# SBB - Sunbridge Group



## System (4 December 2013)

Sunbridge Group Limited (SBB) is a leading retailer of menswear in the People's Republic of China.

The Group owns and operates the "PANDIST 邦迪.斯顿" and "AGUESEADAN 亚阁.仕丹" brands of menswear, which are targeted at different age group segments of upper middle class males. The Group's products are currently sold in over 400 retail outlets across the PRC.

http://www.sunbridge.com.au


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## rcm617 (4 July 2014)

Anybody have a look at this before, it has a very low PE of 2 and has been growing revenue and profit. It is based in China and does all its business there. Has dropped from 20c to 6.5c after a large percentage of shares went out of escrow and seems to be getting fed more shares at that price.
 Seems extremely cheap on the numbers, so don't know if this is a great opportunity as a result of some large shareholders needing the money or if they know something I don't.


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## rcm617 (4 July 2014)

I should have also mentioned that they have cash of $31 million, with liabilities of about $10m.
The market cap is also about $31 million.


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## craft (4 July 2014)

rcm617 said:


> I should have also mentioned that they have cash of $31 million, with liabilities of about $10m.
> The market cap is also about $31 million.




I've had a quick look and didn't find anything glaringly obvious. On the face it, its very cheap and not that ugly.  Have taken a position (0.065) - a sensible risk managed position size - because I don't know much about it yet other than it's superficially cheap.

Thanks rcm for bringing it to the forums attentions


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## rcm617 (4 July 2014)

I have also taken a small position, will look a bit more into it and maybe buy a few more. Doesn't seem to be any need for hurry as someone is selling whenever a decent number builds up in the buy queue at 6.5 cents.


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## VSntchr (4 July 2014)

craft said:


> I've had a quick look and didn't find anything glaringly obvious.




The one thing that I found a little : was the "MEGA RICH INTERNATIONAL CREATION Ltd" Hong Kong Based company that is the middle rung of their corporate structure lol!!


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## Klogg (4 July 2014)

craft said:


> I've had a quick look and didn't find anything glaringly obvious. On the face it, its very cheap and not that ugly.  Have taken a position (0.065) - a sensible risk managed position size - because I don't know much about it yet other than it's superficially cheap.
> 
> Thanks rcm for bringing it to the forums attentions




Short of this being a scam/fraud, this one is very cheap.

I've gone through a fair bit of digging on this one, mainly around verifying the company exists, and have found:

- "Pandist" products listed on eBay, Baidu and alibaba
- Searches in Mandarin bring up their products, as well as reviews on forums about their products (I had a friend translate for me), dating back to '04
- Called the office to confirm their most recent 'letter to shareholders' (the one on Collins st, Melbourne)
- Found images of the MD in some recent sponsorships of major events (fashion show, volleyball tournament)

This has verified to me that the company exists and has done so for some time.


For obvious reasons, I have to rely on the auditor to weed out anyone cooking the books. Given it's done by an organisation with a decent reputation (Grant Thornton), there's a level of comfort to be had there.

In regards to adequate funds, the company looks the goods. It has already paid a dividend, carries 31m in cash (10m net liabilities though) and at current earnings, the yield is in the vicinity of 12%.

The only concern for me is the board of directors. While they have a board of directors that includes two Australians, their recent directorships haven't exactly brought about significant success (e.g. Plympton with NZX:MAD, ASX:ENT, ASX:BSI [I think this changed names])


Nevertheless, for me, this one is binary. It's either a scam, or investors will make good money.


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## craft (4 July 2014)

VSntchr said:


> The one thing that I found a little : was the "MEGA RICH INTERNATIONAL CREATION Ltd" Hong Kong Based company that is the middle rung of their corporate structure lol!!




Its better than "MICRO POOR DOMESTIC DESTRUCTION Ltd" 

It just seems to be the pre-listing private company name. Never part of the marketing or brand names.


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## McLovin (4 July 2014)

Klogg said:


> Short of this being a scam/fraud, this one is very cheap.




Hmmm...

Myself and another poster have been discussing this company for a few weeks via PM. While neither of us could put a finger on a single smoking gun, the impression we both got was that the further you dig the more it starts to smell.


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## Ves (4 July 2014)

Klogg said:


> The only concern for me is the board of directors. While they have a board of directors that includes two Australians, their recent directorships haven't exactly brought about significant success (e.g. Plympton with NZX:MAD, ASX:ENT, ASX:BSI [I think this changed names])



Andrew Plympton,  I assume it is the same bloke,  turned the St Kilda football club around in the 90s.   Under his watch their financial position improved extensively,  and on the field they made two grand finals against Adelaide.

The threads for this company over at Hotcopper are running hot at the moment.   Didn't really find anything too illuminating on there unfortunately.  Just the usual ramping /  opportunity of a life time comments.

I'll have a read of the prospectus over the weekend.  I agree with the others: looks reasonable enough on the risk / reward at this price.

The Bull.com.au also did an article at some point on Chinese IPOs.  This one was mentioned.


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## VSntchr (4 July 2014)

The announcement on 2/12/2013 regarding substantial holdings shows that most entities have registered the exact same address in the Virgin Islands.

Not sure if this has relevance, just another piece to the puzzle.


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## rcm617 (4 July 2014)

Only found one substantial holder apart from the founder who still has 55% ownership and that was Grace Trend Management ltd.
Was there more?


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## skc (4 July 2014)

McLovin and I have talked about this for a few weeks. It's stirred up enough attention here so I might as well present to you my findings. These are my findings only and they could be wrong, incomplete etc etc, so DYOR.

1. Who were the sellers in the IPO? 55% of shares held by the MD, with the remaining spreading across 11 companies.

2. What do these companies have in common? See Schedule 1 of the announcement on 2/12/2013. Where are they all based in?

3. Who were the buyers of the IPO? Hint: compare the Top 20 holders on 25/11/2013 to the Schedule 1 above. Who stood out?

4. The new big holder from 3 above... what his/*her* story? Try googling her name.

5. For those who take comfort in Grant Thornton being the Auditor. Who was the auditor for Sino-Forest? The answer is EY. Who was the internal auditor for Eratat Lifestyle (a Chinese fashion house recently defaulted on a $5m interest payment, while claiming to have $600m in cash)? 

6. Speaking of interest... how much interest do you expect to earn on the $28m cash pile? 

7. Directors... how much have these directors been paid? How much work do you expect them to perform at this pay scale? 

8. Dividends. They paid 0.06c (i.e. $0.0006) in dividend to holders. That's <$300k. If someone chooses to see that as comforting then he/she is easily impressed.



Ves said:


> The threads for this company over at Hotcopper are running hot at the moment.   Didn't really find anything too illuminating on there unfortunately.  Just the usual ramping /  opportunity of a life time comments.




There was something really illuminating poasted there. One poster put up the share registry information. Unfortunately that information has been interpreted incorrectly. He thought the large holdings by Citi and a Singaporian bank were accumulated by those institutions. The fact is that they are original holders who transferred holding to them, most likely for selling. They have been moved from the holder's name to street name, so to speak. Citi has been a net seller... in fact they are so net that they have not bought a single share for the last 2 months. The net buyers? Almost entirely Comsec and E-trade.





So, DYOR, draw your own conclusions and best of luck. I can only list so many questions.


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## Huskar (4 July 2014)

Klogg said:


> Short of this being a scam/fraud, this one is very cheap.
> 
> . . .
> 
> The only concern for me is the board of directors. While they have a board of directors that includes two Australians, their recent directorships haven't exactly brought about significant success (e.g. Plympton with NZX:MAD, ASX:ENT, ASX:BSI [I think this changed names])




Interesting

As Hempton says (with perhaps stronger language), you can tell a fraud / failure far more from the associates than from the accounts...


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## craft (4 July 2014)

McLovin said:


> Hmmm...
> 
> Myself and another poster have been discussing this company for a few weeks via PM. While neither of us could put a finger on a single smoking gun, the impression we both got was that the further you dig the more it starts to smell.




You got any details McLovin? Or at least a heads up from which direction an odour is coming?  

It was only a very small initial offering (~20 Million) to gain a listing with the original minority shareholders (198 Million) escrowed until last month and the founders shares (259 Million) escrowed for another 18 months.

Some of those dozen odd original minority holders now have a market to dispose of their shares and are selling at what appears to be low prices.  They are probably more familiar with the company then the buyers - so that should be heeded but does that necessarily mean something fishy is going on? or are they exiting maybe a long term holding at the first real opportunity for their own personal reasons?

If this turns out to be a total fraud there would be some awful red faces at the auditors and the ASX etc. A poor business - that's a different story with far more potential - but again at face value I don't mind where this business is pitched and if its all as stated the price is good.


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## Klogg (4 July 2014)

skc said:


> 1. Who were the sellers in the IPO? 55% of shares held by the MD, with the remaining spreading across 11 companies.
> 
> 2. What do these companies have in common? See Schedule 1 of the announcement on 2/12/2013. Where are they all based in?
> 
> ...




On some of those points (numbered accordingly):
5) Yes, point taken on this one. Only covered off the obvious of some backyard agency doing a dodgy... Doens't remove all doubt by any means

6) I did wonder why there was only <$1m in interest bearing accounts... but couldn't find much more. 

7) I believe that's fees paid to directors for just over 1month post-IPO.

8) Again, the IPO states dividends to be paid, 25% of NPAT post-IPO. Given it's a little over 1month, that calculates to an NPAT of just over 1mil, which works with financials.

I am very intrigued by earlier points! Am very keen to look into it. Thanks skc/McLovin

As I mentioned earlier, this is a binary outcome in my view. Have limited exposure to this accordingly.


