China Minzhong Food Corporation

[hyom]

This is surprising indeed. I thought the financial results were going to be disappointing. Just took a quick glance and cannot find anything seriously wrong to explain the big drop in price in the morning. Will take a closer look later.

As usual, vested interest.

http://help-your-money.blogspot.com

[propertyinvestor]

The problem is no dividends. But then again, this is a growth stock. CEO also doesnt really care about the share price. But to be fair he bought 200lots at 1.1X before...

[dzwm87]

Unlikely the stock was pushed up due to potential dividends. It is already an open news that CMZ will not pay any dividend.

[Nick]

Its smaller peer, Yamada Green, has gone up by 10% today.

[weijian]

my 2 cents below:

IMO, CMZ has had a very poor 2Q2012 based on its financials. Together with the heightened expectations previously (stellar 1Q2012 results), this explains the price reduction seen today:

(1) The headline in PR looks good. But it is because it only reports 1H figures. Quarterly 2Q figures are NOT attractive and this speaks volumes about Mgt (try to package and hide bad news)

(2) All margins in 2Q has actually got worst - Gross Profit, EBITDA and net income.

(3) 2Q2012's profit before income tax was actually 1.3% LOWER than 2Q2011 (P/L under page1). The net profit came out ~12% higher for 2Q2012 because of a lower effective tax rate (2Q2012: 7%, 2Q2011: 15%). The notes do not explain how did the lower tax rates came about.

(4) On revenue of 650mil rmb, 2Q2012 recorded a whopping 307mil rmb in trade receivables! This means that for every 1dollar of sales, only 50cents was collected in 2Q. On the balance sheet, trade receivables (508mil rmb) now make up ~37.5% of current assets, and is 9X more than avail cash of 58mil rmb.

(5) Dangerous cash position. The cash position is the lowest in my memory in CMZ audited books? In 2Q2012, it recorded CAPEX of 162mil, but only had net 100mil of new loans. Either it starts to collect its trade receivables or get more loans, or else it might have to slow down its expansion or even encounter a cash flow problem

(vested)

[KopiKat]

surprising fall on its price. think there was too much bullishness and expectation on CMZ?

From Lim and Tan,

 2Q ended Dec ’11 bottom-line rise of 12% to Rmb175mln was slower than top-line growth of 19.4% to Rmb651mln as higher SG&A and finance expenses and fair value loss on biological assets cased a drag on margins. If not for the halving in tax rate to 7%, bottom-line performance would have been worst.

 2Q’s 12% yoy net profit growth represents a sharp slowdown from 1Q’s 78% growth as the high base effect kicks in.

 We believe 2Q’s performance was slightly below expectations.

 Looking ahead, management expects to continue to benefit from the government’s efforts to become self sufficient with producing their own vegetables for internal consumption and the continued urbanization in China. The increased health awareness in China as well as overseas will continue to underpin demand for vegetables, especially with their increased focus on higher margined organic vegetables, king oyster mushrooms and black fungus.

 The recently opened new production facility in Fujian helping to increase their capacity by 3x will come in handy as demand continues to climb and management expects the new facilities to achieve full utilization within the new few years.

 Given the slightly weaker than expected 2Q performance we believe there may be some downward adjustments from the street.

 While we continue to like the company for its exposure to an industry that is well supported by the Chinese government, given its strong run-up ahead of its results (from the 90 cents level just a week ago) and slightly weaker than expected performance, we prefer to buy the stock on some price weakness below the $1 level.

[propertyinvestor]

Negative cashflow company....

[D123]

Did anyone notice that their reported sales volume for FY2010 has changed?

In 2010, it was reported that 137k tonnes of fresh vegetables were produced, and about 90k tonnes of processed vegetables were produced.

In 2011, the same figures were revised to 93k tonnes and 75k tonnes respectively.

Did management explain how this happened during the AGM?

_______________________________________________________________

Btw, I got the numbers from the FY presentation slides

[weijian]

hi D123,
Good catch!
I did attend the last AGM but i did not notice what you flagged out.

I took a quick look (With the assumption that the numbers are correct) and here's what i guess it is:
(1) In FY10, the sales were broken down into 'processed veg' and 'fresh produce' ONLY.
(2) In FY11, the sales were broken down into 'processed veg', 'fresh produce', 'mushroom pores' and 'others' (as per FY11 ppt, 'others' defined as 'IQF processed products/beverages' etc).
(3) In FY11 ppt, only the 'processed veg' and 'fresh produce' were given sale volume figures.
(4) My guess is that the numbers used in FY11 ppt for FY10 for 'processed veg' and 'fresh produce' were stripped of the contributions from 'mushroom pores' and 'others'. In FY2010 ppt, both ('mushroom pores' and 'others') were consolidated in 'fresh produce' and 'processed veg' respectively. Hence this explains the discrepancy.

The basis of my guess: In FY11 ppt, for FY2010 revenue contributions, if one consolidate 'mushroom pores' to 'fresh produce' and 'others' to 'processed veg', then we will get similar % compared to FY10 ppt's FY2010 numbers.

(Vested)

[dzwm87]

interesting drop by 5% in trading today with heavy volume, anybody know why such a market reaction?

quite weird given the recent strong institutional buy