(17-07-2012, 05:31 PM)dzwm87 Wrote: [ -> ] (17-07-2012, 04:55 PM)yeokiwi Wrote: [ -> ]In this case, how do you conduct your due diligence?
I can't be 100% sure that CMZ's farmland is certainly there. Even if there's a picture of the farmland, it doesn't certify anything except creating a false sense of security - pictures can be faked as suggested by Huabao Intl. It doesn't need to be a Chinese S-chips to allow fraud to happen.
I think what makes CMZ different (with respect to farmland) is this:
1. They are more transparent in their disclosure - their FY2010 or FY2011 AR has a list of their leased farmland. And they are the only agricultural company (at least from what I know) who makes the effort to do this. Chaoda doesn't and China Green doesn't either. Of course, the list can be a fake. Nobody can guarantee this. But if they truly want to create a fraud then by going through all this means of exposing themselves (by creating a fake list), it's either they want to steal the cash big time or they are genuine. As of date, we know management may have yet to cash out any huge sum at all.
2. They organize site visits to their new processing plant in Putian. They do have site visits to their old Putian plant as well. In fact, I suppose there is an analyst site visit sometime this month but I'm not sure if it was executed. I believe you can request to their IR if you're interested but at my investment level, my cost-benefit weight suggests otherwise.
3. Lastly, Templeton's huge investment stake. Even though their investment is not my primary anchoring factor, it does show a strong signal with regard to CMZ business. I know it can be a free ridership issue but I supposed the mgmt will tackle this similar issue before putting in a huge stake.
But I agree with you, there is always that possibility of fraud just as much as I can't prove against it 100%. But at current level, it is a discomfort level that I am comfortable with.
I certainly won't enter if CMZ was trading at around 80c or even past a dollar. But at around their all-time low, the market has probably priced in too much pessimism?
Sigh, am I the only one for CMZ now? :x
GAM has ceased to become a substantial shareholder. They had been net sellers ever since 3Q FY12
I'm a noob. I believe in CMZ, lost quite a bit of money, but still believe in CMZ. haha.
However, i also think that near term sentiments is really negative on the stock, especially Chinese stocks in general. Just look at the Shanghai Index, its one of the worst performing market in the world, except for some of the European markets. Its no surprise the stock should trend down given the worries over the assets, after all the concerns over the land rights have never been solved. This is unlike the Chinese property market which is highly regulated and controlled, with a physical building to observe (even from google maps). After Sino-forest, there is Chaoda (a competitor of CMZ), and then most recently there is Evergrande. Guess as concerns will never end.
Without actual land rights, its hard for CMZ to borrow at low rates, though the recent rate cuts should benefit them. Hopefully with a shift into industrial buildings, they are able to turn towards cheaper (secured) borrowings, allowing them to leverage up for higher returns. I thought secured borrowings from established banks kind of show that the assets are there, since the banks will have to go 'rigorous' credit reviews, taking copies of the building ownership documents etc. Besides, with the government eager to support SMEs and food security, i still think that agriculture is to benefit.
That said, mushrooms and vegetables arent staple like corn, so you wont see CMZ rallying like the other agricultural commodities. (i kind of think mushrooms are 'luxury' lol) They don't exactly benefit from the recent droughts. Historically, if it is to be believed, CMZ has always been rather lucky in that its fields in Fujian area were seldom affected by the droughts or floods.
As one of the analyst reports have mentioned (forgot which one). Think the catalyst would only be when CMZ starts giving out dividends. At a PE ratio of 2x, and perhaps a 30% dividend payout ratio, dividend yield would be 15%. That should provide some support for the stock. Actually, I wouldnt be that surprised if the company suddenly announces some dividends to boost stock price, especially this is the final quarter.
On the other hand, the high growth seemed to be tampered out due to higher staff costs etc... not too sure if earnings growth will return. Have to see the results from this quarter.
Finally, technicals look bad due to sell off from funds. As mentioned 1 year ago, the private equity funds (e.g. GAM) has a date to sell off the assets to redeem the fund. As seen in the announcements today and recently, seems like the selling down is taking place once again. That should continue to put pressure on the stock. Finally, the stock is now at its all-time low, technical speculators are unlikely to support the stock given its 'uncharted' status. A rebound would probably have to wait.
Just 2 cents worth... just here to learn... appreciate comments Thanks!
** not vested **
