China Minzhong Food Corporation

[VestedInterest]

Can anybody tell why is it that the price keeps dropping? Could it be because of the new listing rules to be imposed by SGX which affects overseas, especially Chinese, companies?

[Nick]

Poor S-Chip sentiments ? Minzhong is a high growth - high risk play. The share price will be very volatile until it matures in the years to come.

(Not Vested)

[weijian]

Can anybody tell why is it that the price keeps dropping? Could it be because of the new listing rules to be imposed by SGX which affects overseas, especially Chinese, companies?

my 2 cents:
Based on their 2009 prospectus, overseas markets account for ~70% of revenues and a good portion (~30%) is denoted in USD/Euros for their processed veg business. So the fate of these countries has a greater impact than domestic demand.

[VestedInterest]

It is very near its historical low. But the latest quarterly report was excellent. It has many 'big' investors although one of its substantial shareholder has been paring down its stake in recent weeks- this could account for the price drop. Otherwise it is in the correct business in the world's most populous country. Gross and net profit, revenue all up double digit in terms of %. ROE 19%, NAV $1.01852, PE (at $1.14) is only 5.73; growth prospects looks great, especially with PRC Government support. Things against it: S-chip (tarred with the same brush), no dividends at all, and as weijian says, subjected to currency risks and downturn in key markets, and to the crazy weather befalling many countries of the world. Provided there are no hidden skeletons, this counter looks compelling despite the risks.

[Nick]

China Minzhong share price continues to slide and it hit its all time low today. The Group's CEO Lin Guo Rong purchased 200,000 shares at $1.03193 per share today. This raises his stake slightly to 6.32%.

China Minzhong generated strong profit growth over the past few years on the back of ambitious acquisitions of leasehold farm land and expansion into high margin products. It reported FY 2011 EPS of 20.1 SG cents and NAV of $1.02. There was no dividend declared.

(Not Vested)

[weijian]

hi nick, i noticed you were once vested back in july but not now anymore. Any reason?

With 100% increase in depreciation, taking on debt to 10% gearing and 1bil rmb spending in 2011, CMZ looks poised to expand in the next few years...Therefore, its P/E looks interesting now. Is the Market discounting this growth by suggesting that its key export markets will disappoint?

From Jan-May2011, 2 substantial shareholder hedge funds pared their stakes to a min, earning a big profit from IPO/share rise after IPO. Does this act of theirs suggest that they do not believe CMZ will continue to give them such returns in the days to come?

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hi nick, i noticed you were once vested back in july but not now anymore. Any reason?

With 100% increase in depreciation, taking on debt to 10% gearing and 1bil rmb spending in 2011, CMZ looks poised to expand in the next few years...Therefore, its P/E looks interesting now. Is the Market discounting this growth by suggesting that its key export markets will disappoint?

From Jan-May2011, 2 substantial shareholder hedge funds pared their stakes to a min, earning a big profit from IPO/share rise after IPO. Does this act of theirs suggest that they do not believe CMZ will continue to give them such returns in the days to come?

(not vested)

[Nick]

I sold the bulk of my shares during the bull run in 2Q 2011 in stages as I felt it was fairly valued at > $1.60 judging by peers in HK and Yamada Green in SGX then. I never did expect to see it collapse so spectacularly. Honestly, I thought it was more likely to breach $2.00 than fall back to its IPO price ! Goes to show that we can never predict how Mr Market reacts. I am very much interested in Minzhong though the lack of dividends is a major bug bear now.

Substantial shareholders (like CMIA and Olympus) were closed end private equity funds and have to divest after one year to recycle capital. Olympus continues to hold 10% of Minzhong while GIC retains its 17% stake. Both have already profitted massively since their cost price is significantly low.

I believe Minzhong is one of the rare S Chip whose executive team do not have a controlling stake in the Company. The growth plan is intact though farm land price has been sky rocketing. They did upload a list of their farmland leasehold assets recently. I suspect that they should maintain their growth though the usual risk applies - forex, natural disaster, govt policies on export etc.

[kazukirai]

Hi Buddies,

Update: Ok, I've browsed through the report. It's more entertaining than enlightening really. For what it's worth, my original post after the break.

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There's a report out on Chaoda Modern Agriculture (listed on the HKex) by one of those guerilla shortists groups that's making it's way around.

China Minzhong is mentioned in the report as having the same business operating model- NOT that the Business Model is fraudulent but that it is susceptible to fraud and corruption.

So the report may be an alternative read into the business that CMZ is into and from there, Buddies interested/vested may want to do your own fact-checking/independent analysis.

Report here.

(not vested)

[weijian]

Hi Buddies,

Update: Ok, I've browsed through the report. It's more entertaining than enlightening really. For what it's worth, my original post after the break.

---

There's a report out on Chaoda Modern Agriculture (listed on the HKex) by one of those guerilla shortists groups that's making it's way around.

China Minzhong is mentioned in the report as having the same business operating model- NOT that the Business Model is fraudulent but that it is susceptible to fraud and corruption.

So the report may be an alternative read into the business that CMZ is into and from there, Buddies interested/vested may want to do your own fact-checking/independent analysis.

Report here.

(not vested)

hi kazukirai, thanks for the link. I guess this is a major reason for the huge pricedrop over the last 3 weeks. It's an entertaining and enlightening report as well - enlightening in the sense that we can make use of parts of the report to test/benchmark against CMZ.

To quote part of the report here -
' While our research indicates that there may be a select few legitimate companies in this space with good corporate governance practices, we do not believe Chaoda is part of this group'

GIC has a 17% stake at CMZ and so it should have better corporate governance? (not that it matters very much if we remember what happened at ABC learning)

Let's see how the double whammy at Chaoda pans out and will affect CMZ as a result:
http://www.bloomberg.com/news/2011-09-28...aring.html

(vested)

[Nick]

There are two distinct factors which comes into my mind for Minzhong. Firstly, I believe Minzhong is the only company in the sector which provided a complete list of its farmland assets and lease tenure - http://www.chinaminzhong.com.sg/referenc...pr2011.pdf [SGX Announcement]. Secondly, the Management only owns 7% of the Company so there is no interested party transactions or huge board control present.

Recent reports -

http://www.remisiers.org/cms_images/rese...CIMBOP.pdf [CIMB Report]

http://www.remisiers.org/cms_images/rese...y_DBSV.pdf [DBSV Report]

(Not Vested)