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## craft (4 July 2014)

skc said:


> 1. Who were the sellers in the IPO? 55% of shares held by the MD, with the remaining spreading across 11 companies. Correct - not particularly unusual for a private company.
> 
> 2. What do these companies have in common? See Schedule 1 of the announcement on 2/12/2013. Where are they all based in? All bar XU and one other registered in the Virgin Islands - Probably not that unusual for wealthy Chineses investors, and perhaps speaks to the companies being 'related' - I would be surprised if they are not related parties in a private company.
> 3. Who were the buyers of the IPO? Hint: compare the Top 20 holders on 25/11/2013 to the Schedule 1 above. Who stood out? Ms Shanshan Hong accounts for 14,226,000 of the 21,738,000 IPO shares. .
> ...




We are not talking a pristine well established public company but as small private companies being taken public to try and find a bit of liquidity for early investors to exit - it seems pretty run of the mill just with a Chinese flavour - well that's the argument for the positive anyway.

None of the registry stuff overly concerns me (yet). Is the cash really there - that's more significant question (for all businesses) 

A concern is that the minority holders don't seem to be in sync with the Mr Xu (who's escrowed for another 18 months) that's a story I would like to know more about, because he is pivotal to future minority holder outcomes. 

DYOR.

Its good to see a bit of discussion happening on a stock thread.


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## skc (4 July 2014)

craft said:


> We are not talking a pristine well established public company but as small private companies being taken public to try and find a bit of liquidity for early investors to exit - it seems pretty run of the mill just with a Chinese flavour - well that's the argument for the positive anyway.
> 
> None of the registry stuff overly concerns me (yet). Is the cash really there - that's more significant question (for all businesses)
> 
> A concern is that the minority holders don't seem to be in sync with the Mr Xu (who's escrowed for another 18 months) that's a story I would like to know more about, because he is pivotal to future minority holder outcomes.




Craft,

2. Yes. That's the same reasonable conclusion that I've reached.

4. She's the one who got the IPO over the line. Only a related party or assocaite of the company would invest $2.8m in this kind of float... and I would be surprised to find such person in Australia.

5. I like the hedging this with a long in IMF . But have a read of the Eratat Lifestyle story. It's quite fascinating. http://www.themalaymailonline.com/m...-eratat-lifestyle-ltd-where-has-the-cash-gone

6. RMB deposit interest rates in China. It's not high but it is not zero. http://www.sc.com/cn/en/save/deposit-interest-rates.html

7. Page 11 of annual report shows director remuneration. The two Australian directors were appointed 2 July 2013 and paid $5007 and $3750 to the end of Dec 2013. The Prospectus had the higher numbers as you stated. It is entirely possible that they are paid more after listing since workload has increased. All I am saying is that don't expect them to have spent too much time checking the financials in the Prospectus. Read the Eratat story above and you will find that the Singaporian Board there has no idea what the Chinese management team is doing. And that company listed for over 4 years.

8. Yes it is the stated Policy. But since insiders (I am including Ms Hong's holding here) control all except ~8m shares, the vast majority of money paid out as dividend stays with the insider anyway. So the 0.06c dividend resulted in ~$5k going to the new holders. Also, for a company to pay only 1 month's worth of dividend (as opposed to 6 months or 12 months' worth), it is implied that the sellers sold their share ex-div. But there was no dividend paid in 2013 according to the annual report. Did they forgo their 2013 dividend? In 2012, dividends paid was $7.6m.

The cash holding (if there) being larger than debt is not itself an issue. Someone like RCG and SFH have more cash than they do debt. They do however have net interest revenue (as opposed to net interest expense).

A few other things that I can't work out...
9. Customer receipts are remarkably similar to revenue, implying customers make cash payments. Yet receivables is almost a quarter of yearly revenue, implying customers get 90-day payment terms. However there may be an accounting reason for this.

10. Cashflow from investing activities, purchase of PPE from 2013 to 2010 were RMB 0.226m, 2.286m (labeled as Purchase of franching rights in MegaRich's annual report, but possibly misplaced in the Sunbridge's annual report as payment for PPE)，7.25m and 2.05m. The investor presentation claimed that the company is constructing a new 8 storey building for head office, due for completion in June 2014. Yet they've not spent much on finishing the job. 



craft said:


> Some of those dozen odd original minority holders now have a market to dispose of their shares and are selling at what appears to be low prices. They are probably more familiar with the company then the buyers - so that should be heeded but does that necessarily mean something fishy is going on? or are they exiting maybe a long term holding at the first real opportunity for their own personal reasons?




There are few possibilities.
1. The minority holders have serious problems themselves unrelated to the company, and are genuine distressed sellers. This may be the case if one or two of them were selling, but the registry showed that 7 of them have been selling to various extent.
2. The minority holders have really wanted to exit for a long time, so clutching at any liquidity they can get. This sounds crazy considering that their dividend from 2012 is about 25% of the current market value.
3. The minority holders know something, and that something isn't good, and it's coming soon. Pure speculation on my part.
4. Something more elaborate at play?

On the other hand... the company appears to have real operations. i.e. there are clothes being made and places to buy them. It's the numbers that need to be scrutinised. Also, I am taking numbers from one part of the accounts to scrutinise other parts of the accounts, so it may or may not be correct.


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## craft (4 July 2014)

skc said:


> It's the numbers that need to be scrutinised.




Totally agree there. BUT

The but for me is that I don't think I could ever get to a definitive answer given the nature of the company. Which brings it back to risk control.  As Klogg said it's pretty much a binary outcome. Position size based on a total wipe out to buy a ticket based on the superficial valuation.

I read rcm's post had a quick look, did a quick sizing calc, brought some stock and have since spent a few hours having a bit more of a look - I now know a little bit more but the main thing I know is that I'm not going to be able to get satisfied enough to go big (long or short) so I'll leave the position for interest sake and get back to researching my bread and butter - quality stocks.   

cheers


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## McLovin (5 July 2014)

craft said:


> You got any details McLovin? Or at least a heads up from which direction an odour is coming?




Pretty much what skc said. Oh and guess where the 28 year old CFO used to work...

http://au.linkedin.com/pub/yee-shyang-wong/1a/99b/281

I also found it odd that a public company's entire senior management was employed on one month's notice.

ROIC and margins at the ebit level are quite incredible. Makes you wonder why the target payout ratio is so low. Also given the cash balance, you wonder why they even bothered floating, and why in Australia, especially if the minority shareholders are all related to insiders.

I think there is a real business here (no one would pretend to sell such ugly clothing!), it just doesn't smell right.


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## craft (5 July 2014)

Given SKC’s and Mclovin’s hesitations I spent a little more time digging but really have no more clarity. 

Be interesting to know if CanOz or somebody else has ever seen firsthand the brand/shops in China.

The cash flows for dividend seems a bit weird although it seems to net off O.K against the prior related party advance to Mr XU – so would explain no cash flow.

The jump in trade receivables for 2012 is interesting, but I really can’t draw any conclusions if they are actually related party advances not declared. At some level you have to accept the auditor has reconciled the bank account and checked for related party transactions. Its total negligence if they haven’t. 

It would appear from the dividend flow that XU was the sole owner prior to 31/12/12.

Selling 45% privately to pre-float investor’s is not unusual. (the future float was probably a pre-requisite of them buying in).  The price they paid would be an interesting question as is whether they are controlled by XU and why they want to ditch so aggressively.  The 20cent IPO level is entirely manufactured with what appears to be an insider getting it across the line. Perhaps these pre-float investors aren’t taking too much of a bath even at these levels  – depends what price they paid. On the other hand if the 11 companies are controlled by XU – then he’s the whole game and desperate to fleece a few bucks on the secondary market before an elaborate sham is up and all hell breaks loose. (Possible but not sure it’s probable) 

Whatever the story, I have not achieved enough transparency, for anything more than a little flutter on this one, long if you think Mr Xu is legit or short if you don’t. 

The more the pre float investors sell the more the free float increases the more the real story will come to the surface as more people dig into what this company really represents.  If it’s all as it’s portrayed – its a cheap exposure to rising Chinese domestic consumption. Wherever there is apparent cheapness there is always uncertainty and where there is uncertainty there is the potential for fraud. 

Just remembered [again] why my bread and butter are quality stocks. 

DYOR - I had taken a position within a few minutes of looking at the company for the first time on the superficial cheapness - the sizing means a total loss of that position is utterly insignificant to me - so pleas nobody place any weight on my actions. (this is akin to a flutter at the casino for me - and as such I have spent too much time on it now)


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## So_Cynical (5 July 2014)

Interesting to see how this turns out....will it be a "value" trap or a once in a life time (3 or 4  months) opportunity. :dunno:


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## rcm617 (5 July 2014)

Thanks everybody, certainly a wealth of knowledge on here.
Cashed in my parcel on Friday for a quick profit and will have a long think whether to get back in early next week. Probably the classic fear and greed stock this and as mentioned by most is a straight out gamble. 
The thing that worries me the most with this stock is the rush by the initial investors to get out, would think that if they had confidence in the business they would hang on for the multiples in price one would think this would be worth if legitimate. 
The other thing that worried me was why they would pay out nearly half a million in interest when they had $31 million in cash sitting around which only yielded them $2000 odd in interest.


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## Ves (5 July 2014)

craft said:


> Just remembered [again] why my bread and butter are quality stocks.
> 
> DYOR - I had taken a position within a few minutes of looking at the company for the first time on the superficial cheapness - the sizing means a total loss of that position is utterly insignificant to me - so pleas nobody place any weight on my actions. (this is akin to a flutter at the casino for me - and as such I have spent too much time on it now)



I remember that after I looked at the latest company investor presentation and walked away from the computer yesterday afternoon that my train of thought was in a similar direction.

It is important for me to be able to walk away from the market for a month or more at a time  (as I have had this month due to personal commitments) and have the advantage of quality "sleep well at night" companies on my side.

