16-02-2016, 08:16 PM
(16-02-2016, 05:56 PM)Boon Wrote: [ -> ](16-02-2016, 01:47 PM)portuser Wrote: [ -> ]In Sino Grandness' 2014 annual report, reference to adjusted profit was made thrice, in page 6, 8 and 14.
In page 6 and 14, adjusted profit was defined as the sum of:
(a) net profit attributable to shareholders,
(b) changes in fair value of the option derivatives in relation to convertible bonds, and
© non-cash interest expenses of convertible bonds.
In every subsequent press release accompanying quarterly results announcement, adjusted profit was disclosed, and the management has said that adjusted profit is the profitability measure for Sino Grandness as well as Garden Fresh.
An assertion has been made in this forum that the true profitability measure should be the sum of (a) and (b) only; and © ought to be excluded.
At first glance, this alternative measure, which excludes non-cash interest expenses, will give rise to lower numbers.
But not so in 3Q 15, when Sino Grandness reported huge 'positive' finance costs of RMB 187.12m, which would be counter-intuitive to us (table A below).
The strange result came from the valuer (table B below). Note that liability component decreased as much as RMB 188m, whereas option derivatives rose by RMB 244m. How the valuer arrived at these, we do not know. I was told that assumptions are made to a large array of data before they are fed into the computer to churn out the results. Adjusted profit ignores the valuation results altogether.
The following table compares the adjusted profit (adopted by Sino Grandness) and the alternative measure (advocated in this forum) for 3Q 15 and 9-month 15:
................Adjusted profit (RMB m)..........Alternative measure
3Q 15.............................133.0..............................321.2
3Q 14.............................209.6...............................201.3
9-month 15.....................423.2...............................448.0
9-month 14.....................448.3...............................380.9
The 'positive' interest costs in 3Q 15 gave rise to higher profits under the alternative measure.
It will be good to attend the EGM to find out more.
Table A (RMB m)
..................................................3Q 15.......3Q 14
Revenue...................................949.60...1,030.51
Gross profit...............................385.31......410.18
..............................................................................
Distribution &
selling expenses......................(190.87)...(102.62)
Finance costs..........................187.12......(22.71)..........strange 'positive' RMB 187.12m finance costs
Profit before tax & change
in fair value of the option
derivatives in relation to CBs.....371.21......271.41
Change in fair value of
the option derivatives
in relation to CBs......................(244.38).....(15.14)
Profit before tax..........................126.83......256.27
Attributable profit..........................76.85......186.12
Table B
................................................................................................RMB m
.................................................................end-June 15.......end-Sep 15.......Variance
Liability component at amortised cost...............647.86...............459.61........(188.25)
Option derivatives at fair value..........................130.11...............374.49.........244.38
Total..................................................................777.97...............834.10...........56.13
Hi portuser,
In determining the aggregate conversion proportion of CB1 and CB2,
who told me that FY2014 reference net profit was out of scope?
Who told me that FY2012 Reference Net Profit was irrelevant?
Who told me that the Reference Net Profit financial year was FY2013 ?
So what is the relevance of FY2015 numbers?
You can define net profit in any other way you like and for any other purposes but for the purpose for determining the aggregate conversion proportion of CB1 and CB2, there is contract that one has to adhere by.
http://www.valuebuddies.com/thread-3371-...#pid125702
Hahaha!
_________________________________________________________________________________________________________________________________
Reference profit is for 2013 profit:
"The Projected Net Profit (or if available, the Net Profit) for the financial year of the HK Issuer commencing on 1 January 2013, provided that such Projected Net Profit is as disclosed in the
prospectus relating to the QIPO or has been approved by an Extraordinary Resolution. For the avoidance of doubt, Reference Net Profit shall exclude any one time fees arising directly from the QIPO and any Fair Value Change"
Reference profit was used to determine aggregate conversion proportion.
The purpose of showing 3Q 15 numbers is to let readers know that in that quarter, there was a huge unusual 'positive' finance costs of RMB 187.12m; which resulted in profit determined by alternative measure higher than adjusted profit.
See you at EGM.
See
