After searching high & low, my patience was rewarded. I found this China Milk thread buried deep in the forum, which i knew contained a wide range of views back when the dark clouds gathered over the company. This evening, KPMG's report was made avail at the SGX website. What a can of worms it opened!
The f-king China Milk management was clearly squeezing $ out of the company. U just have to read it.
And as i went through the postings of forumers below, mmmmm... I can see those who already were sceptical of the company and those who held on to their optimism. Anyway, easy to say yr 2 cents worth on hindsight. Now, which other S-chip is dirty?
In 2006, a company called China Milk listed on the Singapore Exchange to widespread acclaim. It came with a simple premise: to revolutionize the Chinese dairy herd. Chinese cows produce three to four tons of milk per year, compared to eight to 10 for Canadian cows, yet each cow consumes the same amount of feed. So the company brought in a herd of Canadian Holstein cows and bulls – the champions of milk production in the bovine world – and set about building a business based on bull semen, cow embryos and raw milk. It was, to use an oil term, an attempt to redefine the upstream end of the Chinese milk industry.
At first the stock thrived: its management, particularly CFO Martin Choi, was impressive; they told a good story; and their glossy annual reports spoke of a strategy being well executed for the long term. Investors loved it as a play on the changing nature of the Chinese national diet. Revenues grew 186% annually between the 2003 and 2005 financial years; when the company floated, DBS Asset Management, JF Asset Management, Everest Capital and the Dubai Investment Group were anchor buyers.
Then, in January 2010, came a troubling announcement. China Milk had received valid put exercise notices from convertible bond holders seeking to make an early redemption on US$146 million in principal. Since the company hadn’t costed for this, expecting the bonds to be redeemed upon expiry some time later, they had a shortfall. “The board wishes to advise that the company is still currently awaiting clearance from the State Administration of Foreign Exchange… for the remittance out of the PRC of approximately US$170.56 million” to settle the bonds, it said. “The company believes the delay is administrative and procedural in nature and there is no legal obstacle to the remittance of the same.”
But on February 12 2010 its shares were suspended; one year on, they still are. Over the subsequent year, announcements – which at first focused on delays in coming out with annual results for the company – have become steadily more opaque and less useful and dried up altogether in October, when it told the market that despite being instructed by the exchange to appoint a quantity surveyor, it wasn’t going to do so. Since then the web site has been shut down. Go there now and one gets a maddening message saying simply: “…nothing here…” There was never an office in Singapore: the company is domiciled in the Cayman Islands and its assets are in far northeast China. True, its independent directors and company secretary, Ng Joo Khin, are in Singapore; but Mr Ng said he was “not in a position to comment” on Asiamoney’s written queries about China Milk, which begs the question, who is?
Few saw this coming. One fund manager, who asks not to be named, did sell out of China Milk before its suspension, having begun to doubt the management, but even he genuinely believed the problem was a temporary forex issue. “We’re scratching our heads here,” he says. “Was this fraud?”
Early redemption ??? The management was so eager to lay their dirty hands on the bond money that they didn't even bother to read the small print. Even good companies can be hit badly if they do not scrutinise or fully understand the small print when they raise funds via bond issue.
