Monday, October 27, 2008

ChinaMilk - Mooing away to a Bullish Time?

ChinaMilk has suffered a crisis within a crisis within a crisis for 1) being a China Share 2) Being embroiled in the Melamine scandal and 3) being in the financial crisis. As the saying goes, in crisis lies great opportunities, therefore, our SGDividends radar decided to zoom in on this counter. Is there a GEM of an opportunity? Let us see...

It's net profit is an astonishing 64%!! Not surprising actually when one thinks of it, just think of how cheap semen is and embryos.

Looking at the balance sheet, the current asset is much much larger than the current liabilities. And look at its Cash warchest! It is much more than the current liabilities. For sure, this is one company that does not require to take on any loan during this credit crunch.Just to confirm, we looked at another part of the report, just in case there was a printing error. (Just joking, see below)Voila! It has nothing to repay within this year.

We therefore proceeded to look at the Cash Flow Statement, and guess what again, it has a rich, sustained FREE cash flow. Sperm is indeed cheap. This company will only continue to increase its already gargantuan cash balance.

So let's see how cheap is this company. See below. Its Net Tangible Asset 246RMB which is approximately 49cents and what is the now? 35 cents. Cheap!

Risk Reduction
On 26 September 2008, samples of the Group’s raw milk were sent to an independent laboratory for testing, namely, Daqing Bureau of Products Quality Supervision and Inspection (大庆市产品质 量监督检验所), a government laboratory accredited by the Heilongjiang Bureau of Quality and Technical Supervision (黑龙江省技术监督局) which in turn is an affiliate of the General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China (国家质量监督检验检疫总局) and it was tested that there was no trace of melamine.

Possible Upside
A recent acquisition of a joint venture company with the Heilongjiang Animal Breeding Centre of an amount of SGD$28.6 million which it paid for entirely with cash. Objective of acquisition has got something to do with sourcing for superior breed Holsteins from Heilongjiang and neighbouring provinces instead of Australia to save cost. ( A good sign eh....)
Given that it has not been embroiled in the melamine scandal, and part of its business is also to sell raw milk, it should be possible to take market share from its melamine- scandaled competitors don't you think?? Your guess is as good as ours!

Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.