18 October 2011

Sino Grandness - A China Company that Grows in Its Fruit Juice Business

Just a couple of days ago, Sino Grandness hold a briefing with us ( a group of remisier in Kim Eng). There were two main officers came to our office. One was the IR Head and another was CFO. From the name card, I roughly knew that CFO background was Financial Controller and IR Head were Malaysian and head hunted by the China man.

One thing that made me curious was that, what was the purpose that they came to our office for the briefing and what can we learn from there? As a remisier, my duty is not to fully understand the underlying business model as well as its intrinsic value so that everyone can buy or sell based on my research report. However, I can judge a company based on what he told us.

First of all, the IR head told us that CEO 黄总 was formally ex-AGM from China Government Department that related to Exporting. So when he first stated his own private business after the China Government opened up the opportunities to its people, he was able to get the connection to export to the famous Supermarket / Hypermarket in U.S.A and Europe. As what he assured us, the quality of the canned food are qualified under Europe and U.S.A standard. Their canned food business is now expanding to Australia.

As you would be able to see from research report from various research houses, that this company is still expanding very aggressively for its fruit juice 鲜绿园 brand in China. They worked very hard for the past 1 year to get the fruit juices sold in 1st tier city in a few province. So their plan is to get more invested capital through convertible bond for their fruit juice subsidiary shares to grow their fruit juice business and get its division listed one day.

As what I can see is that, if you are a big investor, then your choice of investment is widen, as you would be able to get private placement or convertible bonds from the investment bank, that retail investor normally hard to get through.

Now come to the questions, why are they coming to our company for the briefing? I believe that it is due to the liquidity issues. If a company that is illiquid and hard to fulfill the minimum spread of number of the investors, then they have to have more activities to lure more new investors. Ok, then another question is, why there are not many investors in this company?  As you are aware of, a lot of S-Chip shares are now dropping a lot from its previous high, as there are a lot of bad news coming out from the market, such as Chaoda.

So I asked the IR head, how would he re-assure the investors that it is safe to invest in his company. He replied me that, "to know whether a company has problem in its financial statement, you should look at his Cash Flow as well as the reason behind on why the company still issue a lot of right issues and other corporate action while it showed a lot of cash in the balance sheet statement."

He also said that the CEO was well trained to manage a group of people, and he was able to hire a Taiwanese to be the Research & Development Head in his Co, which is not easily be done by other China businessmen. CEO was also willing to pay higher to lure other senior managers from competitors to join him. And this is why they are able to grow the new division so fast.

So, above are the reasons why I hold a little shares of Sino Grandness. If you look at the balance sheet, it is quite normal. Now it is time for me to focus more on its management especially the CEO (He is still around 50, so there is still a long way for him to fight). The CEO promised not to sell his shares within 2 years of listed in Singapore Shares Market. So let us see whether he will sell his shares next year. :) It will prompt alert to us.

Disclaimer: I hold Sino Grandness. Please consult your remisier or dealer before making any investment decision.

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