My initial psychological reaction (and what I may have done in a rush of blood) before I put myself alone in the metaphorical "dark room" away from all influences was interesting enough for me to say that putting some time into this company was not a complete waste of time. The concept of an "it looks cheap, impulse buy" is a habit that I try to avoid, as it has hurt me somewhat in the past.

The second issue for me, is  that the size of my portfolio  wouldn't let me be able to buy a small amount of a stock like this and call it a lottery ticket. The position sizing probably wouldn't be a marketable parcel. And in fact,  if it could,  I would be wondering the purpose of it,  since the stock would need to increase many multiples to have any noticeable affect on the portfolio at the position sizing that I am leaning towards in my head.

Personally,   I think there are better ways of achieving the thrill, that being involved in some of these companies seems to have on some investors.  

That's probably my way of saying that there's too many balls up in the air here, and I'm not a particularly good juggler.


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## rcm617 (5 July 2014)

The Virgin Island address given by the majority of shareholders pre the IPO is the address for the Offshore Incorporations Centre in the BVI. Also used by some of the vendors of Eratat, so might be common practise in China.
Offshore Incorporations Centre, PO Box 957, Road Town, Tortola, British Virgin Island - See more at: http://www.offshore-inc.com/en/cont...tish-virgin-islands.html#sthash.6GOuHXv1.dpuf
The prospectus for Eratat can be found at http://www.convergingknowledge.com/UploadedImg/File/Prospectus/C-ChinaEratat-(Clean).pdf
Looks like it took them six years to get to the point where they got into trouble.


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## So_Cynical (5 July 2014)

rcm617 said:


> The Virgin Island address given by the majority of shareholders pre the IPO is the address for the Offshore Incorporations Centre in the BVI. Also used by some of the vendors of Eratat, so might be common practise in China.




Is a common practice in China and HK, i had a detailed look at the HK market last year and one of the stand out differences was the very high occurrence of foreign tax haven company registration, and not just little company's.


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## VSntchr (14 July 2014)

Lift off!

Just hit 10c....the selling seems to have stopped, for now.


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## skc (14 July 2014)

VSntchr said:


> Lift off!
> 
> Just hit 10c....the selling seems to have stopped, for now.




Still plenty of selling actually... that's why the volume was 25m shares traded. But the word is clearly out about this little Chinese fashion house going for PE <2. You have to say that the seller is finally behaving a bit more rationally. Waiting for the bids to come to it rather than just smashing them like he needed them sold yesterday.

Total escrow selling now over 50m excluding the last 3 days. So with over 40m traded in the past 3 sessions, escrow selling could be over 75-80m... Only one of those BVI entities in the top 20 had more than 22.5m shares, and no change in substantial holding has been filed so far. So...it suggests that quite a few of these individual BVI entities are selling.


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## Paavfc (16 July 2014)

I wonder why SBB listed on the ASX ??
Market credibilty.
ASX pushed hard to get the listing on their exchange. 
Founder and family probably have a property in Sydney they would like to spend more time at.

If there were doubts about the company how can the ASX allow a listing ?


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## skc (17 July 2014)

A poster KnowThePast took a position on SBB and generated some discussion on the company over in his thread. I have taken the liberty to link those posts here.

https://www.aussiestockforums.com/f...=26890&page=11&p=832740&viewfull=1#post832740

If you want to discuss the company please post in this thread. If you want to discuss KnowThePast's position etc then please do so in that thread.



McLovin said:


> Even more hilarious is he will stay with the company until the 4th of August to "assist with the transition". Is there some sort of all night supermarket that sells CFOs?




If they just want someone equally (un)qualified, there are plenty of those in any of the big accounting firms' offices. 



Paavfc said:


> I wonder why SBB listed on the ASX ??
> Market credibilty.
> *ASX pushed hard to get the listing on their exchange. *
> Founder and family probably have a property in Sydney they would like to spend more time at.
> ...




ASX pushed hard to get the listing? Where did you get that information and who did they have to fight with? 

ASX recently admitted FTH, Fifth Element Resources. 2 months and 7 price queries later, and they are now suspended by ASX. Again, I am not saying SBB must be a fraud, I am just saying that ASX can't know eveything.


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## skyQuake (17 July 2014)

Just had a look.

Commsec and Etrade biggest net buyers

Pershing and Citi biggest net sellers


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## galumay (17 July 2014)

More bad news on this one, http://www.asx.com.au/asxpdf/20140717/pdf/42qw3w9cs0y433.pdf


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## Paavfc (17 July 2014)

Sorry should have said DID the ASX push to get the SBB listing ?

CFO going could be a positive, a move to a more reputable experienced CEO..

All accounts are independently audited in Au so should be all OK there.

A lot of conspiracy theories with Chinese companies the ASX is only just getting used to them.

SBB is transitioning to an Au Company..


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## skc (18 July 2014)

KnowThePast said:


> There are 3 things that are concerns with this stock:
> 1. Minority holders selling out at any price.
> 2. CFO resigning.
> 3. A bunch of small things that essentially add up to - It's Chinese, and there been frauds with Chinese companies before.
> ...




1. Minority holders selling is the biggest redflag but I agree that there can be plausible reasons for it. The example you've given relates to one individual's particular circumstance. SBB is different in that 

a). 8 of the 11 minorities are selling (so highly unlikely that they are all distressed on their own accord).
b). They are just minority holders and not owner operator (so they are not tired from building the business for 20 years).
c). The 2012 report stated that Xu was the only director and owner of the business. By the time the share sale agreement was executed in Jun 2013, there were 11 entities plus the MD. So the minorities have only been holding for no more than 6 months (so highly unlikely that they've been waiting a long time for their liquidity).

So to me the probability suggests that something else is at play. One possibility is that it is the MD who's ultimately behind those minority entities and he's selling for reasons a), b) and c) above. But if that's the case it doesn't look good for him to hide his holdings across all these entities.

2. CFO resigning. It's not a good look and it's terrible timing, Yes he was a bit green and they glorified his pen portrait a bit, but on it's own it's not possible to draw any conclusions. May be he's just sick of all the HC posters calling the company to speak with him.

3. The fact that it is in China just makes it harder for the Australian investor to verify things. It doesn't change the intrinsic riskiness of the company on its own, but it should change how one approaches it.

So the question is... if there isn't the escrow selling redflag, are there any reasons to be suspicious? I think there are a few.

- The company is wildly profitable compared to most other listed fashion houses. Look up ratios like NPAT/sales, marketing expense/sales and ROE. 
- The IPO was only successful because of a single investor who bought 14,226,000 of the 21,738,000 IPO shares.
- The incomplete story on the company's premise and new head office building.
- There are some inconsistency with the 2012 dividend of RMB 63m declared (and supposedly paid according to page 2 of the Megarich report). On the balance sheet, dividends payable is zero. On statement of change in equity, dividends declared is RMB 63m. On the 2012 cashflow statement, dividends paid was RMB 50m (which is the 2011 figure). On the SBB annual report, dividend paid for 2012 was AUD $7.63m (RMB 63m) in the cashflow statement, which is contradictory to the figure in the 2012 Mega Rich report. And in note 26 of the annual report, dividend paid in 2012 was AUD $9.613m. There is no dividend cashflow for 2013. So is this dividend paid or not paid?
- There are some inconsistency with the related party cashflows. In 2012 MegaRich report, note 26a) and b), net cash of RMB 51,754,849 was advnaced to the MD. In 2012, the MD repaid RMB 2,518,962. Yet in note b), the balance of receivable changed from RMB ~65.5m in 2011 to 0 in 2012. Did the repayment take place? 
- Craft suggested that the dividend payable to the MD was netted against his cash advances... which is plausible, but it suggests a set of confused financial statements and serious mingling of private and company interest (which may be OK for a private company). It also doesn't explain how the receivables on the balance sheet (which I assume includes the MD's receivables one) remains such a large number for 2012.
- Grant Thornton's qualifying statements in the back of 2011 and 2010 Mega Rich reports. Basically stating that they were not appointed until 2012 so they can't verify the starting point of the financial statements.

These are the redflags independent of escrow selling. None of them is conclusive by any means. 

But putting everything together, to me it spells stay away.


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## studmuffin (18 July 2014)

Much kudos to SKC. This thing smells fishy as. I am headed over to HC to check out the mass delusion, hand holding and kumbaya chanting.


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## McLovin (18 July 2014)

Great post skc, you've really done your homework on this.


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## skc (18 July 2014)

McLovin said:


> Great post skc, you've really done your homework on this.




You might recognise that I stole quite a few of those points from your brain 

Just a bit of background... I first noticed this stock on 13 June when they got issued a speeding ticket. I looked casually at the numbers which looked really good. I thought that only one or two escrow holders were in liquidation mode and I was going to monitor the volume and buy when either the volume is exhausted or when a positive announcement was made. I also bounced ideas around McLovin... I presented all these points about how the business appears legit and that the MD himself isn't/can't sell. So I was actually on the other side of the fence for a while.

I traded it back on 26 Jun when the positive annoucnement came out, but the unreasonable price action following from that led me to investigate further. From then on it became more about satisfying my curiousity then anything else. 

And just to repeat... everything I've presented is for information only. They are not conclusive and they are not advice... it could all still very well be legit and above board, and I reserve my right to change side again should that be proven.


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## Paavfc (18 July 2014)

skc said:


> You might recognise that I stole quite a few of those points from your brain
> 
> Just a bit of background... I first noticed this stock on 13 June when they got issued a speeding ticket. I looked casually at the numbers which looked really good. I thought that only one or two escrow holders were in liquidation mode and I was going to monitor the volume and buy when either the volume is exhausted or when a positive announcement was made. I also bounced ideas around McLovin... I presented all these points about how the business appears legit and that the MD himself isn't/can't sell. So I was actually on the other side of the fence for a while.
> 
> ...




