China Minzhong Food Corporation

[weijian]

You're right; I'm vested but I also cannot understand what's going on!

The previous time Lin probably sold out because of the bad name caused by the short seller's rumour mongering. Salim had to step in because he already had a stake and the price went down by 50% when Glaucus stepped up his attack.

But this time, why did Lin want to pay the same price to regain control of the company? I'm scratching my head; the only lame reason I can think of is that Lin knows the company is worth much more than what he's going to pay Salim. If Salim also knows, why does he want to sell? Perhaps (not sure), he wants the use the cash for something else and feels that his remaining 30% is safe in Lin's hands at the helm. But I am vested, so am naturally biased. Glad to hear other views from VBs.

Hi sykn,
None in the Mgt team sold a single share to IndoFood when the G.O of 1.12sgd was tendered in Sept2013. In fact, when the G.O document came out, the Mgt team had undertaken to irrevocably reject the offer. In addition, Lin is now possibly paying a higher price of 1.20sgd to gain ownership control of the company, not the same price as previous.

http://www.chinaminzhong.com.sg/attachme...617_en.pdf (Point 3.1/3.2)

[weijian]

yea no one would use real hard cold cash to cover fraud. Even Satyam was trying to use overvalued assets to cover the fraud

I think Salim was white knight for the GO when fear was abound... now Salim stake back to square one. It could just be their cooperation is meant to remain at around 30% interest and not synergised as thought.

As discussed, we shouldn't discard an asset class or sector just based on generalisation. But it will take much more effort to figure out S-chips, so depends whether it is worth the effort.

The primary issue with short sellers is that it is much easier to destroy repute and credibilty than to build it up. You can be honest for life but one lie that is being caught can overwhelm all. This asymmetrical nature means short sellers should rightfully be regulated more.

The key for Minzhong should be that Indofood network and organic demand synergies minzhong sales. So far it doesn't seem to have happen yet which puzzled me

Something was fishy when the last fiscal qtr of results indicated only a paltry 2mil RMB of sales related to selling instant noodles' veg packs to IndoFood (at least i know the IndoMee original flavor noodles' fried onion bits that i ate came from CMZ). On hindsight, it seems like your deduction is more logical. This is a real life lesson of how much 'BS' Mgt can cook up at times. A less cynical view could be that CMZ and IndoFood figured out that what they cooked up in 1 month (the synergy and all those BS), wasn't really going to work out, after 1 year - It might be attractive for IndoFood to consolidate CMZ's P/L rather than B/S on their books after all. Observers in the SFIG thread who are championing all the grandiose plans and synergies that their new Thai honorary chairman will bring, might be better serve to temper down their expectations.

You got it right on again as personally, CMZ makes up ~2.5% of my portfolio but may have taken up to 20% of my time/effort that i put in. Sometimes, i do wonder whether is the 'return of brain damage' really worth it? Looking on the bright side (i always do), i rationalize that as a part timer who has the advantage of time and no peers to compete with for new business, CMZ has been/is one of those that contributed to my learning journey tremendously. In other words, the return of investment (ROI) is small comparatively, but the return of learning comparatively matches the effort/time put in. As you had at numerous times advocated, the importance of real time observing and learning from how events unfold.

[sykn]

Yes, you are right; my facts were not very accurate. Indeed, the GO was for $1.12 but now Lin is planning on offering $1.20 per share to buy back. Personally, I am not surprised that Management did not want to share their holdings to Indofood, because when the GO was made, I reviewed all my calculations again and decided to hand on. Unfortunately Mr Market did not agree with my valuation and the price dropped some 30 cents. Thanks for correcting my errors.

You're right; I'm vested but I also cannot understand what's going on!

The previous time Lin probably sold out because of the bad name caused by the short seller's rumour mongering. Salim had to step in because he already had a stake and the price went down by 50% when Glaucus stepped up his attack.

