrained from it as it's too much OT... Now, let me attempt to make it less OT...

Even in investing, many continue to look for young and sexy things...

Young, as in new IPOs, little or no track records. Sexy, as in a a wonderful Growth story, coupled with the kind of Profitability and Balance Sheet that we can usually only dream of... I have been tempted before, many times, by these sexy and young things... especially the S-Chips... But, what had always held me back, is not because I'm smart.. On the contrary, it's the opposite. I know my limitations, I'm unable to figure out many things in the financial statements, let alone, signs of frauds... It's these unknowns (some hidden diseases) which I know I won't be able to detect, that kept me away.

Next, many has the tendency to ignore the hidden beauty of what's directly in front of them, right under their nose. The stocks which you're holding, the longer you had held it, the more you ought to be familiar with and the better you are at realising that it may be the best stock to vest in a much bigger way... The hidden value (if any), may not stay hidden forever. If it's a gem, be decisive, before you lose such good opportunities...

PS. I won't be deleting my post... Will edit out wsreader quotes if requested...

[Temperament]

The lessons learnt (Do feel free to cut this and continue the list)
-------------------------------------------------------
1) Be weary about analyst buy calls and their computation of values. Short prior to this ordeal analyst is still putting out buy calls and suddenly the cease coverage
2) Check the motivations of substantial shareholders in pushing the company in the right or wrong directions. Areas to check are amount of holdings, type of renumerations and warrants issued
3) Be realistic about exceptionally good margins, profits. Check against other industry competitors to see if there is a realistic justification why they are better
4) Compare the total returns since IPO to minority shareholders (and perhaps against substantial shareholders) versus the amount they raise during IPO to see if minority share holders are getting a good return
5) Check the level of withholding tax paid from the parent company to ascertain whether the funds raise in IPO are truly used in the operations or kept offshore (or anywhere else) and also if the cash flows to parent is fabricated
6) Large receivables accumulated that do not match Sales perhaps is a red flag of underlying issues (in this case and CH Offshore)

i think the main problem is a company can fake anything in QR/AR for at least 1 to 3 years, before anyone comes to find out. So a company that keeps on asking for fresh capital after IPO though its QRs/ARs say that company is doing very well and has a lot of cash in balance "somewhere" should be a prime suspect. Or even an established Blue Chip suddenly asks for fresh capital, won't you want to know why? you certainly do.

It's something like your friend keeps on showing you he has a lot of cash balance and yet wants to keep on borrowing money from you.
Will you lend?

[pianist]

Seriously, if their fraud is really so blatant (faking their largest customer etc), why no one before us, GIC or Indofood, realized before hand? What are the buy side analyst doing? Why didn't I realize before hand? Gosh.

No need to feel awful. Everyone makes mistakes. Live and learn. What doesn't kill you, will make you stronger.

One thing to remember regarding GIC is that they invested a long time ago. It is entirely possible that at that time, China Minzhong was fully legitimate. However the company's farming acreage quadrupled in size in the subsequent years.

Most likely, GIC did not check as thoroughly after investing. It's like buying a 4-block complex of buildings when only the first block is up - if the first block checks out, you pay up and assume the other 3 upcoming blocks will be of the same quality. However, there is no guarantee that these future blocks will indeed be of equivalent quality unless you inspect them as closely as you did the first block - which you probably won't.

I realized this last year and got out. The loss was painful, but I've had worse. With Minzhong I broke 3 simple rules of thumb. It had a limited track record, the managers were not the largest shareholders, and the business model consumed cash instead of generating it. China Minzhong is/was a reminder that I should not try to outsmart myself too often. Rules exist for a reason - to keep us out of trouble! Rules can be broken, but at one's own peril.

I only bailed in after Indofood bailed in..

As for Indofood, the controlling shareholder is Anthoni Salim, the youngest brother of Andree Halim, who controls QAF. Their father is the late Sudono Salim a.k.a. Liem Sioe Liong. Why is this relevant? Because in June 2005, QAF bought 55% of China Food Industries, which was subsequently discovered to be a fraud. Clearly, QAF didn't do its due diligence properly, and now, it seems, Indofood didn't either. Does this hands-off approach to investing run in the family? Only the brothers themselves know for sure.

based on the above info, i am wondering if anthoni salim is overpaying for Guthrie in the current GO by the M & S controlling shareholders? if yes, we shld accept his GO?

[momoeagle]

Originally, I did not intend to write a post in this thread during this time as many buddies have commented on this saga much better than I ever can.

However, I cannot resist to issue a friendly reminder when I read the following :

...I showed the prospectus to my gf. She looked at the cover page, and declared, no, don't buy into this company. So I didn't look through further.

Her sixth sense saved me a number of times lol.
...
Moral of the story: My gf's sixth sense is more powerful than any of my analysis or thoughts.

CMZ IPO at around Apr 2010. It is Aug 2013 now. The best thing in the world is right in front. Hope you understand this friendly message from a kaypoh uncle.
(No reply necessary and I will remove this post later.)

I wanted to post something similar, but, refrained from it as it's too much OT... Now, let me attempt to make it less OT...

Even in investing, many continue to look for young and sexy things...

Young, as in new IPOs, little or no track records. Sexy, as in a a wonderful Growth story, coupled with the kind of Profitability and Balance Sheet that we can usually only dream of... I have been tempted before, many times, by these sexy and young things... especially the S-Chips... But, what had always held me back, is not because I'm smart.. On the contrary, it's the opposite. I know my limitations, I'm unable to figure out many things in the financial statements, let alone, signs of frauds... It's these unknowns (some hidden diseases) which I know I won't be able to detect, that kept me away.

Next, many has the tendency to ignore the hidden beauty of what's directly in front of them, right under their nose. The stocks which you're holding, the longer you had held it, the more you ought to be familiar with and the better you are at realising that it may be the best stock to vest in a much bigger way... The hidden value (if any), may not stay hidden forever. If it's a gem, be decisive, before you lose such good opportunities...

PS. I won't be deleting my post... Will edit out wsreader quotes if requested...

I actually meant sixth sense as a joke. Edited my earlier post with the joke tagline

I'm actually a very boring investor. Like in the movie on Mahjong (que shen 3 I think), the person said, do you prefer your game to be exciting but lose money, or boring but make money?