And what wouold convince you that this is a legit business ??

To me this is a Chinese Business transforming into an Australian business.

Could be good but no garuntees risk reward..


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## McLovin (18 July 2014)

Paavfc said:


> And what wouold convince you that this is a legit business ??




There's no single factor that changes it. You've got to take a holistic view, imo.



Paavfc said:


> To me this is a Chinese Business transforming into an Australian business.




Really? Aside from the listing in Australia, there's no real connection to Australia at all. These listing have almost become like a flag of convenience.


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## Paavfc (18 July 2014)

McLovin said:


> Really? Aside from the listing in Australia, there's no real connection to Australia at all. These listing have almost become like a flag of convenience.




More Au Directors and Management would be a start.
Even an Australian CFO would be great.

As insto's slowly take a position they will have more bargaining power to appoint to the board.

Just a market you want to be involved in, if successful could be very rewarding indeed...


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## craft (21 July 2014)

Muliple choice

A)	The CFO is competent and has resigned because he sees something rotten that he can’t fix and so his only option to save his reputation is resign.
B)	The CFO is incompetent which wasn’t picked up during the hurried recruitment of many staff to get the company listed but is now being dealt with.
C)	The CFO has resigned for personal reasons.


A)	The pre float investors know something that the buyers don’t and are selling at any cost?
B)	 The pre float investors are likely also major investors in Erartat given the similarity of industry and location. They are spooked by the similarities and mitigating risk, in light of their now likely locked in outcomes to Erartat.
C)	The pre float investors are really alternative identities for Mr Xu and this is a major fraud where Xu is shooting himself in the foot in regards to his 2 Year escrowed holding.

A)	All Chinese companies are fraudulent; they must seek listings on new exchanges to find new suckers.
B)	Because some Chinese companies are fraudulent, other legit companies will seek listing on international exchanges with tighter governance practices to try and build legitimacy.
C)	The ASX has woeful governance practices

A)	This is a fraud – the investment will be worth nothing, and nothing will be recovered from the auditors or their insurance despite them having to be totally negligent or fraudulent for this outcome to occur.
B)	This is a potentially O.K company priced accordingly with the currently known/feared risks.
C)	This is an awesome company priced ridiculously cheaply and everybody buying is going to be fabulously rich tomorrow.


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## KnowThePast (22 July 2014)

No question, SBB is a stock with plenty of risks associated with it. I think these risks have been described very well by others, skc in particular, so I won’t dwell on them further.

Those risks, in my mind, are very real, and those that are not prepared for a very real chance of total loss on this investment should read no further. For those like me, who are prepared to take lots of small bets on opportunities such as these, read on.

Are the warning signs so bad that one shouldn’t invest in SBB at any price? Is it completely worthless to a rational investor? Clearly not, there’s no evidence of outright fraud, not yet anyway. So, I’ve tried to work out what the valuation should be for this company, and then decide whether the current price factors in the risks. 

Current numbers:
Price/Earnings: 2
Price/Book: 0.66
Price/Sales: 0.36
ROC: 32%
Current Assets – Total Liabilities: $38m
Market cap: $28m

First thing that jumps out is that it’s a “net-net”, trading at a 26% discount to its cash backing. In theoretical case of liquidation $10m is a profit made by the investor and the 26% discount are the odds that you take that this is not a fraud. I never liked this approach, because in practice this never happens. At the same time, buying “net-nets” has always been a good investment strategy.

So, let’s now assume that things are as they are presented. A growing company, currently generating profits of $13.9m/year. I will disregard any growth here, not my thing. Being an average company with average prospects, I would suggest a PE of 12. But, and this is a big but, Chinese companies do not trade on the same multiples as Australian companies. They are always substantially discounted. This one might change the trend, but I wouldn’t count on it. So, I would assume a PE of 6, and that is assuming everything in the report is true, things are rosy, and the profit remains the same or grows.

The next big question for me, however, is how sustainable these numbers are. As skc and others have pointed out, they are very high. I don’t necessarily think they are suspiciously high – a) small private companies before listing generally have better performance. B) some retailers in Australia have/had similar margins. C) SBB is in a growing and less mature market.

But one must ask what if the numbers were only temporary, perhaps “adjusted” for the float. What if this is just another commodity business in a highly competitive industry? In that case, Price/Book would be the starting point of analysis to work out the replacement cost of capital. Which is usually a little higher for businesses such as these, because brand name, designs, contacts, etc. are not recorded on the balance sheet. Without doing much research, I will assume a valuation equal to Price/Book of 1.25.

So, here’s what we have:





To me, 26%-67% discount is substantially greater than what I think the odds of fraud are. As I mentioned, liquidation play is not something I seriously consider, so for me the discount is closer to 48%-67%.
The discount to valuation could be treated as substitute for odds of fraud, but it’s not that simple. There are other businesses also selling at a discount, without suspicions of fraud, so it must be compared to them. At the same time, looking at other businesses in the same price range, they are either making a loss, or have other serious issues with them. 

All in all, I see an opportunity with a fair risk/reward ratio. I certainly do not see it as a once in a life time opportunity, but one that fits in well with *my* investment strategy. To me, it's similar to the psychological tests where you chose whether to flip a coin or not when heads gets you $100, tail loses you $90. As long as you don't bet large amounts, you want to make as many of these bets as possible. 

Whatever the outcome, this one's been fun and I am sure it will provide lots of valuable lessons.


P.S. Minority sellers could be all one person, but not necessarily the CEO. It could be a single other person operating under different names. In which case, Xu doing anything suspicious, and there aren't multipe holders trying to get out at one time. Just another options to add to craft's excellent questionnaire.


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## Garrett (22 July 2014)

Great post KTP.

That's about how I see it too; the investment would seem to be risky, but if I can find a lot of investments with decent risk/payout ratio then I should do okay overall.

I have a large proportion of my money in the boring stocks, but it's fun to have a few speculative ones too.

DYOR.

Cheers


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## galumay (22 July 2014)

KnowThePast said:


> .....Whatever the outcome, this one's been fun and I am sure it will provide lots of valuable lessons.




An interesting post outlining your thoughts on SBB, KTP. 

For me the previously documented issues make it too likely that there is something fraudulent going on.

The other thing that tickles my inate intuition against this one is simply the old adage that "if its too good to be true, its likley too good to be true - the PE ratio, book value, net tangible assets, all add up to a picture that is truly too good to be true.

I too am happy to speculate with small positions occasionally, but I need to have some confidence in not losing all my stake, and I cant find that here.


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## So_Cynical (22 July 2014)

KnowThePast said:


> No question, SBB is a stock with plenty of risks associated with it. I think these risks have been described very well by others, skc in particular, so I won’t dwell on them further.
> 
> Those risks, in my mind, are very real, and those that are not prepared for a very real chance of total loss on this investment should read no further. For those like me, who are prepared to take lots of small bets on opportunities such as these, read on.
> 
> Are the warning signs so bad that one shouldn’t invest in SBB at any price? Is it completely worthless to a rational investor? Clearly not, there’s no evidence of outright fraud, not yet anyway.




So having said all that, in the absence of evidence of outright fraud...you crunch the numbers anyway. 

And this is why the fraudsters continue to do what they do...bait the hook and wait for the particular fish that is interested/susceptible in/to your bait to come along.


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## skc (22 July 2014)

KnowThePast said:


> But, and this is a big but, Chinese companies do not trade on the same multiples as Australian companies. They are always substantially discounted. This one might change the trend, but I wouldn’t count on it. So, I would assume a PE of 6, and that is assuming everything in the report is true, things are rosy, and the profit remains the same or grows.




Take a look on the SGX. There is a group of shares known as S-chips which are essentially Chinese companies listed in Singapore. Collectively they do trade on pretty low single digit PE's (the attached link is a bit dated). 

http://www.nextinsight.net/index.ph...-dividend-paying-stocks-at-book-value-or-less

Perhaps a good quantitative research there could help guide the % chance of fruad and longer term PE etc.



KnowThePast said:


> All in all, I see an opportunity with a fair risk/reward ratio. I certainly do not see it as a once in a life time opportunity, but one that fits in well with *my* investment strategy. To me, it's similar to the psychological tests where you chose whether to flip a coin or not when heads gets you $100, tail loses you $90. As long as you don't bet large amounts, you want to make as many of these bets as possible.




Good analogy (I was going to use it myself), albeit not a psychological test, but simply a logical/mathsmatics proposition. 



KnowThePast said:


> P.S. Minority sellers could be all one person, but not necessarily the CEO. It could be a single other person operating under different names. In which case, Xu doing anything suspicious, and there aren't multipe holders trying to get out at one time. Just another options to add to craft's excellent questionnaire.




Yes. Entirely possible.



craft said:


> Muliple choice




The mulitple choices are not MECE (mutually exclusive and collectively exhaustive) so I don't know if it's particularly useful in aiding decision or assigning probability. The only MECE set one can derive is at the top level, as you had it earlier, that this is either a fraud or not a fraud.

It is however helpful to highlight the possible positive outcomes under the different headings.



Paavfc said:


> And what wouold convince you that this is a legit business ??




The reverse of what made me uncomfortable holding it. E.g.

- Several periods of consistent results / dividends.
- Escrow stops selling / major holders buying.
- Answers to questions like "What's the deal with the office tower / 2012 dividends / trade receivables etc?"



Paavfc said:


> To me this is a Chinese Business transforming into an Australian business.




It's not transforming anything. It's a Chinese business listed on the ASX. Nothing more than that. If some improved governence brushes off that'd be a major achievement.


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## KnowThePast (22 July 2014)

So_Cynical said:


> So having said all that, in the absence of evidence of outright fraud...you crunch the numbers anyway.
> 
> And this is why the fraudsters continue to do what they do...bait the hook and wait for the particular fish that is interested/susceptible in/to your bait to come along.




