To appreciate SPU's potential, take a look at Wimm-Bill-Dann (WBD). It is a juice, dairy products, etc. manufacturer in Russia, which rapidly grew over the years starting from a small base. Since mid-1990s, it is up by at least 30-fold.
Stable, rapidly growing market for its products, great margins, potential to expand into other areas (canned fruit, dairy, etc.), access to huge Chinese market, etc.
1. Does the management treat existing shareholders like cra*? Several dilutions over the past 2-3 years might suggest a "yes" answer. However, considering the rapid growth of the SPU's business, they had to balance the interests of the existing shareholders with the need to raise funds to expand. Going forward, they need to rely on the operating cash flows and debt financing for further expansion. Otherwise, they will be just messing with the minority shareholders.
2. Is this one of those Chinese "frauds" we are hearing about all the time nowadays? It is possible, but for an investor with a long term view it is worth buying a few shares, in my opinion.
As I said on May 18th: "Accounts Receivable is absurdly high for this company. In every single Chinese RTO where I have seen high and unexplained AR there has ended up being substantial fraud or misrepresentation."
The predictive capability of high and growing Accounts Receivable is still maintaining its perfect track record.
It was all right there in the publish accounts. All you had to do is read the accounts receivable as a percentage of other key figures over time and look at the growing Days Sales Out (DSO) numbers, and you knew immediately that this company was cooking more than pears and fruits.
if the price of Apple juice concentrate was not around $2000!!! ton I would be less inclined to believe the numbers.
read for yourselves, I am not making this up.
there is a reason why Apple juice concentrate futures will be trading on the MGEX soon.
sometimes, things that DO look too good to be true ARE.
Well some people like to be in a small position for a big gain. This can't go down much lower than it already is anyways. I just put only some of my profits for this yr into this atm.
This company looks too good to be true. In this market, the only "too good to be true" public companies seem to be in China and eventually turn out to be fraudulent. I wouldn't touch this company with other peoples money.
>I now believe<
So you have gone from righteously warning the board to a "buy" rating.
Can I have back the time it took to read this thread?
I'm entitled to change my opinion. As soon as my contact got to see the company and it's construction progress, and also it appears management is more forthcoming with disclosures as well as prompt reporting of filings and very detailed 10-Q, it has now passed my smell test.
Do you bother to research companies like this or do you just toss the baby out with the bathwater everytime?
The Company has not experienced any significant difficulty in collecting its accounts receivable in the past and is not aware of any financial difficulties being experienced by its major customers. There was no bad debt expense during the three months ended March 31, 2011 and 2010, respectively. Our credit term for distributors with good credit history is from 30 days to 120 days. There was no accounts receivable over 120 days outstanding as of March 31, 2011. Accounts receivable over 120 days accounted for 3.1% of accounts receivable outstanding as of December 31, 2010.
The following was not in the 10-Q but was in the earnings release. Not sure why this is the case.
Accounts receivable were $36.2 million, compared to $46.0 million as of December 31, 2010; accounts receivable turnover was 193 days in the first quarter of 2011 .
I now believe that the company's definition of Accounts Receivable turnover equals the number of days it takes to cycle thru the dollars spent to buy the raw materials, process it, sell it, and collect the cash.
That's the only explanation I can come up with.
from the recently filed 10-Q on 5/17:
Based on the evaluation of our internal control as of December 31, 2010, our CEO and CFO concluded that because of the lack of disclosure related to related party transaction occurred in 2009, our disclosure controls and procedures were not effective as of December 31, 2010. During the first quarter of fiscal 2011, we enhanced our procedures governing related party transactions, pursuant to which, related parties to a transaction with the Company are required to disclose and confirm any affiliation at the end of the relevant quarter end and sign the related party transaction disclosure list. We believe that these procedures enhanced our internal control over financial reporting.
On April 20, 2011, plaintiff Paul Kubala (on behalf of his minor child N.K.) (“Plaintiff”) filed a securities fraud class action lawsuit in the United States District Court, Southern District of New York against the Company, certain of its individual officers and/or directors, Yongke Xue and Xiaoqin Yan, and Rodman & Renshaw, LLC, the underwriter of the Company’s public offering consummated in August 2010, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder (the “Complaint”). The purported class period is from March 31, 2010 through and including April 1, 2011.
The Complaint alleges that certain public statements made by the Company were materially misleading in violation of U.S. securities laws. In particular, the Complaint alleges that the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 filed with the SEC on March 31, 2010, was not in compliance with FAS No. 57, and therefore misleading under U.S. securities laws because it did not identify the Company’s acquisition of Yingkou Trusty Fruits, Co., Ltd. (the “Yingkou Acquisition”) as a “related party transaction.” The Complaint also alleges that the prospectus contained in the Registration Statement on Form S-1 filed with the SEC on April 20, 2010, as amended, for the Company’s public offering that was consummated in August 2010 was likewise misleading because it stated that “there has not been a reportable transaction between us and a related party since January 1, 2009.” Plaintiff maintains that the Company’s stock price dropped, and its shareholders suffered damages, once the Yingkou Acquisition was disclosed as a “related party transaction” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, which was filed with the SEC on April 1, 2011. Our CEO and chairman of the board, Xue Yongke, and a director, Yan Xiaoqin, were parties related to the Yingkou Acquisition. For more details of the Yingkou Acquisition, please refer to Note 4 to the Condensed Financial Statements contained in this report.
Plaintiff seeks compensatory damages and attorneys fees and costs “in an amount to be proven at trial.” It is unclear at this time what Plaintiff’s damages will be, if any. The Company has retained a defense counsel to represent it in the matter. The Company has not yet responded to the Complaint, but believes the allegations contained in the Complaint are without merit and intends to defend itself vigorously against Plaintiff’s claims.
The Company had $12.8 million in short term loans with local and provincial banks in Shaanxi and Liaoning Provinces as of March 31, 2011. (these loans are all due between June and Dec 2011).
tigerpac, I share your concern on DSO. Accounts Receivable is absurdly high for this company. In every single Chinese RTO where I have seen high and unexplained AR there has ended up being substantial fraud or misrepresentation. One clear example of that was FUQI.
If there were an industry standard DSO that was constant across periods when they do not grow as well as periods when they do grow, I would validate that DSO as a constant and then accept this is a slow paying business. But what you must always be extremely skeptical of is the company that grows sales rapidly and only begins to blow out its AR during that period of high growth. A substantial number of companies that do this trick are cooking the books, and at very least you should want to validate the company's reported numbers when that happens.
And to the person who said he doesn't care because the auditor will address that: what brand of weed do you smoke 10 times a day? After all the Chinese RTO frauds that have been uncovered, you have the gall to tell us to rely on auditors? Auditors have uniformly failed investors for this class of companies.
Whether the financials look suspect or not, traders are looking to make a dollar. So if you bought at $3.40 and sold at $3.90, then good for you.
That shouldn't be overlooked in the scheme of things.