China Sunsine Chemicals Holdings

[Bluechipfan]

CIMB’s field trip report on China Sunsine has noted the lengthening of cash conversion cycle in 2013.

Things may be much better in 2014. In the first quarter, cash conversion cycle shortened by 1 day (from 85 to 84). The second quarter saw a drastic reduction of 13 days (from 83 to 70):

………………….(Days)……….…………………..2013…….1Q13…..….1Q14……..2Q13……....2Q14
Trade receivables turnover (A)…….….61.94….…64.26……..67.99……..64.57……….59.79
Inventory turnover (B).…………………...37.59….…35.47….….34.01………33.79……...27.09
Trade payables turnover ©........….…14.42......14.66…..…18.08...….15.45……...16.92
Cash conversion cycle (A + B – C)……85.11……..85.07......83.92……82.91………69.96

(Calculations based on conventions adopted by Sunsine – notes receivables excluded as they are risk-free)

Faster turnovers in trade receivables and inventory contributed very much to the improvement.

This seems to corroborate the following observation in Maybank’s report on the same field trip:
“we observed that Sunsine’s existing lines were mostly running at full capacity, and even the warehouses were low on stocks of finished products, reflective of the tight supply for rubber chemical products.”

An important indicator is impairment of trade receivables, which have been minimal for annual sales far exceeding RMB 1 billion:
2010……RMB 311k
2011……RMB 532k
2012……RMB 47k
2013…..RMB 866k.

This should come as no surprise as credit terms are granted to clients with better financial standing, whereas others have to back their purchases with bank-issued promissory notes.

Cash conversion cycle has shortened for 1H FY14 to 82 days, as reported by The Edge in last week's issue. This is a vast improvement over FY13. Now Sunsine's next quarter results should be released in about a month and I am optimistic about its performance. There should be surplus cash and in the interview with The Edge, the company hinted possibility of special dividend or paying down the debt. I wish they do both and if they can't, I rather they pay down the debt.

Vested more and more since May 2014.

[simpleman]

Bluechipfan

Can't get last week Edge.

Mind sharing who from the company indiatced to Edge reporter possibility of a special dividend?

[budgetier]

[font=Arial][size=small]

Sunsine's EBITDA has been much higher than Profit over the past 5 years. EBITDA has also been growing except for 2012. Should we be looking at Profit or EBITDA to better understand the growth and the company's future potentials. Wld appreciate readers' views. Thank you.

Period........Profit(RMB m)........EBITDA(RMB m)
2009................88.3......................129.3
2010..............115.3......................162.3
2011................99.4......................199.6
2012................32.0......................132.0
2013................76.7......................208.7

1H13................32.1.......................91.9
1H14................83.0.....................160.1
2Q13................20.5.......................55.6
2Q14................60.2.....................106.8

[CityFarmer]

[font=Arial][size=small]

Sunsine's EBITDA has been much higher than Profit over the past 5 years. EBITDA has also been growing except for 2012. Should we be looking at Profit or EBITDA to better understand the growth and the company's future potentials. Wld appreciate readers' views. Thank you.

Period........Profit(RMB m)........EBITDA(RMB m)
2009................88.3......................129.3
2010..............115.3......................162.3
2011................99.4......................199.6
2012................32.0......................132.0
2013................76.7......................208.7

1H13................32.1.......................91.9
1H14................83.0.....................160.1
2Q13................20.5.......................55.6
2Q14................60.2.....................106.8

IIRC, Mr. d.o.g. said we need a toolbox, rather than only a hammer, otherwise all will look like nail. The same applies here, IMO.

In short, it depend on the objective of the analysis.

If we need to compare profitability of two business models, I will use EBITDA. That eliminates noises e.g. depreciation policy, financing etc. Of course, if you want to value base on EV/EBITDA, then probably EBITDA is a must.

If we need to look into specific company profitability, net profit, or more specifically, the FCF is more appropriate.

Again, analyzing base on various perspectives will give a more complete picture of a company financial health.

Sharing a view

(not vested)

[Bluechipfan]

Bluechipfan

Can't get last week Edge.

Mind sharing who from the company indiatced to Edge reporter possibility of a special dividend?

My helper had cleared the old papers. Maybe can make a request to The Edge if you really need the information.

[sunview]

Bluechipfan

Can't get last week Edge.

Mind sharing who from the company indiatced to Edge reporter possibility of a special dividend?

My helper had cleared the old papers. Maybe can make a request to The Edge if you really need the information.

