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On 31 Dec 2011, NAV per share was RMB 1.66. At current SGD/RMB exchange rates of 5:1, NAV is SGD 0.332 per share.

Put yourself in the shoes of Su Qingyuan:

1. You own 65% of a business that earned RMB 276m in the last financial year ended June 2011.
2. The latest results suggest everything is going smoothly.
3. The business holds RMB 438m of cash and carries no debt.
4. Free cash flow has been positive the last 4 years so the cash is available for distribution.

Let's assume you want more cash than what you currently get from salary and dividends.

Here are some of your choices:

1. Increase your salary

You are currently paid RMB 960k/yr plus profit sharing of 1.5-2.5% of pretax profits above RMB 300m.

You own 65% of the company, so you can make the pay increase happen for sure. But to avoid too much scrutiny you can't increase your salary too much, maybe at most by 50-100%.

Windfall: RMB 1-2m per year.

2. Pay a big dividend

You own 65% of the company so you can get RMB285m, whether eventually or immediately. RMB 226m of the RMB438m came from the IPO i.e. it wasn't money you earned anyway. Assuming all non-IPO money is "your money" that's RMB 212m (RMB 438m less RMB226m).

Windfall is (RMB 285m less RMB 212m) = RMB 73m.

3. Sell a piece of the company.

The implied valuation of the company at SGD 0.17 per share translates to RMB 0.85 per share, or about half its book value.

(Given the earning power of the business, book value appears to understate the intrinsic value of the business.)

The cash on the balance sheet amounts to RMB 0.64 per share.

So, you are selling the business on an ex-cash basis for RMB 0.21 per share.
Earnings in FY2011 were RMB 0.41 per share.
Earnings in the first 6 months of FY2012 were RMB 0.25 per share.

In other words, net of the cash acquired, the buyer is getting better than a 6-month payback period on their purchase.

===
Looking at the 3 choices, we can see that #3 is clearly the dumbest choice of all. #1 would be simple to do but would have limited effect. #2 would be simple and effective but Su Qingyuan took the opposite route - he took scrip instead of cash! And of course we know he also did #3, selling 114m shares for $0.16-$0.17, raising RMB 97m.

#3 is an amazing deal for the buyer. It is a horrible deal for the seller. It is clearly win-lose.

The simplest, though not necessarily the correct, conclusion is that Su Qingyuan is stupid, crooked, or both. I await a logical answer that resolves the situation above while also exonerating Mr Su.
Hi d.o.g.

I can understand the CEO selling some shares as he has 65%, but I think selling a big chunk in mid-Feb ( or mid-3Q ) and now announce a 3Q profit guidance is not nice. The Aussie fund was caught with their pants down and had to quickly sell out. If the 3Q results are very bad, then choice #3 is not dumb.

Anyway, if share price crash, should we take a short term punt? May be better bet to make some pocket $$$ than going to casino LoL.
Not sure whether you had taken note of d.o.g. signature.
Quote:I do not give stock tips. So please do not ask, because you shall not receive.

My personal view is that:-
betting on a stock that you do not know well enough is no difference from going to casino.
The probabililty of winning is at the mercy of factors that you cannot control.
(22-04-2012, 07:34 PM)yeokiwi Wrote: [ -> ]Not sure whether you had taken note of d.o.g. signature.
Quote:I do not give stock tips. So please do not ask, because you shall not receive.

My personal view is that:-
betting on a stock that you do not know well enough is no difference from going to casino.
The probabililty of winning is at the mercy of factors that you cannot control.

Agree...

But, while searching the net to help explain the difference to my kid on the words 'will' vs 'shall', it'd seem that 'will' is used for very definite kind of situation while 'shall' is for those instances where it's not as definite.

In conclusion, it may not totally discourage people from asking for stock tips as there's still a chance of getting it... Hee.. Big Grin
(22-04-2012, 07:34 PM)yeokiwi Wrote: [ -> ]Not sure whether you had taken note of d.o.g. signature.
Quote:I do not give stock tips. So please do not ask, because you shall not receive.

My personal view is that:-
betting on a stock that you do not know well enough is no difference from going to casino.
The probabililty of winning is at the mercy of factors that you cannot control.

Oops, I don't know as I am new. No disrespect, but following tips is the fastest way to the poorhouse, unless they come from the CEO who is my biological brother haha. I have 2 S-Chips in my portfolio, which is one too many. But its fun to follow S-Chips in the various forums.
Well Qingmei is available today at S$0.088 and there are no takers. Is this going to be one more S-chip that goes burst or is it being treated very unfairly by the market. 3QFY12 results will be out on or before 9 May 2012 after trading hours. This is one set of results I would be very keenly looking out for.
Qingmei is just one of many S Chips that no investor dares trust. Sino Grandness appears to have released a pretty decent set of results this morning but no reaction. China Minzhong which is on my watchlist and backed by GIC/Templeton also perpetually falling.

I will certainly be looking forward to attend the AGM this year.
Qingmei has really started to hurt...S$0.078 and yet no signs of the stock having reached the bottom...Have not yet been able to figure out why a profit warning can have such a drastic effect on this stock...

And it's not that they are going to report a loss in Q3, just that their net profit would be lower than the NP in 3Q2011...Any insights would be much appreciated...
My guess for the drop is that Hunter Hall is liquidating their entire position. You need to wait for them for finish unloading before price stabilizes. I don't see much more downside for Qingmei personally but I'm not going to add on anymore as of now.

I'll certainly make sure I find the time to attend Qingmei's AGM to blast management with questions.
well you will surely have me for company at the AGM...

I spoke to and e-mailed Mr. Calvin Tan (Lead Independent Director) today morning but he had the standard response that they cannot discuss any company matters on an individual basis. He did mention that he has forwarded my e-mail to Qingmei and that management will take appropriate action.

Will update all once I get a response...

(02-05-2012, 01:57 PM)sgpunter Wrote: [ -> ]My guess for the drop is that Hunter Hall is liquidating their entire position. You need to wait for them for finish unloading before price stabilizes. I don't see much more downside for Qingmei personally but I'm not going to add on anymore as of now.

I'll certainly make sure I find the time to attend Qingmei's AGM to blast management with questions.
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