But this time, why did Lin want to pay the same price to regain control of the company? I'm scratching my head; the only lame reason I can think of is that Lin knows the company is worth much more than what he's going to pay Salim. If Salim also knows, why does he want to sell? Perhaps (not sure), he wants the use the cash for something else and feels that his remaining 30% is safe in Lin's hands at the helm. But I am vested, so am naturally biased. Glad to hear other views from VBs.

Hi sykn,
None in the Mgt team sold a single share to IndoFood when the G.O of 1.12sgd was tendered in Sept2013. In fact, when the G.O document came out, the Mgt team had undertaken to irrevocably reject the offer. In addition, Lin is now possibly paying a higher price of 1.20sgd to gain ownership control of the company, not the same price as previous.

http://www.chinaminzhong.com.sg/attachme...617_en.pdf (Point 3.1/3.2)

[specuvestor]

yea no one would use real hard cold cash to cover fraud. Even Satyam was trying to use overvalued assets to cover the fraud

I think Salim was white knight for the GO when fear was abound... now Salim stake back to square one. It could just be their cooperation is meant to remain at around 30% interest and not synergised as thought.

As discussed, we shouldn't discard an asset class or sector just based on generalisation. But it will take much more effort to figure out S-chips, so depends whether it is worth the effort.

The primary issue with short sellers is that it is much easier to destroy repute and credibilty than to build it up. You can be honest for life but one lie that is being caught can overwhelm all. This asymmetrical nature means short sellers should rightfully be regulated more.

The key for Minzhong should be that Indofood network and organic demand synergies minzhong sales. So far it doesn't seem to have happen yet which puzzled me

Something was fishy when the last fiscal qtr of results indicated only a paltry 2mil RMB of sales related to selling instant noodles' veg packs to IndoFood (at least i know the IndoMee original flavor noodles' fried onion bits that i ate came from CMZ). On hindsight, it seems like your deduction is more logical. This is a real life lesson of how much 'BS' Mgt can cook up at times. A less cynical view could be that CMZ and IndoFood figured out that what they cooked up in 1 month (the synergy and all those BS), wasn't really going to work out, after 1 year - It might be attractive for IndoFood to consolidate CMZ's P/L rather than B/S on their books after all. Observers in the SFIG thread who are championing all the grandiose plans and synergies that their new Thai honorary chairman will bring, might be better serve to temper down their expectations.

You got it right on again as personally, CMZ makes up ~2.5% of my portfolio but may have taken up to 20% of my time/effort that i put in. Sometimes, i do wonder whether is the 'return of brain damage' really worth it? Looking on the bright side (i always do), i rationalize that as a part timer who has the advantage of time and no peers to compete with for new business, CMZ has been/is one of those that contributed to my learning journey tremendously. In other words, the return of investment (ROI) is small comparatively, but the return of learning comparatively matches the effort/time put in. As you had at numerous times advocated, the importance of real time observing and learning from how events unfold.

I think the reversal of Indofood back to square one stake is most instructive. It is akin to paying Indofood 7% interest for holding period

I think "return on brain damage" is a good way to look at how to allocate our intellectual resource besides just asset allocation but for new investors it might be worth it because of the steep learning process in these case studies.

VBs should also remember that unlike most things in life, in investing tickets are not required to watch the show

Real time observation of events unfolding and learning from what people do in real time rather than from hind side commentators has benefitted me tremendously. Alas i only realised it ½ way through my investing journey, thinking books were the fountain of understanding. Actually books only point us to the fountain... hope you have it better than i did

Lin Guo Rong now owns 0.82% of China Minzhong.

Based on the announcement, Salim will sell 52.94% to Lin and keep 36.05% of Minzhong.

Lin will need $497m to buy from Salim and another 10.19% from other shareholders.

Indofood had placed out minzhong shares to satisfy 10% free float.

