From the posting: Quick Review On Xingquan's Earnings
- mosea said...
The bad thing is that they have yet to be able to deliver dividend which is a dampener. - snowball said...
First, the receivables is up almost twice as much than the sales, which is worrying if it becomes a trend.
Second, their tax exemption on a major entity, addnice sports which produces 80% of its revenue will ends on 1 Jan 2011, so, on the 2HFY2011, Xinquan need to make 10% (80%*12.5%) just to make up the lose ground.
Third, they have some advances from directors, which I am not sure whether it is needed since they have so much cash which prompt me to look at their cash and interest income. They earn an annualize interest rate of just 0.33% [(498*4)/((587000+631000)/2)], which is suspiciously lower than that of the current interest rate of China banks-0.36%. Here's the interest rate from ICBC :http://bit.ly/9hF5xN . I have check my computation a few times as it is really too low. It means that they are keeping a lot of money in their office to earn such a low rate. But, if so much of their money is in their office, do they need any advances from director? So, I can't resolve this inconsistencies. But, the advance from director is very low- RMB172k only. However, the interest they earn is surprisingly low, which is a bit worrying. If the money is kept as strategic cash hoard, I think, as a successful businessman like Xinquan owners are, they should be logical enough to put into higher yielding account. But, the current rate is even lower than that of the lowest savings account rate.
Snowball: Great point about the tax exemption and yes, I would fully agree with you that this could be a massive burden. And again, one might have to consider the
And the cash and dividend issue, which goes back to my first posting: Regarding Xingquan
Let me reproduce the following part..........
Some thoughts regarding its 'cash richness'.
Xingquan raised some 159.682 million from its IPO listing. From its last reported earnings in May 2010.
From the above table, apparently there's plenty of cash raised from the IPO still hasn't been utilised and then Xingquan had stated in the press about its capex plans.
And as per the latest earnings pdf file ( page 11 ), Xingquan reported that currently it had used only 111.058 million. So there's 'plenty of money' not used YET.
Yet, Xingquan had insisted it wants to do the TDR to raise another 76 million.
And naturally the 'confusing' part is that as per current earnings, Xingquan has some 291 million cash (and some 29 million in borrowings).
Ok, snowball has stated before that..
- Small and medium Chinese company in general like to hoard a significant amount of cash. This is my general observation of S-chips, Red Chips etc. The cash hoard is for strategic reason because of the limited access to credit facilities in China.So, in Xinquan case, the management may want to keep some of the cash for strategic reason either to react to competitor actions or to face possible uncertain regulatory environment. That's why we are seeing chinese companies listed abroad raising doing so many rights issues despite being on net cash.
But the cash as stated by snowball are earning peanuts.
And then the lack of dividends mentioned by mosea.
And if one takes the company's plans into consideration as stated at the end of the posting Regarding Xingquan , then wouldn't it not suggest that the company's main focus is to expand, expand and expand.
Of course a company's plans to expand is not bad but then as a shareholder, one has to wonder 'apa macam ni'? Dividends mana? Somemore got future dilutiions in earnings caused by the TDR. Well, it's certainly not really attractive, yes?
And also, I have no idea in regards to the apparel footware industry in China but I would still question why such an industry requires such massive capital? Shoes woh. Needs millions and millions meh?
(The TDR progam had stated “The proceeds will be used for the expansion of sales and distribution network (RM44.55mil), point-of-sales makeover as part of the rebranding exercise (RM26.51mil) )
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