I checked on the Oct 6 issue of the EDGE:

Quote "China Sunsine's management has guided for earnings of RMB170 million to RMB207 million for 2014. Chen (Note: Roy Chen, an analyst at CIMB) is forecasting earnings of RMB177 million for 2014, and RMB164 million for 2015. He says given the record earnings the company is expected to make in FY2014, it could use its cash to pay down its debt or distribute a special one-cent dividend. As at end-June, China Sunsine had a net debt-to-equity ratio of 21%, which company officials say is not a burden. Since its IPO, the company has paid out dividends of one cent per share annually." Unquote

So it seems that the comment was from Chen of CIMB and not from a company official of China Sunsine.

[Bluechipfan]

Bluechipfan

Can't get last week Edge.

Mind sharing who from the company indiatced to Edge reporter possibility of a special dividend?

My helper had cleared the old papers. Maybe can make a request to The Edge if you really need the information.

I checked on the Oct 6 issue of the EDGE:

Quote "China Sunsine's management has guided for earnings of RMB170 million to RMB207 million for 2014. Chen (Note: Roy Chen, an analyst at CIMB) is forecasting earnings of RMB177 million for 2014, and RMB164 million for 2015. He says given the record earnings the company is expected to make in FY2014, it could use its cash to pay down its debt or distribute a special one-cent dividend. As at end-June, China Sunsine had a net debt-to-equity ratio of 21%, which company officials say is not a burden. Since its IPO, the company has paid out dividends of one cent per share annually." Unquote

So it seems that the comment was from Chen of CIMB and not from a company official of China Sunsine.

My bad. Didn't remember the details correctly. Incidentally, the company this morning announced positive profit alert through SGX. 3Q results expected to be out by 14.11.14. Hopefully the momentum can keep going till 4Q. I want the dividend. Sunsine and CMHP are 2 S-chips that pay regular dividends. DBS seems positive on CMHP with their regular coverage, I am tempted if they really able and willing to pay 7cents dividend.

[CityFarmer]

It shouldn't be a surprised. The total investment on both the hotel and heating businesses should be around RMB 170 mil, with 150 mil in heating business, and 20 mil (still?) in hotel business.

The estimation of mine was RMB 200 mil previously in my record.

(not vested)

-----
Further to the announcement by China Sunsine Chemical Holdings Ltd. (the “Company” and
together with its subsidiaries, the “Group”) on 30 December 2013 relating to the establishment of
Shanxian Guangshun Heating Co., Ltd. (“Guangshun Heating”) by the Company’s wholly-owned
subsidiary, Shandong Sunsine Chemical Co., Ltd (“Shandong Sunsine”), the Board of Directors
(the “Board”) of the Company wishes to announce that Guangshun Heating has, on 22 October
2014, increased its registered and paid-up capital from RMB 10 million to RMB 150 million by way
of cash injection from Shandong Sunsine.
http://infopub.sgx.com/FileOpen/CS_Capit...eID=319437

[greengiraffe]

Bluechipfan

Can't get last week Edge.

Mind sharing who from the company indiatced to Edge reporter possibility of a special dividend?

My helper had cleared the old papers. Maybe can make a request to The Edge if you really need the information.

I checked on the Oct 6 issue of the EDGE:

Quote "China Sunsine's management has guided for earnings of RMB170 million to RMB207 million for 2014. Chen (Note: Roy Chen, an analyst at CIMB) is forecasting earnings of RMB177 million for 2014, and RMB164 million for 2015. He says given the record earnings the company is expected to make in FY2014, it could use its cash to pay down its debt or distribute a special one-cent dividend. As at end-June, China Sunsine had a net debt-to-equity ratio of 21%, which company officials say is not a burden. Since its IPO, the company has paid out dividends of one cent per share annually." Unquote

So it seems that the comment was from Chen of CIMB and not from a company official of China Sunsine.

My bad. Didn't remember the details correctly. Incidentally, the company this morning announced positive profit alert through SGX. 3Q results expected to be out by 14.11.14. Hopefully the momentum can keep going till 4Q. I want the dividend. Sunsine and CMHP are 2 S-chips that pay regular dividends. DBS seems positive on CMHP with their regular coverage, I am tempted if they really able and willing to pay 7cents dividend.

http://www.cmhp.com.sg/investor-interim-dividends

Obviously you are yet to be convinced by VB consultants...

Not Vested
China Sunsine

Vested Core
CMP
GG

[Bluechipfan]

AmFraser linitiated coverage with emphasis that they have checked and cross checked company's statistics and it is not blind faith that they are optimistic about China sinsine.