Dukang

Dukang is oversold from its recent high of $0.65 . From the 200dMA, it is staging a strong rebound after bottomed from $0.415. It is going uptrend and the next resistance at $0.52 and well supported above $0.415 level . This is not a Buy call but I am accumulating at this low level now ..

Any ideas when results out?? Thanks.

On 7 August 2013, Profit Crest International Limited ("Profit Crest") entered into a conditional sale and purchase agreement with 2 companies for the ordinary shares in Dukang Distillers Holdings Limited ("Dukang").

Treasure Winner Holdings Limited purchase 235,515,511 (29.5%) @ $0.4742 per share
Kaifeng Tian Feng Mills ("Kaifeng") purchase 114,484,489 (14.34%) @ $0.4742 per share

That a total of 43.84% which is quite a big transaction.

Not sure when the result will be released but should be around the corner . However I have the following highlights to share on Dukang .


Investment Highlights:
• Top provincial brand in Henan, China with a 3% market share in a highly fragmented industry. According to management, Dukang had surpassed
Henan Songhe Liquor Industry Co., Ltd. as of end-12. Its premium Dukang brand (vs the low-end Siwu) is considered the official baijiu in Henan,commonly served during local government affairs.

• Elevated to first-tier status with endorsement by the Chinese government. The Dukang brand was recently officially designated as one of the appointed baijiu to be served to foreign dignitaries. This places it in
the country’s elite list of only less than ten brands. We think the strong support from the national government provides the company with a crucial
stepping stone in growing its presence in China.

• Almost 40% capacity increase by August. Dukang is set to add 700(+24%) fermentation pools by August, which is estimated to add 3,000(+39%) more tonnes in annual capacity of grain alcohol (pure alcohol). This
amount of grain alcohol, when converted to Dukang-branded baijiu, could potentially contribute Rmb540m-675m of revenue p,a..

• Carving a presence outside Henan. Currently, Dukang-branded products are being distributed in over 20 other provinces. Management intends to grow its <1% nationwide market share by targeting the core markets such as Guangdong and Tianjin first. Ad & promo expense will be kept at 12% of revenue while the distribution network for the Dukang brand will be further enhanced. Since 2011, the distributor count outside of Henan has grown more than 50% to reach 85 as of end-March.

• Low credit risk with cash-on-order payment scheme for its Dukangproduct line. This has allowed the group to maintain a low receivablesturnover period of 10 days in 3QFY13 (15 days in FY12).

• Singapore debut by end-13 through Singapore’s leading baijiu distributor,Oasis Global. The current baijiu market in Singapore is estimated to be worth S$3m in revenue p.a. and this is projected to double by 2015, driven by Chinese businessmen in the country.

If you rem what I have post in Feb 2013 before:

As of 31 Mar 2013, the total number of issue Dukang shares is 798,289,318. If Dukang really considered the whole rmb 200 million as dividend payouts and in one single payout, this could means dividend of rmb 0.25 per share or sgd 0.0525 per share based on exchange rate of 1 rmb = 0.21 sgd. This will work out to be an attractive 11.4 % yield based on 0.46 share price. This dividend payout should be confirmed during this 4th quarter results announcement.

Wondering if Dukang will really consider distributing the remaining Rmb 200 million as dividend payouts or not or they just mention for fun. We will soon find out....

From article "DUKANG DISTILLERS: 2Q2013 net profit jumps 52.5% to Rmb 144m" posted in next insight:
Q: Your cash reserves are as large as your market cap and no dividends are paid. What evidence is there that the cash is real?

BDO Hong Kong and BDO Singapore are external auditors that jointly verify our financial accounts. We have Rmb 730 million in cash reserves. We have Rmb 60 million of outstanding bank loans.

We have budgeted Rmb 40 million for expansion in Taiwan. Rmb 200 million has been earmarked for capacity expansion. (700 fermentation pools are being dug and the company expects to complete this by July.)

We are considering allocating Rmb 200 million for operations of the facilities at Ruyang (Luoyang) and Yichuan (Zhoukou). As for the remaining Rmb 200 million, we are considering it for dividend payouts.

Very interesting and large married deal announced today ! Anybody can shed some light on this. Could be some precursor to something, I reckon.