Wednesday, September 11, 2013

3Q2013 Updates

Sorry for the slow updates, been really caught up at work. I have not sold as much as I had suggested in my last May post due to onerous restrictions at work.

Just read a local business news publication and saw an article which got me a tad disappointed with the quality of reporting here. Nothing irks me more than generalization and mis-aggregation of information. It talks about China needing to improve quality of disclosures and regulations and goes on to suggest that Indofood taking over China Minzhong (CMZ) is a divine retribution to foreign speculators. In the reporter's exact words, "They should have been aware that Indofood taking up a majority stake would mean they have done their homework". 

To explain shortly the story, basically Glaucus (Canadian based research firm) accused CMZ of fraudulent financial reporting with a report and a short position. Stock fell 48% to S$0.53/sh. Subsequently Indofood, a Singapore listed food products and palm oil company affiliated with Salim Group who already owns a 33.49% of CMZ, announced taking over CMZ at S$1.12/sh, valuing the firm at S$734m. 

A public announcement to rationalise the offer and to correct the article was rather akward. LINK here and LINK here. My thoughts: 
  1. Does Indofood taking over CMZ mean they are necessarily right and Glaucus is wrong? 
  2. Does taking majority take (30+%) mean Indofood has absolutely done their work and are right?
    • If you bought Zhengzhou Siwei Mechanical and Electrical Co like how Caterpillar Co done their work, congratulations, you have just managed to make -84% returns within a few months. Many other examples like China Agritech and China Biotics and the list goes on, and on and on. 
  3. The acquisition rationale felt like the planning was messed up. 
  4. Ultimately shorting - you need 7 stars aligned. You cant brute it, need to pick the right fight. 
  5. I wont comment on CMZ, but feel free to exchange views with me by dropping a note :) 
I cant fathom how anyone can make such a statement. Fallacious much?

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