A little worried by the 'facts' of the report but nevertheless, there seems to be a very strong case to buy the stock i.e. recent investment by the thai group, ~90% of the CBs agreeing to extend and the 'credible' channel checks done by the analysts.
1. who is 'newman9'? Student or seasoned investor?
2. what is/was his intent when he set out to conduct "months of due diligence and hired local researchers to aid in our investigative efforts. In addition to scouring filings and performing typical public records searches, we procured Euromonitor and Nielsen data, visited over 80 retail sites, had dozens of conversations with distributors, retailers, former employees, competitors, contract manufacturers, and other sources, and visited the Company’s three internal beverage production sites."?
3. Has 'newman9' shorted the stock? I am quite sure he has. He didn't write 30 pages and recommend a short w/o profiting from this.
I would like to add on the observations made on the report from VIC. The report is dated 9/4/2014. Is this referring to Sep 2014 or Apr 2014? My interpretation is April 2014. If this report has been around, then when the Thai investors picked the private placement in Oct 2014, it appeared that they were not influenced by the VIC report. I believe as these Thai investors would have done their due diligence before they invested, it should be ok to buy at the current price of around 50 cts when the placement price was 61 cts.
Value Investors Club has stated on 4 Sep 2014 that Garden Fresh blatantly inflated sales and this can be easily discovered:
“Even modest improvements in coverage or basic IPO due diligence, such as obtaining Euromonitor or Nielsen data, should result in regulators, underwriters, and investors agreeing with our conclusion that earnings are massively overstated. We believe this will most likely lead to a failed IPO, ultimately rendering shares of Sino Grandness practically worthless.
Major investment banks with analysts covering China juices companies subscribe to Euromonitor. Furthermore, key beverage manufacturers listed on the HKEx, such as Tingyi, Uni-President, and China Huiyuan, reference Nielsen data in their filings. We believe that if and when regulators, underwriters, analysts and investors inevitably scrutinize this data, they will see a company materially overstating revenues which will most likely derail the IPO.”
Garden Fresh started its IPO process in 4Q 13, and a sum of RMB 9.8m was paid as “expenses in relation to the proposed spin-off of the beverage business segment”, based on 4Q 13 results announcement.
If the revenue inflation is easily detected, surely IPO managers would have discovered it by now, and resigned from the assignment.
In its announcement on 1 Oct on proposed investment in Sino Grandness, TTA stated the following:
“Global consulting firm Frost & Sullivan forecasts that the loquat juice market in China will have an average annual growth rate of 39.3% through 2017. The juice originates from the loquat plant, whose tangy and sweet fruit is considered to be rich in vitamins, minerals, and anti-oxidants. With its own-branded鲜绿园® (Garden Fresh) of loquat juice, SINO GRANDNESS has captured more than 75% of the Chinese market. Beverage sales accounted for more than 60% of SINO GRANDNESS’s revenue last year.”
If Value Investors Club is correct in its assertion that it is easy to detect the fraud, then one has to conclude that TTA is a novice in investment field to have committed to lock up 47 m Sino Grandness shares using TTA shareholders’ money.
Yes, Value Investors Club’s report cannot have been published in April because it casts doubt on Sino’s announcement (dated Aug 14 2014) on possible investment by a strategic investor:
“The Company failed to provide any useful update on the IPO process along with the recent results. Instead, the Company put out a press release disclosing discussions with an unidentified “potential” strategic investor about “possible” investment that may or may not materialize which we thought reeked of desperation.”
It is clear that Sino has not made a wild claim as suggested by Value Investors Club.