I now have a firm timeline of holding Sunsine for at least another 3 years. This would coincide with the materialisation of the expansion in production. The immediate expansion should take place early next year with the additional 10,000 tons IS and 10,000 tons TBBS. This would further scale up to total of 192,000 tons for all products by 2020 as compare to the current 152,000 tons. This is growth play and it is likely to pan out as planned because the 2 main competitors, Yanggu Huatai and the unlisted Kemai are having difficulties in securing the funding they projected for their expansion plan. Kemai has tried twice to list on Shanghai exchange and apparently it is unlikely to be successful. Yanggu has tried to issue placement shares but was rejected and has instead issue rights shares and the capital raised was significantly lower than it intended. It is likely that Yanggu could now use the fund to relocate the factory but no fund for expansion. Even if both the competitors managed to secure the desire funds somewhat, by the time their expanded production line is ready, they will be at least 3 years behind Sunsine, hence, I believe I can hold on to Sunsine for at least 3 years and monitor periodically in the interim and reassess in 3 yeas.
Market
For Sunsine’s growth plan to materialise, its customers must also be able to grow. Sunsine’s main customers are domestic and international tyre manufacturers. Currently, China is facing overcapacity in term of tyre manufacturing but this is changing fast with the closing down of the factories that did not meet environmental protection measures. The overall tyre market is expanding due to growth in car population. With the expansion, the need for replacement tyres is also growing and it account of 70% of all tyre sold. The growth is projected to continue for at least the next few years.
Balance sheet strength
Sunsine’s balance sheet is getting stronger since its listing in 2007. It has no debt and has cash equivalent of about 19 cents per shares. The NAV stood at rmb 1972m as of 9M2017. It has grow exponentially since becoming debt free in 2016 and the trend is likely to continue.

Net profit
Similarly, Sunsine has achieved net profit of around rmb 200m since 2014. This is around the time that China took the environment protection seriously and it mark the start of small players exiting the market. In 2016 and this year, the environment protection measures started to get more stringent and inspection frequencies intensified. In the past, some manufacturers resorted to shutting production when inspectors were in town and they re start production when inspectors left. This could no longer be done and looking at 9M2017’s figure, it is almost a foregone conclusion that Sunsine will achieve record profit this year since its listing in 2007.
Dividend
One of my main reasons behind holding Sunsine is its constant dividend. I wouldn’t say it is generous but I can sense that the company is prudence in its dividend policy. From the payout history, we can see that the company is willing to pay dividend even in the earlier years when the profits were not so high. What is note worthy is that it started to pay higher dividend since 2014 when the profit started to rise substantially for the reasons cited above. In addition, it has announced its dividend policy of paying at least 20% of net profit for FY17 and FY18. This would translate to at least sgd 2.5 cents if eps is sgd 12.5 cents (ttm eps is 12 cents). For the first time, it also pay out interim dividend in June this year and going forward, I am cautiously optimistic that the dividend rate should continue to rise.
As of the latest closing price, the correction is almost 25% from the high of 1.09 and in view of the above, I have decided to act and added a bit more at 83 cents. Seeing the price went up on Friday, I am feeling a tinge of 'indecisiveness' in myself as I had inclined to collect more but didn't. However, I reminded myself not to bottom fishing and there is no telling as the price could still drift downward. I may still have chance to buy at lower price and I should be equally satisfy if the price resume its uptrend. I think 83 cents represents value as based on ttm eps of sgd 12 cents, the pe is only 6.92x. This compare to Yanggu Huatai's 17x pe. Of course, there is wide gap in the valuation for stocks listed in SGX and Shenzhen. Nevertheless, I aim for at least 10x pe for Sunsine eventually and it should not be unrealistic.