China Minzhong Food Corporation

I just managed to update the last set of results into my database, and I discovered some things very surprising (surprisingly good!). CAPEX for FY11-13 averaged RMB 600-700M, but in FY14, CAPEX came in at only RMB 99M, one-six of the average burning rate of the previous 3 years. Consequently, although net earnings were lower than FY13, FCF (owner's earnings if you use Buffet's terminology) was 55% higher than FY13. That is probably why the amount of cash left in June 14 was RMB 3.3B as compared to 826M in FY13. I am suspecting that IndoFood insisted that CMZ pay some back as dividends. I am also wondering where some of the huge CAPEX in the previous 3 years might have ended up (draw your own conclusions). On hindsight, I think IndoFood coming in may have imposed more governance into Minzhong and turned this S-chip into something hopefully less "S". If the price goes a bit lower, I may go in and buy a bit more. What do you guys think?

Correct me if I am wrong. The capex ended because it has completed its industrial park, at least the initial phase. On the other hand, why would the company hold more than 3 billion cash if the expected capex is going to be low in the near term future? It can easily afford much higher dividends.

The key for Minzhong should be that Indofood network and organic demand synergies minzhong sales. So far it doesn't seem to have happen yet which puzzled me

Well, consider the alternative scenarios:
1. There isn't this RMB 3.3 of retained earnings - not so great
2. They have no clue what to do and return all of it as dividends - I would be happy to cash up in the short term, but not feel that great in the longer term (assuming I'm a value investor); actually, the dividend yield of 5% for FY14 is not so bad
3. They fritter the money in some crazy M&A which destroys value - not so great either
4. Actually there is no money in the bank (3.3B RMB doesn't exist, like for Eratat's case) - worst scenario, but I tend to think IndoFood won't let that happen
Hence so long as they make plenty of money but don't mis-spend it, I'm happy. But I fully agree with Specuvestor that the key is in their ability to integrate with IndoFood, but it has been about 1 year since M&A took place and they have not really gotten their act together yet.

http://infopub.sgx.com/FileOpen/Santa%20...eID=330120

In Sep 13, the Salim Group made a GO to acquire all Minzhong shares it did not own for $1.12 apiece, and ended up owning 88.99% of Minzhong.

Before the offer, Minzhong was hit by short selling on allegations that the company’s books were cooked.

Now the Executive Chairman/CEO, a PRC national who has been helming Minzhong for years(?), has proposed to buy a 52.94% stake in the company for $$1.20 per share, from Salim.

(31-12-2014, 06:26 PM)portuser Wrote: http://infopub.sgx.com/FileOpen/Santa%20...eID=330120

In Sep 13, the Salim Group made a GO to acquire all Minzhong shares it did not own for $1.12 apiece, and ended up owning 88.99% of Minzhong.

Before the offer, Minzhong was hit by short selling on allegations that the company’s books were cooked.

Now the Executive Chairman/CEO, a PRC national who has been helming Minzhong for years(?), has proposed to buy a 52.94% stake in the company for $$1.20 per share, from Salim.

Interesting developments man. Goes to show that not all s -chips are rotten. Bad luck that they (and also Sino G) are the targets of unscrupulous short sellers..

bet CMZ shares will boom from here..but then again, CMZ business is not that kind of fantastic in terms of growth, only the beverage business shows more promise.

Hope all goes well.

(31-12-2014, 07:44 PM)leeeta Wrote:

(31-12-2014, 06:26 PM)portuser Wrote: http://infopub.sgx.com/FileOpen/Santa%20...eID=330120

In Sep 13, the Salim Group made a GO to acquire all Minzhong shares it did not own for $1.12 apiece, and ended up owning 88.99% of Minzhong.

Before the offer, Minzhong was hit by short selling on allegations that the company’s books were cooked.

Now the Executive Chairman/CEO, a PRC national who has been helming Minzhong for years(?), has proposed to buy a 52.94% stake in the company for $$1.20 per share, from Salim.

Interesting developments man. Goes to show that not all s -chips are rotten. Bad luck that they (and also Sino G) are the targets of unscrupulous short sellers..

bet CMZ shares will boom from here..but then again, CMZ business is not that kind of fantastic in terms of growth, only the beverage business shows more promise.

Hope all goes well.

Will they be required to make a GO?

Trying to buy back.before salim realised books are cooked?? If so good why sell to salim last time??

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(01-01-2015, 11:51 AM)BlueKelah Wrote: Trying to buy back.before salim realised books are cooked?? If so good why sell to salim last time??

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IIRC, his stake was just 7% then. If the books are cooked, wouldn't it be better to just walk away ?

something very fishy about this deal.....Nick is right, if the books are cooked, CEO better just to walk away....but again, if the business has good prospect, will Salim be satisfied with just 8 cts gain and sold the majority?