Hi SC,

You bring up a good point - if this is a fraud, the numbers are useless. 

But, if you think there's a chance that it's not, than surely there are odds that are worth betting on.

Clearly, you think the current price is too much. Would you buy the entire company for $1 though? If the answer is yes, than clearly the valuation would be between $1 and the current market price of $28m.

How much then do you think it's worth, and what method of valuation would you suggest in a case like this?


The thing is, I find myself in perfect agreement with yourself, skc, and all other skeptics. Psychologically, my gut feel tells me to stay away. But writing things down, and working through the numbers, it stacks up as a good bet in my eyes. And I've learnt to trust that more than my gut feel.


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## galumay (22 July 2014)

KnowThePast said:


> and working through the numbers, it stacks up as a good bet in my eyes.




The numbers are TOO good! Thats the biggest problem for mine - and what i reckon makes it a really bad bet!

I see your larger point though, you are risking capital you are prepared to lose, on the chance that its not a shonky and you can profit from the deal. 

You have posted your reasons in good faith and a few of us have posted a contrary view, its a good learning opportunity for all and time will tell how it works out.


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## So_Cynical (22 July 2014)

KnowThePast said:


> Hi SC,
> 
> You bring up a good point - if this is a fraud, the numbers are useless.
> 
> But, if you think there's a chance that it's not, than surely there are odds that are worth betting on.




For me the first decision to be made has to be 'is it a fraud or not'? just like pregnancy one cannot be half pregnant just as a company cannot be a half or sort of a fraud...it one or the other.




KnowThePast said:


> I've learnt to trust that more than my gut feel.



 Fair enough, im a big believer in the gut.


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## McLovin (22 July 2014)

So_Cynical said:


> For me the first decision to be made has to be 'is it a fraud or not'? just like pregnancy one cannot be half pregnant just as a company cannot be a half or sort of a fraud...it one or the other.




I actually think there is a real business there. It's not really in doubt that they are selling these products and they have stores/concessions. I just don't know if everything being presented is an accurate portrayal of that business.


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## KnowThePast (23 July 2014)

galumay said:


> The numbers are TOO good! Thats the biggest problem for mine - and what i reckon makes it a really bad bet!






So_Cynical said:


> For me the first decision to be made has to be 'is it a fraud or not'? just like pregnancy one cannot be half pregnant just as a company cannot be a half or sort of a fraud...it one or the other.




So what you guys are telling me, is that you are 100% sure it is a fraud, and no price is low enough to compensate for that risk?

Yes, just like pregnancy, the fraud is either there or not. But as an outsider, at an early stage of the process, I am looking at a small bump and wonder whether saying congratulations may offend them.


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## galumay (23 July 2014)

KnowThePast said:


> So what you guys are telling me, is that you are 100% sure it is a fraud, and no price is low enough to compensate for that risk?




Where have i said that I am 100% sure its a fraud? Overall there are many clues that all is not above board with this company, taken as a whole I believe there is something fraudulent about the amazing figures that are published for this company.

Its not about how low the price is, price is actually irrelevant to me in considering gambling with a speccy, its about position size given that i am only prepared to spend as much money as I am prepared to lose, and normally that is $2K.

But I still need some confidence that I am not automatically going to lose the money, otherwise I may as well light a fire with the $2k - and I dont have that confidence in SBB. Secondly by its nature a speccy bet needs to entice me with the possibility of a pretty high pay out to make it worth even bothering with, probably potential to be a multi-bagger, with SBB I see it will either turn out to be a fraud, or it will turn out to be a successful clothing company - and I dont see multi-bagger potential there!


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## craft (23 July 2014)

KnowThePast said:


> All in all, I see an opportunity with a fair risk/reward ratio. I certainly do not see it as a once in a life time opportunity, but one that fits in well with *my* investment strategy. To me, it's similar to the psychological tests where you chose whether to flip a coin or not when heads gets you $100, tail loses you $90. As long as you don't bet large amounts, you want to make as many of these bets as possible.




I reckon that is spot on. Very similar to how Howard Marks thought about and made good money from Junk Bonds.
A portfolio of these things is less risky then a one off play and if you are building a portfolio of these things then SBB belongs in it even if your gut tells you otherwise. Its not about being right on any one outcome, its about correctly pricing risk/reward and positioning for unknowable future outcomes.


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## craft (23 July 2014)

skc said:


> The mulitple choices are not MECE (mutually exclusive and collectively exhaustive) so I don't know if it's particularly useful in aiding decision or assigning probability. The only MECE set one can derive is at the top level, as you had it earlier, that this is either a fraud or not a fraud.
> 
> It is however helpful to highlight the possible positive outcomes under the different headings.




Not meant to be a MECE exercise. the answer could just as easily be D,E,F - Z.

The point is that any 'conclusion' you reach with imperfect information could just as easily be explained by another plausible explanation.  Facts you don't have to question, but opinions, which is what we form when evaluating imperfect or insufficient information need inverting. that's the purpose of the multiple choice exercise.


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## craft (23 July 2014)

KnowThePast said:


> Yes, just like pregnancy, the fraud is either there or not. But as an outsider, at an early stage of the process, I am looking at a small bump and wonder whether saying congratulations may offend them.




That's funny.


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## craft (23 July 2014)

galumay said:


> The numbers are TOO good! Thats the biggest problem for mine - and what i reckon makes it a really bad bet!




Too good to be true IS a great concept to protect yourself against possible scams and fraud. 

But balance it with the famous efficient market analogy.

A finance professor and a student who come across a $100 bill lying on the ground. As the student stops to pick it up, the professor says, "Don't bother - it if were really a $100 bill, it wouldn't be there."


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## galumay (23 July 2014)

craft said:


> Too good to be true IS a great concept to protect yourself against possible scams and fraud.
> 
> But balance it with the famous efficient market analogy.
> 
> A finance professor and a student who come across a $100 bill lying on the ground. As the student stops to pick it up, the professor says, "Don't bother - it if were really a $100 bill, it wouldn't be there."




Its not a great analogy, with a share the risk is its a fraud or there is someother reason for the apparent massive mispricing, the CONSEQUENCE is potentially total capital loss.

With the $100 dollar bill the risk is its not real, the consequence is the effort of bending down!

Risk always needs to be considered with consequence.


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## So_Cynical (23 July 2014)

KnowThePast said:


> Yes, just like pregnancy, the fraud is either there or not. But as an outsider, at an early stage of the process, I am looking at a small bump and wonder whether saying congratulations may offend them.






craft said:


> That's funny.




I loled 

I haven't said its 100% fraud and that's because i don't know, but i do know that if there is any genuine doubt then one has to err on the side of caution, or be prepared to lose 100% straight up.


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## craft (31 July 2014)

If SBB was too good to be true – it just got gooderer with the latest 4C.

OCF for the 6 months to date:  $10.6 Million.
Investment in Non Current Assets (New stores): $1.7 Million
Net repayment of debt 3.8 Million
Dividends 290K
Net increase in cash of $4.8 Million before FX
Cash at end of quarter $30.5 Million.
The Australian chairman signed this quarterly.

Market Cap 38 Million (as at yesterdays close)


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## skc (31 July 2014)

craft said:


> If SBB was too good to be true – it just got gooderer with the latest 4C.
> 
> OCF for the 6 months to date:  $10.6 Million.
> Investment in Non Current Assets (New stores): $1.7 Million
> ...




The 4c is largely consistent with the last two updates provided by the company. Now there should be a clean run between now and the actual report date. Let's see if the inside escrow holders would stand back and let the price rise for a change.


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## craft (1 August 2014)

skc said:


> The 4c is largely consistent with the last two updates provided by the company. Now there should be a clean run between now and the actual report date. Let's see if the inside escrow holders would stand back and let the price rise for a change.







Equivolume Chart

The escrow sellers have now had/created decent volume for a while to assist their exit – how much is left?

The 4c confirms that they are on something ridiculous like an OCF/EV of ~ 1.

Chart is likely to pop today into something that looks appealing to trend/momentum followers.

Should be a interesting day – If a good day doesn’t happen here then that would say something significantly negative.


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## VSntchr (1 August 2014)

Steaming ahead....volume looks stronger than the last pump up (and crash).
Latest 4C looks to have provided a sentiment shift. As craft says, a new group of traders will be all over this one now...it's not getting any less emotional yet!


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## skc (1 August 2014)

craft said:


> The escrow sellers have now had/created decent volume for a while to assist their exit – how much is left?




There were 190m shares that came out of escrow. Of the 8 entities that have been selling they held a total of 118.8m shares. As of 16 Jul (minus 3 days) they have sold around 65m shares collectively. I haven't seen an updated share registry since but broker activity suggests that another 11m or so have been sold up until 3 days ago. So if these 8 entities want to reduce their holdings to zero there are ~43m shares left. But if they don't sell to zero, or other entities start to sell, then it's anyone's guess. 

Comsec/Etrade have donminated trading in the past 3-4 weeks so the secret of "best value stock on the ASX" is well and truely out. The volume today is massive so plenty of liquidity for the escrow sellers should they chose to take them up... and every indication suggests that they are active today.

Initially the aggressiveness of the escrow sellers made it look like this company was going to blow up straight away. But looking at some of the known frauds on the SGX, they all seem to last quite a few years. So I don't really have a view as to the timing on when things might be clearly revealed one way or another.

Craft, how about a little wager? In 5 years time, say upon the release of FY19 results, if SBB remains listed and everything appears above board, I will find a way to buy you a Pandist leather jacket (I hope they have online sales sorted by then). You'd look really awesome in it I am sure. 




If it's the other way round, I will let you figure out what you'd like to offer in return.