"China Minzhong Holdings Ltd currently holds a 0.82 percent stake in CMFC, while Indofood holds an 82.88 percent stake (which will decline to 29.94 percent after the share sale). Indofood Director and Corporate Secretary Werianty Setiawan said that the company received a purchase offer for 52.94 percent of CMFC’s shares from China Minzhong Holdings on 31 December 2014."

[BlueKelah]

Does sound like this one is close to delisting once share price falls to lower levels.

via Galaxy Tab S with Tapatalk

[weijian]

Does sound like this one is close to delisting once share price falls to lower levels.

via Galaxy Tab S with Tapatalk

Previously, CMZ wasn't 1 of those standard s-chips in the sense that the CEO/chairman wasnt 1 of the substantial shareholders. It is going to change with this transaction. Although the CEO Mr Lin doesn't strike me as 1 of those who has a big enough appetite to take over the company, but he might collude with his close buddies to do so. There is this new risk as you mentioned, with this change in structure. This probably explains why the price gap between pre/post announcement of CEO buyback from IndoFood only closed by ~50% since it came out. Either way, Mr Market is assigning a ~50% probability that the transaction doesn't go through? (most probably a mixture of both i guess?)

When IndoFood came in with its G.O, i did not bulge. It had largely played out in the way i expected in terms of balance sheet and payout - CAPEX slowed down, focused on collecting receviables/sacrificing sales for better collection and an abrupt 4cts interim dividend came out to substitute the final dividend (in order to allow all shareholders to get paid ~4months earlier)....even though Mr Market's sceptism never went away. With this change in structure, the thesis to hold onto this has to be reviewed and closely monitored in terms of whether previous improvements in balance sheet/payout will be reverted back again.

[CityFarmer]

The management is serious to take the company private...

-----
The Board of Directors (the "Board") of China Minzhong Food Corporation Limited (the
"Company") refers to the announcement issued by the Company on 31 December 2014
on the Notification from China Minzhong Holdings Limited Regarding a Possible
Transaction for a Majority Stake in the Company (the "Announcement"). Capitalised
terms used but not defined herein shall bear the same meanings ascribed to them in the
Announcement.
...
http://infopub.sgx.com/FileOpen/CMZ%20Up...eID=333384

[testwrite]

The management is serious to take the company private...

-----
The Board of Directors (the "Board") of China Minzhong Food Corporation Limited (the
"Company") refers to the announcement issued by the Company on 31 December 2014
on the Notification from China Minzhong Holdings Limited Regarding a Possible
Transaction for a Majority Stake in the Company (the "Announcement"). Capitalised
terms used but not defined herein shall bear the same meanings ascribed to them in the
Announcement.
...
http://infopub.sgx.com/FileOpen/CMZ%20Up...eID=333384

the stock is definitely cheap, so is every s chip before they are suspended and investor lost everything, the only credible thing about this stock is that indofood holds more than 80% of the stock, and if it is cheap why will indofood wants to sell back a big chunk to the CEO. unless they have "no choice"

next question, where did the money comes from, if he can buy back at 1.2 now, why cant he buy back at 1.12 last year? I suspect, most likely he is using the cash in the company to buyback, if the takeover is at 1.2 using company cash, obviously he is buying cheap, he is getting the company back without paying anything, so minority shareholder lose out

it shows buying S chips, even if good S chips, you will lose out whether you are minority or majority shareholder, i shudder to think sgx is welcoming more s chips to singapore, dont they have any statistic over these years, whether singaporean on average make or lose money on S chips, i am quite sure it is not pretty, so why still encourage s chips to be listed

[CityFarmer]

the stock is definitely cheap, so is every s chip before they are suspended and investor lost everything, the only credible thing about this stock is that indofood holds more than 80% of the stock, and if it is cheap why will indofood wants to sell back a big chunk to the CEO. unless they have "no choice"

next question, where did the money comes from, if he can buy back at 1.2 now, why cant he buy back at 1.12 last year? I suspect, most likely he is using the cash in the company to buyback, if the takeover is at 1.2 using company cash, obviously he is buying cheap, he is getting the company back without paying anything, so minority shareholder lose out

it shows buying S chips, even if good S chips, you will lose out whether you are minority or majority shareholder, i shudder to think sgx is welcoming more s chips to singapore, dont they have any statistic over these years, whether singaporean on average make or lose money on S chips, i am quite sure it is not pretty, so why still encourage s chips to be listed

Interesting view, let's explore.

