MacGyver Site Visit to China

Dear Forummers,
I came back to Singapore last week after a very fruitful trip to China. I have visited 8 listed and 4 private companies in total, which helped me a lot in my understanding of the happenings in China.
I will do a brief summary of some of the companies that I have visited and met the management. Some are fundamentally good companies while some are total crap.
Do bear in mind that this is a private trip and what i write is my personal opinion. It does not constitute to any recommendation. You can choose to believe in what i write or just take it as total rubbish. I do not have a duty of care towards anybody in any form.
 

I started with an update of the sportswear industry in China.
This industry is likely to be in big troubles for 2013. I witnessed huge discount cutback to around 80% of the retail prices in many o****** along the streets in Guangdong, Hunan, Hubei, Shanghai and Anhui,
I asked retail assistants about the sales and they replied that most of the shoppers are asking if there will be better discounts tomorrow.. Everybody is expecting bigger discounts tomorrow and this will create a huge huge lag in the recovery cycle. There are days where there are zero sales. This has not happen before in the history, according to the assistants.
I also asked about the rental in these o****** and 1-2 outlet managers replied that rental soared 50% last year but remained flat this year and likely to be so in 2013. Bear in mind rental rates are not dropping because of poor sales.
The outlook for the retail sportswear scene looks extremely bearish. The retail channels have huge inventory problems which may take 12-18 months more to clear. I am of the belief that there will be 1 or 2 larger brands wiped out which may have started to happen.
Li Ning is expected to announce losses for 2012 and 2013 is certainly not a recovery year for Li Ning.
I read the UBS updated report on the sector. The analyst has a different view and he may be right that the market has bottomed.
But for the time being, I would not touch any sportswear related stocks.
 

Do agreed that Li Ning is a gone case, as the company top management have change so much for a company to be functioning properly the top should not be changing, as policy will take time to settle, so as the culture. For branded product, it should not be considering on discounting, or minimum should be apply. After discounting, Li Ning have lossed the niche market of the rich and thus loss its branding. And it will be difficult for them to come back with the branding. And the discounting cause the profit to be limited.
 

bro macgyver, you are back! thank you for your last recommendation

what's goes around comes around.. we took a bigger picture at China sportwear.. I remember few years back (probably 2 years back), US sportwear giant Nike had some problem on their sales, and Investment God Warren Buffett sold his holding of Nike.. and that's the history.. it happened due to slow down in world economy and of course US consumer purchase power (also due to US economy) It's quite surprising that Li Ning also caught off guard of what coming.. and it really take a top notch management to able to see the crisis coming (did Anta management see it?) Look at overall industry, I think those big brands and big corporate will able to survive and become stronger.. but of course it takes time.. give them 12 to 18 months revive the business.. It could be a good opportunity to accumulate Li Ning.. lol.. but those supplier like Qingmei may not make it... finger cross.

Textile Industry
I visited several textile players in Fujian. This is a very fragmented market with biggest player holding less than 5% market share.
I still see oversupply in the PRC apparel industry and this is likely to affect the supply chain. Don't expect to see recovery in the entire sector but there are pockets of opportunity around. Companies like Texhong (2678 HK) look fundamental sound. The 25% drop in spot cotton price will help this company to last longer than the peers. 2H2012 should be good for them.
According to the NDRC, China’s textile industry growth has slowed notably in the first 5 months in 2012. Overall production volume still value grew 11.8% yoy but the rate of growth has decelerated as compared to recent months. For the yarn sub-category in particular, volume increased by 14.1% yoy to 12.2m tons. From an export stand point, textile and garment products
only saw a 2.1% increase in value, but would be negative in volume terms.