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## craft (1 August 2014)

skc said:


> Craft, how about a little wager? In 5 years time, say upon the release of FY19 results, if SBB remains listed and everything appears above board, I will find a way to buy you a Pandist leather jacket (I hope they have online sales sorted by then). You'd look really awesome in it I am sure.




Sorry no bet.  Barely got enough visibility to see where to put the next step let alone 5 years, Besides I only wear fur.


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## Ves (1 August 2014)

Lol,  SKC great picture. 

Is it unusual for 10% of the company to change hands on a day that there was a "positive announcement" released?  Looks highly unusual,   any other examples in other companies out of curiosity?  (Not that it necessarily has to mean anything,  just bored on a Friday afternoon).

PS: Assuming that another 12m shares change hands today, which is likely given the trading so far.


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## craft (4 August 2014)

Have sold 230K @ .15 which returns my original capital – This little ‘mental trick’ allows me to more happily hold the remainder and await more information on what is still essentially a two way bet. 
Legit or not legit.


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## McLovin (4 August 2014)

craft said:


> Have sold 230K @ .15 which returns my original capital – This little ‘mental trick’ allows me to more happily hold the remainder and await more information on what is still essentially a two way bet.
> Legit or not legit.




Well played, sir. That's a tidy profit for a couple of weeks work.

Funnily enough I was at lunch on Friday at the topic of discussion was SBB.


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## skc (4 August 2014)

craft said:


> Sorry no bet.  Barely got enough visibility to see where to put the next step let alone 5 years, Besides I only wear fur.




I understand. Wearing that jacket would be more a punishment than a reward anyway.



craft said:


> Have sold 230K @ .15 which returns my original capital – This little ‘mental trick’ allows me to more happily hold the remainder and await more information on what is still essentially a two way bet.
> Legit or not legit.




Nice trade. (Your portfolio is a lot bigger than I assumed).


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## craft (4 August 2014)

skc said:


> I understand. Wearing that jacket would be more a punishment than a reward anyway.
> 
> 
> 
> Nice trade. (Your portfolio is a lot bigger than I assumed).




The 230K is number of shares not $.

Lucky more then anything else. With the information at hand on entry the outcome could have gone either way.  But not much I do is on a time frame conducive to posting about – so it’s nice that this one that fit the time frame for a live show didn’t blow up (so far).  To finish this little exercise off I just need to manage complacency with overreaction as I let the story unfold with the remaining lot - Until that lot is sold there is no 'economic' realised profit and SBB is a long way from my type of long term hold company yet.


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## Paavfc (4 August 2014)

McLovin said:


> Well played, sir. That's a tidy profit for a couple of weeks work.
> 
> Funnily enough I was at lunch on Friday at the topic of discussion was SBB.




Please share what was said at this lunch


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## McLovin (5 August 2014)

Paavfc said:


> Please share what was said at this lunch




Nothing too exciting. 

I see they found a CFO, just in the nick of time too! They're quite vague about her experience. But from LinkedIn, it appears this is her...

http://au.linkedin.com/pub/susan-zhang/25/788/390


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## ROE (5 August 2014)

just read this thread and see all the value investors on this forum pile in
so I take a peek and see what is all the commotion 

Good luck and nice to see you guys making profit, not enough to tempt me


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## goccipgp (5 August 2014)

The company says it received $1,000 in interest during the quarter, on an average cash balance of over $30 million. That equates to an interest rate of 0.006%. The technical chart (at au stoxline) shows support between 0.06-0.05 with the next serious resistance at 0.159-0.22.


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## skc (5 August 2014)

Looks like the fool is having a bit of crusade against SBB.

http://www.fool.com.au/tickers/asx-sbb/

Interesting to see the latest registry on the other site.

- Citi now holds ~80m shares, which are transferred to them from the "seed investors". How are they going to dump this lot?
- How come Grace Trend Management (5%+) transferring its share to Citi doesn't require a change in substantial holder notice?
- Even Ms Shan Shan Hong has sold down 4m shares. She's NOT a pre-IPO investor. She "paid" 20c a pop in the IPO. 

There's not much to say about the new CFO, except that she seems equally underqualified to be a CFO, if she's indeed the person in the LinkedIn profile found by McLovin. 

And I love this...



> The Board and Management look forward to working with Susan to further Sunbridge's solid financial position




Seriously?! Sunbridge's balance sheet needs strengthening? It has $30m in the bank and made $10m cash in the half year. Which planet's CFO would come into this job with the emphasis on strengthening the balance sheet?


----------



## McLovin (5 August 2014)

skc said:


> There's not much to say about the new CFO, except that she seems equally underqualified to be a CFO, if she's indeed the person in the LinkedIn profile found by McLovin.




I'm pretty sure it's her. Masters of Accounting from Monash and then the job titles match pretty closely with what press release says her experience is. Accounting, bank, global investment manager.

Completely underqualified to be a CFO.


			
				skc said:
			
		

> Seriously?! Sunbridge's balance sheet needs strengthening? It has $30m in the bank and made $10m cash in the half year. Which planet's CFO would come into this job with the emphasis on strengthening the balance sheet?




This is funnier I thought...



> Sunbridge Managing Director Mr Xu Jia Yin commented: “We are very pleased to be appointing someone with Susan’s qualifications and experience to the role of Chief Financial Officer.”


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## Miner (5 August 2014)

McLovin said:


> I'm pretty sure it's her. Masters of Accounting from Monash and then the job titles match pretty closely with what press release says her experience is. Accounting, bank, global investment manager.
> 
> Completely underqualified to be a CFO.
> 
> ...




I think we are missing the point.
A smart CEO needs a scape goat. So hire an incompetent subordinate to take the blame.
It does not matter what others think but CEO needs to run own show. Often a very clever CFO could be a threat. So in that his choice was good


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## craft (7 August 2014)

One upside to doing a little research on a Chinese company.

The ASF adds I'm now matched too have improved.


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## Ves (7 August 2014)

craft said:


> One upside to doing a little research on a Chinese company.
> 
> The ASF adds I'm now matched too have improved.




Yeah,  I'm getting them on blogs / other forums,  anything with advertising.   Probably not a good look in the office...


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## skc (23 September 2014)

SBB trading strongly today, up 28% on 41m shares on the back of a major announcement.

Actually, it's not a major announcement. It simply showed the numbers from the half-year again, and a photo of the Aussie directors and Chinese CEO in front of the "new" office building. 

There are a few gems in the announcement that was just simply delightful.



> ...is pleased to *confirm *the strong trading performance for the half year period ended 30 June 2014




Confirm the HY numbers? Really? They were *reported*. Why do they need to be confirmed?



> With a strong balance sheet and solid cash reserves, Sunbridge is well placed to pursue further growth for our shareholders in the second half of 2014, while maintaining our *conservative approach to gearing levels.*




Gearing levels? SBB supposed to have $30m cash in the bank. You can't be geared more conservatively than that!



> The Directors are pleased to confirm that the offices are in the final stages of fitout and construction of the new warehousing facility is well advanced. The *cost of this construction has been expensed *in the first half.




Cost of construction expensed? Really? Who on earth expense construction cost of the building? And if that's the case, why did they not explain that in the HY report? 



> Sales for the second half are expected to remain stable with margin and sales growth expected.




So is the second half stable? Or growing? 




Are those two Chinese executives wearing their own brand?

Lastly, there's an interesting news last week of a German-listed Chinese footwear company boss apparently running away with the company's cash, only to resurface a few days later to say he just lost his phone while on holiday! He also said he will pay back the cash (so he did take it?!). 

http://www.shanghaidaily.com/national/I-lost-my-phone-says-missing-CEO/shdaily.shtml

https://au.news.yahoo.com/world/a/2...urt-exchanges-china-dream-turns-to-nightmare/


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## VSntchr (23 September 2014)

skc said:


> So is the second half stable? Or growing?




Yeah exactly! 
For a statement that was obviously delivered to try and calm down the anxious investors (HC still going nuts over this) who have no doubt been firing a million emails to the company...could it have been any more unclear!!


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## galumay (24 September 2014)

You guys are so harsh! The minor inconsistencies were obviously just an outcome of using google translate for the announcement, it could happen to anyone.


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## skc (1 October 2014)

SBB released an investor presentation after market close yesterday.

The most interesting news in there is that they are going to spend $4m acquiring company-owned stores (with aim to go to 70 stores by end of 2014) and then spend $9m renovating them.

$9m for 70 stores = $135k per store.
Last year average NPAT per store = $33k.

I hope this is not a page out of Eratat's renovation subsidy playbook.


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## McLovin (1 October 2014)

skc said:


> SBB released an investor presentation after market close yesterday.
> 
> The most interesting news in there is that they are going to spend $4m acquiring company-owned stores (with aim to go to 70 stores by end of 2014) and then spend $9m renovating them.
> 
> ...




Err...you can apparently construct and fit out an 8 storey building _from scratch _for $2m but a store fitout costs $135k.


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## VSntchr (1 October 2014)

skc said:


> SBB released an investor presentation after market close yesterday.
> 
> The most interesting news in there is that they are going to spend $4m acquiring company-owned stores (with aim to go to 70 stores by end of 2014) and then spend $9m renovating them.
> 
> ...




As soon as I saw the capex page my initial reaction was that this would be a good way for them to flush some imaginary cash.


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## skc (1 October 2014)

skc said:


> $9m for 70 stores = $135k per store.
> Last year average NPAT per store = $33k.




It's all OK. There's an amendment. The $9m is earmarked to be invested in store renovations in general, not just company-owned stores. Oh wait... that's still no good. Those stores are franchise stores... why is SBB paying for their renovations? It is sounding even more like Eratat's renovation subsidy. 



McLovin said:


> Err...you can apparently construct and fit out an 8 storey building _from scratch _for $2m but a store fitout costs $135k.




