China Minzhong Food Corporation

[cfa]

Off market trade.

[youngandfoolish]

Total volume traded on Mon: 174 mil shares
No. of shares purchased by Indofood on Mon: 69 mil shares

Sure, shares can be sold, resold and re-resold within a day but, hmm, why do I have a feeling someone else is doing some serious purchasing of CMZ shares

[FA+TA]

Does anyone speculate that Glaucus was invited by Indofood to short CMZ so that Indofood can collect the shares and later privatise CMZ?

[sgd]

Does anyone speculate that Glaucus was invited by Indofood to short CMZ so that Indofood can collect the shares and later privatise CMZ?

it did cross my mind but that would be fraud if it every came out. Not to say is not possible but for Glaucus to do something like that and risk reputation what would they be getting out of it?

Also Indofood offer is $1.12, they not buying cmz at a discount, is not the case Glaucus made a killing shorting cmz and Indo swoop in make another killing by scooping up cmz for cheap.

By the looks of it both parties Glaucus and Indofood have not benefit from this at all apart from the free publicity. So unlikely.

[Stockerman]

I thought of the same thing but if I put it down in words , would probably Kenna warning from moderators ... Haha .... Anything is possible out there in the ruthless corporate world

[Ray168]

China Minzhong
Don’t Mess With Bapak*
* “Bapak” is a salutation used in Indonesia to greet a man who is older and whom you know well

https://www.kelive.com/KimEng/servlet/PD...7&ky=15108

[Tiggerbee]

Seems like Franklin Templeton has yet to sell their stake.

[specuvestor]

We have no idea who is right IMHO except an educated probabilistic guess but net net on a factual and report writing basis I think Glaucus did better, even with the rebuttal.

Specuvestor

I beg to differ. Glaucus' case was premised on the issue of fictitious customers. All the rest of the "evidence" is rather iffy. Once CMZ can provide a good reason for these "fictitious" customers, their case start to look less credible.

The evidence provided by CMZ was not really that great. A company that was not set up before 2009, with no public filings, and owned by one Taiwanese businessman,which no one know, was the top buyer of CMZ's products??

If someone comes with this story and willing to sell you his company at PE 4. Will you buy?

Indofood probably knows more about CMZ. But, for us with only public information, it is really a bit difficult to believe.

It is illegal to operate a business in Hong Kong (or anywhere in the world, to our knowledge) without a business
registration. But the legal ramifications pale in comparison to the practical considerations. We are not aware of any
jurisdiction in which a business can open a bank account without formation documents, so was the Company simply
receiving RMB 188 million from a personal account?

the rebuttal was quite humorous...haha..

Hey, don't look down on sole proprietorship, ok.

CMZ is not the only S-chip with sole proprietorships as their top customers.

I know where you guys are coming from... but as per my previous posts, things are more grey than black and white if you do business in China. It doesn't work like Singaopore. That is why I think Glaucus attack is "powerful" because MINZ will be stuck trying to produce documents even if it was legit.

In fact the paperwork and regulatory structure was the main attack on US listed internet companies when they use service agreements. On a pure financial claim point of view they are indeed very risky. But nowadays no one doubt these companies are not legit.

My stance since day one is that CMZ does look legit based on its cashflow and cornerstones, but so was Satyam, which even Aberdeen bought into. These are risks that sometimes value investors inherently have to take. But one definitely has to scrutinise S-chip much more closer, know and observe their business and industry more detailed, and give a wider margin of safety. Given that their assets cannot be claimed by foreign shareholders, any valuation based on even 75% to RNAV as value investing is crazy. I would highly value dividend streams coming from S-chips.

I share the view that they are not one-foot poles, but neither should they be totally written off. It is just much harder to find the 10% gems. IMHO YZJ and Yanlord are already good examples of exceptions to the rule.

We have no idea who is right IMHO except an educated probabilistic guess but net net on a factual and report writing basis I think Glaucus did better, even with the rebuttal. Note however the main arguments are on documentation facts rather than operational. Muddy Water follow up report on Olam OTOH was dismal. Anonymous report on HK listed Huabao was very well written and rounded.

@Kopikat does offshore shortselling in Singapore has to be declared as well like in HK?

Indofood's investors sure didn't like the CMZ takeover. Indofood share price is down 9% today. Personally, I think Indofood snared a great bargain at 4x PE.

All of my fund manager friends hate CMZ's cultivated veggie business because it has no inherent financial leverage (prepaid farm land lease can't be collateralized for bank borrowings or secured bond issuance. There is only so much unsecured bonds you can issue).

Weirdly enough, the cultivated veggie business is also the business retail investors can't stop talking about.

Your FM friends can leverage it up themselves if they so desire I would be looking more at operational leverage instead.

[minimax]

We have no idea who is right IMHO except an educated probabilistic guess but net net on a factual and report writing basis I think Glaucus did better, even with the rebuttal. Note however the main arguments are on documentation facts rather than operational. Muddy Water follow up report on Olam OTOH was dismal. Anonymous report on HK listed Huabao was very well written and rounded.

@Kopikat does offshore shortselling in Singapore has to be declared as well like in HK?

Indofood's investors sure didn't like the CMZ takeover. Indofood share price is down 9% today. Personally, I think Indofood snared a great bargain at 4x PE.

All of my fund manager friends hate CMZ's cultivated veggie business because it has no inherent financial leverage (prepaid farm land lease can't be collateralized for bank borrowings or secured bond issuance. There is only so much unsecured bonds you can issue).

Weirdly enough, the cultivated veggie business is also the business retail investors can't stop talking about.

Your FM friends can leverage it up themselves if they so desire I would be looking more at operational leverage instead.

My FM friends point is that the cultivated veggie business is very hard to scale up because for such a capex intensive business, there is no way for CMZ to use secured borrowings to fund the capex---hence the part about the business having no inherent financial leverage.

It has nothing to do with using margin borrowing to buy more CMZ stock.

[weijian]

Now that the dust has kinda settled, it is time to take a look at the FY13 results announced late last week:

My Thoughts:
- All margins (gross/operating/net) and ROE have dropped between 3-4% over YoY.
- Net Profit +11% YoY but effectively, EPS has reduced ~6% due to issue of new shares (~15%) to Indofood in Feb2013.
- Operating FCF turns +ve for first time to RMB 359mil (FY12: -374mil) and declares 1ct/share dividend amounting to ~1% payout ratio.
- Trade receivables at 2nd all time high (3Q13 was highest) of 1.097bil and is 40% of current assets. Trade receivables turnover increased to 116days (FY12:85days, FY11:38days). Processed veg and fresh veg have credit terms of 90days and 30-60days respectively but only a 2.6% increase in %contribution of processed veg to total business is not expected to add another 31days to turnover. Credit terms seems to have gotten from bad to worse.

So in essence, most operating metrics have continued to decline although this is expected due to rising costs and moving forward, profit is expected to be driven by volume. Mgt FINALLY declares a dividend to try to overcome the 'S-chip bias' but the amount is token at best. The increase in trade receivables turnover is a worrying sign...Does that imply signs of increasing competition, driving sales by loosing credit terms or simply an accounting fraud WIP?