Think you guys are all a bit too pessimistic. Economic cooling will affect exporters mainly. PRC is still a net importer of starch so govt will not allow destruction of local starch supply after putting up so many levies for euro starch.
Another thing is farmers need to get rid of their potatos. If CESS can't buy them, who will? It could turn out a bit like what euro govt have been doing for decades is subsidizing milk/meat/grain/etc.. So Cess can buy potato at lower price to make some margin to stay afloat and therefore helping farmers to offload.
06-09-2012, 03:01 AM (This post was last modified: 06-09-2012, 03:09 AM by Underdogger.)
(05-09-2012, 07:22 PM)jzk Wrote:
(04-09-2012, 09:43 PM)Underdogger Wrote: Are we going to see a similar “crush spread” in potato starch?
...
Don't you think that is what has been going on for almost a year now?
yes you are right. starch makers are squeezed in the middle since govt is out to help the farmers.
Quote:(by Potatolover)
...Starch manufacturers were buying raw potatoes at 640 to 680 RMB per tonne (compared to Essence 700 to 750 RMB)...
Are you saying, that potato price is 10% down from the last guidance?
Quote:Essence is buying potato from farmers at higher than the prevailing market rate. it will mean that it is even harder for essence to breakeven when the smaller starch markers have broken even with their lower unit cost for starch.
(By Potatolover)
Qingmei with more than $500mil RMB net cash (zero gearing) is trading at ard 6 cents.
Does it make sense for Essence to still trade at 4.1 cents?
If loving potatoes doesn't prove to make you a good living, you still have a bright future ahead of you in the flourishing hedge fund industry.
I agree with your point that govt is trying to help the local starch industry.. but how much further can they do?
we might be seeing a lot of zombie companies around. Also, essence is not a SOE. If it falls, will the govt buy over after it has been delisted?
If you work out the full unit cost of 1 tonne of starch, it will be around 7000 to 7300 RMB (VAT included).
Hence, if the starch price does not go above this level, Essence will not make any net profit at all.
Current starch price is still at 6000 to 6500 RMB and so Essence will be losing about 900 RMB per tonne. it plans to produce 80k ton this year. If starch price remains at this level, it will incur net loss of 72mil RMB full yr.
Can it hold out another year as an ongoing concern?
(05-09-2012, 10:21 PM)rstopel Wrote: Think you guys are all a bit too pessimistic. Economic cooling will affect exporters mainly. PRC is still a net importer of starch so govt will not allow destruction of local starch supply after putting up so many levies for euro starch.
Another thing is farmers need to get rid of their potatos. If CESS can't buy them, who will? It could turn out a bit like what euro govt have been doing for decades is subsidizing milk/meat/grain/etc.. So Cess can buy potato at lower price to make some margin to stay afloat and therefore helping farmers to offload.
Qingmei is a better gamble? No debt at all & each share is backed by more than 12 cents of cash....
As mentioned by underdogger, essence has sealed its fate by locking in potato price higher than the prevailing market prices for 50% of the potatoes needed...
The problem was that Essence did not have the money to buy the cheap potato last year. But this year, there might not be enough potatoes going around to be bought...
(05-09-2012, 10:21 PM)rstopel Wrote: Think you guys are all a bit too pessimistic. Economic cooling will affect exporters mainly. PRC is still a net importer of starch so govt will not allow destruction of local starch supply after putting up so many levies for euro starch.
Another thing is farmers need to get rid of their potatos. If CESS can't buy them, who will? It could turn out a bit like what euro govt have been doing for decades is subsidizing milk/meat/grain/etc.. So Cess can buy potato at lower price to make some margin to stay afloat and therefore helping farmers to offload.
At current price it is worth a gamble.
just my 2cts
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11-09-2012, 01:13 PM (This post was last modified: 12-09-2012, 12:55 PM by Curiousparty.)
almost every other S chip counter is like a few cents...
Fuxing, Chinapaper, Essence, China Bearing, Qingmei, China Sports, China New Town, China Energy, Anchun, China XXX, China YYY...
[I am not here to promote any stocks. Please always do your own research before embarking on any investment decision. I will not be liable for any of your own decisions. Your use of any information or materials is entirely at your own risk. It is your responsibility to ensure that any products, services or information meet your specific requirements. I do not produce material which meets the objectives of any specific financial and risk profile of investors.]
potato prices seem to be dropping?
strange....does not bode well for starch prices which are still depressed...
[I am not here to promote any stocks. Please always do your own research before embarking on any investment decision. I will not be liable for any of your own decisions. Your use of any information or materials is entirely at your own risk. It is your responsibility to ensure that any products, services or information meet your specific requirements. I do not produce material which meets the objectives of any specific financial and risk profile of investors.]
Could you elaborate on what you think is fishy about China Essence?
Tks.
(17-08-2012, 11:12 PM)d.o.g. Wrote:
Musicwhiz Wrote:I think this fund probably didn't realize what was happening and thought it was purchasing a bargain.
I looked up Sanlam. They are a financial services group with operations in banking, insurance and asset management.
In the annual report of their funds they list all the holdings in the funds they manage.
China Essence appears in the Sanlam Global Best Ideas Fund (0.96% of the fund)
I noticed that they also own:
Chaoda Modern, at 1.19% of the fund;
China Green, 1.88%; and
Xingda International, 0.45%
I have studied all 4 companies before. All were priced cheaply at some point (which is why I was looking). But China Essence, Chaoda Modern and China Green all have fishy accounting problems of some sort. I didn't find accounting issues at Xingda, but after I met them last year, I concluded that it was a pretty poor business - capital intensive and no pricing power.
So it appears that at least for these 4 stocks Sanlam was buying on quantitative metrics (PE, P/B etc) instead of really trying to understand the business.
28-09-2012, 03:01 AM (This post was last modified: 28-09-2012, 03:02 AM by Stockerman.)
heard that starch price still very depressed...even if Essence can just cover its marignal cost of production to keep its head above the water, how long can it survive before defaulting on its debt repayment?
We are talking about quite a massive debt (local govt short terming borrowing plus CB plus DBS loans)...
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