Yes. Even though the said building has been under construction some time before 2014, they made it sounds like it started in H1 2014. Apparently they also expensed all the warehouse upgrading. 



VSntchr said:


> As soon as I saw the capex page my initial reaction was that this would be a good way for them to flush some imaginary cash.




They are innocent until proven guilty so I can't conclude whether they are imginary or not. But the balance will be a lot lower after the capex plan, and it will be difficult to verify where it all went.


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## KnowThePast (2 October 2014)

skc said:


> It's all OK. There's an amendment. The $9m is earmarked to be invested in store renovations in general, not just company-owned stores. Oh wait... that's still no good. Those stores are franchise stores... why is SBB paying for their renovations? It is sounding even more like Eratat's renovation subsidy.




skc, I think the amendment was to say that $9m is to be spent on all their stores, not just ones they will acquire - no mention of franchise stores.

There, see, the company is totally legit. 

Now, I still have my doubts and I think this story will not play out fully for another couple of years. I also agree that some things look suspicious, but I also think that you could find something at least as suspicious about any other listed company if you tried hard enough. 

Anyone has an idea on how much a store fit out can cost in China? Renovations, lease payments, new inventories, etc? $130k is very cheap for Australia, but I have no idea what the expectation would be in China.

I also think comparing cost of a fit out with cost of construction is apples vs oranges. But even if we go along with it, assuming a comparable fit out in Australia costs $500k, an 8 storey building in Australia would then cost $7.4m. Is this totally unreasonable? I offer no opinion here, not my area of expertise, just asking about it.

I hold a little.


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## skc (2 October 2014)

KnowThePast said:


> skc, I think the amendment was to say that $9m is to be spent on all their stores, not just ones they will acquire - no mention of franchise stores.




When I say "franchise" stores (which is not a term they've used, but they do use the Chinese equivalent term according to Google Translate) I meant all the stores that are not owned stores. They said there are 420 stores selling their stuff, and they plan to acquire up to 70 by the end of the year. That leaves 350 "franchise" stores (or whatever is the right term). 

These 350 stores are not owned by SBB. There's probably some contract for SBB to supply products and the store owner to sell them, and there is probably some lose guidelines on price, presentation, sell practice, promotions etc. 

So what is your understanding of their announcement? Are they renovating 70 or 420 stores? My take was that the initial announcement meant 70, and the subscquent amendment meant 420.



KnowThePast said:


> Anyone has an idea on how much a store fit out can cost in China? Renovations, lease payments, new inventories, etc? $130k is very cheap for Australia, but I have no idea what the expectation would be in China.




They said renovation... so in store display, lighting, shelves and racks, flooring, signs etc. If you push it you can argue POS terminals and IT systems, but I wouldn't lump the cost of lease payment and inventories into the sum.

Just compare the sum to average sales and profit per store.

So... if $9m is to renovate own store (70) only, then the bill is way too high (compared to average store sales). And if $9m is to renovate all 420 stores, then the question is why they are paying for it.

And even all this spend is legit... what incremental sales and profit can you get by spending this money? They seem to have been travelling splendidly for some time with incredible ROE. Why this massive injection now?


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## KnowThePast (2 October 2014)

skc said:


> When I say "franchise" stores (which is not a term they've used, but they do use the Chinese equivalent term according to Google Translate) I meant all the stores that are not owned stores. They said there are 420 stores selling their stuff, and they plan to acquire up to 70 by the end of the year. That leaves 350 "franchise" stores (or whatever is the right term).
> 
> These 350 stores are not owned by SBB. There's probably some contract for SBB to supply products and the store owner to sell them, and there is probably some lose guidelines on price, presentation, sell practice, promotions etc.
> 
> ...




Hi skc,

The wording is:

4th bullet point 1st sub-bullet point should read as “$9.0 million to be invested in store renovations”, instead of
“$9.0 million to be invested in store renovations which will be acquired”

To me it sounds like the first one meant the 46 new stored that are planned to be acquired. The second one meant those 46 plus 24 they already own, for a total of 70.

I don't have enough experience here to judge costs, but taking a few years to return capital invested does not seem unreasonable. Has anyone done research on lines of KMD, ORL, etc. to offer an opinion on how much fitouts costs here?


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## skc (2 October 2014)

KnowThePast said:


> To me it sounds like the first one meant the 46 new stored that are planned to be acquired. The second one meant those 46 plus 24 they already own, for a total of 70.




Your interpretation is as good as mine. But if you are right than it's $130k per store renovating costs.



KnowThePast said:


> I don't have enough experience here to judge costs, but taking a few years to return capital invested does not seem unreasonable. Has anyone done research on lines of KMD, ORL, etc. to offer an opinion on how much fitouts costs here?




What you are interested in is incremental return, not total return. So it's not like they are investing $130k to earn $35k (average NPAT per store) per year. They are earning that already. What they are doing is spending $4m+$9m to acquire then renovate ~70 stores in hope that this will earn higher returns. There aren't enough details available to assess whether it is worthwhile.

Without knowing the size and location of the stores being acquired, you cannot judge whether fitout costs are high or low. Costs by KMD/ORL are not based in China so are not terribly comparable.


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## McLovin (2 October 2014)

KnowThePast said:


> I don't have enough experience here to judge costs, but taking a few years to return capital invested does not seem unreasonable.




A store fit-out lasts anywhere from 2-10 years. The average is probably around 5 years unless you've invested a lot in the design phase for something that will last longer but even then high traffic areas won't usually last that long without looking tatty.


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## KnowThePast (2 October 2014)

skc said:


> Your interpretation is as good as mine. But if you are right than it's $130k per store renovating costs.
> 
> 
> 
> ...




That's an excellent point and you are right, we certainly don't have enough information to judge whether it is a good decision.



McLovin said:


> A store fit-out lasts anywhere from 2-10 years. The average is probably around 5 years unless you've invested a lot in the design phase for something that will last longer but even then high traffic areas won't usually last that long without looking tatty.




Thanks McLovin. And how does $130k/store sound to you compared to Australia?


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## McLovin (2 October 2014)

KnowThePast said:


> Thanks McLovin. And how does $130k/store sound to you compared to Australia?




It depends on store size. Cost is usually somewhere between $1,000-$2,000/sqm.

But I think skc is on the money, where is the value in doing these renovations? If they said we're going to give the stores a lick of paint and get the floorboards redone you could understand, but spending $135k on what are already highly profitable stores does seem to raise a few questions.


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## KnowThePast (2 October 2014)

McLovin said:


> It depends on store size. Cost is usually somewhere between $1,000-$2,000/sqm.
> 
> But I think skc is on the money, where is the value in doing these renovations? If they said we're going to give the stores a lick of paint and get the floorboards redone you could understand, but spending $135k on what are already highly profitable stores does seem to raise a few questions.




I agree with you guys, there's certainly not enough information to make sense of this.

Could the stores be run down, and the time has come for a major refurbishment? Perhaps that was part of the reason behind the listing? 

All questions and no answers.


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## McLovin (3 October 2014)

KnowThePast said:


> Could the stores be run down, and the time has come for a major refurbishment? Perhaps that was part of the reason behind the listing?




These guys have more cash than they know what to do with, even without the IPO (which was only 20m shares).


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## ghotib (30 December 2014)

Anyone still in this? What do you make of the resignation today, effective today, of director Andrew Plympton? The holiday market obviously didn't like it but I'm wondering if that's reflex or if someone knows what's behind it.

I've dipped a toe into trading with this stock but I don't hold it at the moment.


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## craft (4 January 2015)

ghotib said:


> Anyone still in this? What do you make of the resignation today, effective today, of director Andrew Plympton? The holiday market obviously didn't like it but I'm wondering if that's reflex or if someone knows what's behind it.
> 
> I've dipped a toe into trading with this stock but I don't hold it at the moment.




Picked a few up a while ago for a feel but have since put them back down. Just way too hard for me get a handle on and I'm not into holding small parcels for a long time.

Its probably going to end in tears. (but maybe, just maybe it might not). Trade it Technically or Position size it appropriately for the risk in a diversified portfolio and ignore the noise, would be about the best ways to play it if you were so inclined.


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## Ves (4 January 2015)

Outside of the obvious company announcements and speculation over fraud there are a few other interesting notes I have come across on this company   (I follow it mainly to observe the investor psychology of others on another forum -  mainly entertainment purposes).

The capex disclosure going forward is pretty hazy... and it's hard to forecast how much cash will be left,  especially if earnings don't hold up.  Moving from franchising to store ownership would come with additional working capital costs I believe and a delay in the cash flow cycle...  and if the current stores are in need of renovations (on top of expansion) there would be a decent cash burn.  There are a few listed peers on the US stock exchanges from memory  and their profitability has been in a bit of a tail-spin  (holders would probably need to investigate this).  

There is a bit more outside of the corporate governance and fraud speculation to this one IMO.


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## shouldaindex (8 January 2015)

There's a few stocks over there that seem to have their holders in Stockholm Syndrome, so to speak.

It's an absolutely fascinating study of the human mind.  

I'm beginning to work on a philosophy to incorporate into my investing that can take advantage of the extremes.


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## Ves (29 January 2015)

Could you imagine a SBB exclusive version of Gogglebox for the crowd over at Hotcopper?


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## McLovin (9 February 2015)

Pierpont did a column on SBB on Friday.



> PIERPONT
> Thanks to the boom in Chinese trade, Australia now bristles with China experts. But don't include Pierpont in that number, because your doddering correspondent doesn't even understand how Chinese companies do business.
> 
> They seem to have their own quaint ways, which are as mystical to Pierpont as Zen Buddhism. Take, as an example, Sunbridge Group (SBB), which listed on the ASX in November, 2013.
> ...