First of all, a 80% stakeholder has "no choice"? May be you mean Indofood has "no choice", due to its internal issues, which has nothing to do with credibility of CMZ, am I right?

Using the company cash to pay? You means the cash (or account) is real, which lot of investors don't believe. If the cash is real, then using LBO to buy, and pay-back later with the cash, should be a better alternative, rather than to "steal" the cash from the company been privatizing.

Privatizing a company at cheap, isn't from S-Chip. As OPMI, I also buy at cheap, when Mr. Market don't believe. It should be OK to buy at cheap, as long as play by rules.

Damages from S-chip on retail investors (including Singaporeans) is real and a fact. Going forward, we have two choices, ban all China companies from listing in SGX, or find the root cause of the issue, and rectifies them, and move forward. I prefer the latter, and it should be the choice of SGX, with happenings in the last few years.

(Sharing a view)

[testwrite]

the stock is definitely cheap, so is every s chip before they are suspended and investor lost everything, the only credible thing about this stock is that indofood holds more than 80% of the stock, and if it is cheap why will indofood wants to sell back a big chunk to the CEO. unless they have "no choice"

next question, where did the money comes from, if he can buy back at 1.2 now, why cant he buy back at 1.12 last year? I suspect, most likely he is using the cash in the company to buyback, if the takeover is at 1.2 using company cash, obviously he is buying cheap, he is getting the company back without paying anything, so minority shareholder lose out

it shows buying S chips, even if good S chips, you will lose out whether you are minority or majority shareholder, i shudder to think sgx is welcoming more s chips to singapore, dont they have any statistic over these years, whether singaporean on average make or lose money on S chips, i am quite sure it is not pretty, so why still encourage s chips to be listed

Interesting view, let's explore.

First of all, a 80% stakeholder has "no choice"? May be you mean Indofood has "no choice", due to its internal issues, which has nothing to do with credibility of CMZ, am I right?

Using the company cash to pay? You means the cash (or account) is real, which lot of investors don't believe. If the cash is real, then using LBO to buy, and pay-back later with the cash, should be a better alternative, rather than to "steal" the cash from the company been privatizing.

Privatizing a company at cheap, isn't from S-Chip. As OPMI, I also buy at cheap, when Mr. Market don't believe. It should be OK to buy at cheap, as long as play by rules.

Damages from S-chip on retail investors (including Singaporeans) is real and a fact. Going forward, we have two choices, ban all China companies from listing in SGX, or find the root cause of the issue, and rectifies them, and move forward. I prefer the latter, and it should be the choice of SGX, with happenings in the last few years.

(Sharing a view)

I think if we want to buy china company, we can easily buy from hk exchange, where it is better regulated, have better companies, and in a sense it is unfamiliar territory, investor might think more before they invest in these foreign companies.

"correct me if i am wrong" I dont see how these listed s chip benefits singapore retail investor, except listing fee, commission for sgx, if sgx really wants to show it is "working", go and get the whale, like alibaba, etc, if not they might as well not do anything. Singapore investor grow up with our trusted local companies, and have not been exposed to the untrustworthy s chip, by listing these companies in sgx, it cause investor to categorize them as trustworthy as local companies, and usually ends up in sorrow.

we know what is the problem with these companies, fake accounts, fake story, and no recourse for investor when it is exposed, i dont see how these are going to improve going forward, because fundamentally, these are foreign companies, we cant do anything to them

I think looking at the statistic are important, if we have been losing money in those s chips, isnt it better to stop buying no matter how attractive the "story", "valuation", "account" is

my naive view