07-09-2014, 10:28 PM
(05-09-2014, 04:59 PM)Curiousparty Wrote: How does this current shortage of MBT gel with the "excess capacity" cited by company in its previous annual report?
Fundamentally, is sunsine still facing excess capacity issue in the sector it is operating in?
How hard is govt clamping down on the rate of vehicle increase?
The above analysis is good on hindsight.
Curiousparty
You are questioning whether accelerators are really short in supply.
Are you serious?
On 29 May 14, you wrote on Puntergallery:
This is really one of the few best S-chips we have seen so far.
No rights issues, dividend every year since day 1, share buy back, etc.
Given their foresight of advanced investment in green and environmentally friendly pollution control technologies, they are now going to reap the handsome rewards.
Based on the 1Q2014 announcement by Sunsine, many of its competitors had already suspended their operations due to Government action on environmental protection, resulting in a decrease in supply of rubber accelerators. Sunsine will then switch back to increase the price of their products.
Although very capital intensive, sunsine is helped by having a much greater EOS (economy of scale) compared to the other much smaller players. Hence, sunsine has a much lower cost structure and it can afford to play down the prices for the last few years to drive out and suffocate its competitors.
It is a virtuous cost cycle for sunsine. As more companies die out, EOS will get higher and cost structure (per unit volume) will be further lowered.
If everything pans out, sunsine share price should hit a new high over the next few quarters (probably in the region of 35 to 40 cents).
Few days later, on 4 Jun 14, you wrote again:
Now is a good time to accumulate more when everyone is fearful!
"As the China government is placing more emphasis on environmental protection, some medium- and small-sized players in the rubber chemicals industry were forced to suspend their production. Further, due to the China government’s comprehensive measures on environmental protection, a few large-sized players also suspended their production.
"As such, the supply of accelerators in the market is decreasing. In order to maintain their productions to meet higher demand of tires, the tire makers placed more orders to purchase accelerators. The Group anticipates that the sales volume of accelerator products will continue to increase.