Full article here...

http://www.afr.com/p/business/companies/sunbridge_group_investors_are_owed_GSwn9lyw0gUXWrh6dE7kZI


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## skc (9 February 2015)

McLovin said:


> Pierpont did a column on SBB on Friday.
> 
> Full article here...
> 
> http://www.afr.com/p/business/companies/sunbridge_group_investors_are_owed_GSwn9lyw0gUXWrh6dE7kZI




Thanks. I didn't see it last week. Looks like he's researched this and the other forum a bit.

But I am sure the supporters will think he's just downramping to secure some cheap share himself.


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## galumay (9 February 2015)

skc said:


> But I am sure the supporters will think he's just downramping to secure some cheap share himself.




LOL! Thats gold! I enjoyed the excerpt from the article, i dont subscribe to AFR so I couldnt see the whole article but at least i gor the flavour from McLovin's post.


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## Ves (9 February 2015)

galumay said:


> LOL! Thats gold! I enjoyed the excerpt from the article, i dont subscribe to AFR so I couldnt see the whole article but at least i gor the flavour from McLovin's post.



On HC there's a thread called Sunbridge Shareholders.   Post #259 on 6 Feb 2015 at 8:36am  might give you a more elongated version of the article.


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## galumay (9 February 2015)

Ves said:


> On HC there's a thread called Sunbridge Shareholders.   Post #259 on 6 Feb 2015 at 8:36am  might give you a more elongated version of the article.




oh thanks for that....NOT! Just wasted an hour of my life wading through that thread, its like days of our lives on there!


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## McLovin (3 March 2015)

Oh, hello there...



> Broker BBY has started marketing a $15 million initial public offering for Chinese sportswear company XPD Soccer Gear Group Limited.
> 
> XPD is seeking to raise up to $15 million at 20 ¢ a share, which would see it list on the Australian Securities Exchange with a $75 million to $85 million market capitalisation on May 12.
> 
> ...




http://www.afr.com/p/opinion/xpd_soccer_gear_group_in_ipo_66UxyWqG1b7MRbls13sgkN

Now, who was Andrew Plympton also a director of? 

I also note they're from the same province in China as SBB.

ETA: Website is here...

http://chinaxpd.com/en/content/?233.html


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## Ves (3 March 2015)

McLovin said:


> Oh, hello there...
> 
> 
> 
> ...



Let me guess,   they have a heap of cash,  and they will (nope) might (nope) probably won't (nope)  will not (yep) pay a big dividend to all their Aussie friends? 

Do they also have a heap of "franchised" stores that they need to buy back  (most likely from undisclosed related parties at prices way above market value so they can stack their balance sheet with intangible assets)?

Hmmm,  just don't mention seed investors.... and we'll be all lollipops and rainbows.


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## ROE (3 March 2015)

When I look at SBB, I thought its a dot china listing just like the dot com day
China get plenty of coverage due to its population and the potential market

The key word here is potential 

so any business with the magic Chinese Market words in the prospectus would get plenty of punters in 

They wont be the last of dot china as the bull raging ahead


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## skc (3 March 2015)

McLovin said:


> Oh, hello there...
> 
> http://www.afr.com/p/opinion/xpd_soccer_gear_group_in_ipo_66UxyWqG1b7MRbls13sgkN
> 
> Now, who was Andrew Plympton also a director of?




You beat me to it... certainly has a "Ocean's 11" feel to it.

The ASX has a lot to answer for imo.


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## Huskar (3 March 2015)

McLovin said:


> Oh, hello there...
> 
> 
> 
> ...




Awesome sleuthing McLovin! Perhaps Hempton may be your man to let know? He has made a career out of shorting China frauds after all..


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## McLovin (3 March 2015)

Huskar said:


> Awesome sleuthing McLovin! Perhaps Hempton may be your man to let know? He has made a career out of shorting China frauds after all..




Thanks, hesk. I suspect it's too small. I really wish the business media would pay a bit of attention to this sort of stuff, and as skc says, the ASX should really look a bit closer at these floats.


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## ROE (16 March 2015)

This deal is so good, the number is very sweat and the lead manager DON'T want to underwrite 
that said it all 

http://www.afr.com/business/manufac...-taking-a-kick-at-asx-listing-20150315-142abv


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## skc (16 March 2015)

ROE said:


> This deal is so good, the number is very sweat and the lead manager DON'T want to underwrite
> that said it all
> 
> http://www.afr.com/business/manufac...-taking-a-kick-at-asx-listing-20150315-142abv




The financials look more believable than SBB's... XPD doesn't have a huge amount of cash sitting on the balance sheet for a start.

But here's the kicker that I found amazing. P. 68 of the prospectus.



> Note 20 – Subsequent Events
> Subsequent to 30 June 2014, an additional investment of RMB29.8 million to Henan Yuanlong has been made and the investment has been recorded as a long-term investment by the Company. Total investment is approximately AUD$14.9 million as at 31 December 2014.




RMB29.8m = ~A$6.2m. Cash at the end of half year was A$3.95m. So the company decdied, before IPO, to sink all it's cash and borrow a bit more, and "invest" into Henan Yuanlong... which Google suggests is an aluminum factory of some sort.

http://henanyl.com/about/aboutus.html

I hope those interested in investing in the Chinese sportswear industry also happened to be looking for investment in the aluminum industry at the same time.


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## McLovin (16 March 2015)

skc said:


> The financials look more believable than SBB's... XPD doesn't have a huge amount of cash sitting on the balance sheet for a start.




They've learnt the lesson of having huge cash balances.

Unless they've reinvented the shoe, how do you get 5 fold increase in sales in 3 years with those ridiculously fat margins? Oh wait, of course...



> The increase in overall sales from 2011 to 2013 is the result of continuous expansion of distribution network, effective distribution
> management, increased market recognition of the XPD brand as a result of XPD’s brand promotion and marketing activities and the
> broadening of the XPD brand footwear and apparel product offerings. Sales from January to June 2014 (based on annualised sales
> compared to 2013) have remained relatively consistent with 2013 sales.




Just amazing they can do that and have a employee expense of $60k for the HY to 30/6, and a marketing spend of $336k for the same period.

Of course it begs the usual question: Why would you ever think of selling off a portion of this money tree!?

I hope Shan Shan has her cheque book ready.


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## skyQuake (17 April 2015)

Had a look at XPD recently, great story and all...

They sure know how to bait it right!

I think the key here is Mr Jiang Ting who has served with:

XXL AU
SBB AU
PEZ AU
CHI NSX
and now XPB AU

All of them had some very nice looking IPOs with many similarities
- Tiny raising, founders holding 70%+ with escrow
- Very profitable businesses requiring funding to expand to meet demand and growth
- With the exception of XXL, an incredibly wide raising range (eg. 5-15m) in an effort to take all comers with open arms
- Got oodles of cash, the aus raising is for 'prestige' and 'trustworthiness' since ASX is 'well regulated'
- Outrageously handsome fees to advisers
- Grant Thornton auditing with a blindfold on (http://rogermontgomery.com/no-more-chinese-junk/)

XXL announcements/share price makes for a fine drama imo


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## skc (17 April 2015)

skyQuake said:


> Had a look at XPD recently, great story and all...
> 
> They sure know how to bait it right!
> 
> ...




Unfortunately for SBB holders, the company isn't listed on the Shanghai exchange instead... they might have been brought up by the crazy rising tide there otherwise.

I think the most likely longer term (3-5 years) outcome for SBB is that, all the numbers stay OK, no one really proves them to be dodgy or solid one way or and other, and they eventually generate so little interest and volume that they will trade like several other Chinese stocks (like CIK, CMC, RIS, TYO etc) on the market.

No volume, super wide spread, not a good place to be.

P.S. The latest announcements by FTH and NCO are also worrying.


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## skc (8 March 2016)

Interesting article on AFR about Chinese companies looking to list in ASX.

http://www.afr.com/markets/equity-m...-for-asx-listings-at-any-cost-20160224-gn32nh



> The "prestige" of an ASX listing that allows Chinese business owners to win key contracts is the official reason why they are paying exorbitant brokerage costs and accepting valuations that don't reflect their cash balances to raise capital from Australian investors though a stock exchange listing.
> 
> Market watchers and regulators are more sceptical. Several Chinese floats in Canada, the US and Singapore have turned out badly for investors. Auditors tasked with verifying financial information have limited access to China. Meanwhile, the hundreds of billions of dollars flowing out of China have led many to believe foreign listings are a way of getting considerable amounts of money out of the mainland.
> 
> This is just part of the mystery of the ghost-like companies that linger on the local bourse, trading at prices that do not appear to reflect the million of dollars of cash in their bank accounts. Like much about China, the truth is hard to establish while the reality is impossible to ignore.






> This group of 41 companies based in mainland China have cash to market capitalisations in the range of 67 per cent, much higher than the market average which is 12 per cent for the All Ordinaries Index. Trading volumes in this group are also much lower than average with about two-thirds recording barely any trading volume in the last three months.
> 
> The average return for listings of Chinese companies since 2012 has been negative 25 per cent with just under half declining by more than 50 per cent.


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## skyQuake (8 March 2016)

skc said:


> Interesting article on AFR about Chinese companies looking to list in ASX.
> 
> http://www.afr.com/markets/equity-m...-for-asx-listings-at-any-cost-20160224-gn32nh






> One investor believes that the motivation for the listing may be to use their shares as collateral to fund other business ventures





Your turn, ASIC.


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## skc (8 March 2016)

skyQuake said:


> > One investor believes that the motivation for the listing may be to use their shares as collateral to fund other business ventures




Worked a treat for the magical company FTH. 



skyQuake said:


> Your turn, ASIC.




Don't hold your breath.


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## galumay (19 February 2018)

Looks like the ASX might at last be looking into XPD so SBB may be next!


----------

