I went to their Share Registrar Boardroom Corporate Advisory Services today to take a look at the detailed sales and purchase agreement. These are the major findings: 1. Regarding the Earn-out Condition, Net Operating Profits is defined as profit after tax of Bedding SZ excluding any exceptional or extraordinary items but without adjusting for related tax. 2. The 3 properties to be transferred from Man Wah HK (100% owned) to Man Wah Shenzhen (84% owned after the deal) refer to the 3 Shenzhen factories with total land area 19,391 square meters. The valuation was done in Feb 08 by a Shenzhen professional valuer. The new factory in Huizhou Daya Bay is not affected by this transaction. 3. Famous Bedding and its subsidiaries have no borrowings. 4. Mr Yu has 7 patents and trademarks including the trademark for their flagship brand \"Enlanda\" registered in US. These will all be transferred to Man Wah Shenzhen. Overall no red flags.
According to one of Man Wah franchise\'s website, Cheers has been the top selling sofa brand in Hong Kong for 10 years. Source:
www.cszhs.cn/templet/fitment/news_text.html?ID=48212
The Chinese look upon Hong Kong as a trend-setting city. Their success there has certainly helped consumer sales and franchise recruitment in the PRC.
The US small cap value fund ZPR has just issued their September report with interesting comments on Singapore small caps: \"...We could write many pages on Man Wah and China Sports - but the theme is the same. We are buying companies with outstanding fundamentals that have minimal economic risk and we are paying substantially less than their high, but then they have negative relative strength because the price has declined and they continue to fall right along with the market index as the negative investor sentiment is overwhelming even when they continue to report great earnings and promising developments for the future...\" Full report:
www.zprim.com/index.php?Id=341&lng=EN
Leather comprises about 50% of Man Wah\'s COGS, so the falling hide price is going to boost their profit margin. This is an extra boost as I already expect their margin to rise further in the next few quarters due to the increasing economy of scale. All China Leather Exhibition witnesses falling hide prices Leather International, 8 Sep 2008: \"...Once admission was attained it soon became clear that hide traders were not happy. Hide prices are continuing to fall and they can see no immediate signs of recovery. A leading hide trader told Leather International that he believed we are entering a long term global recession which was unlikely to end before 2010. He had seen two other similar recessions, one in 1991 and the other in the early 80s. Overall it is the larger hides for upholstery which are hardest hit...\" See full article here:
www.leathermag.com/news/fullstory.php/ai...ing_hide_prices.html
scbchan: u r amazing. ur postings are really good. no BS. as for the latest posting on leather hide prices, it is going to be impactful on Man Wah\'s profits. i dont think the effect may be so pronounced yet, maybe not in Q2 results, but certainly not too long from now. MW looks like a stock that i will shift money into from some other lesser stocks.
neontet, it\'s good you like the postings. I\'m happy to share my fact-based research with fellow and prospective shareholders. You\'re right the positive effect of falling leather hide prices will be felt not immediately, but only after the current stocks are replenished. In today\'s market where shares are sold down to incredible low level, it is really soothing to remind ourselves the fundamentals of investing. Take Man Wah share movement on Friday as an example, the price moved down from 23.5 cts to 22.5 cts with a total of 89,000 changing hands with a value of some $20k. It moves the market cap of Man Wah from $157m to $150m with 666m shares outstanding. This means a few people controlling $20k can make $7m evaporate. Does it make sense? This is exactly the point Warren Buffett and Ben Graham keep on making: price is not the same as value.
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