Tuesday, January 10, 2012

Would You Bet On XiDeLang (XDL) ???

On the 4th Jan, the EdgeMalaysia highlighted the following article: Xidelang hits six-month high

  • ... There were no new filings for substantial shareholding changes at press time.

    Ding Peng Peng, its co-founder, managing director and CEO, owned 54.55% of the company as at May 3, 2011.

    At yesterday's close of 37.5 sen, there is a 14.7% upside potential to the 43 sen apiece that Mercury Securities said the stock was worth in a note dated Nov 25, 2011.

    Notably, Xidelang's unaudited net asset per share stood at 72.72 sen as at Sept 30, 2011, up from 56.14 sen as at Sept 30, 2010.

    Xidelang, which recently got shareholders' mandate to buy back its shares from the open market, sold its shares for 63 sen apiece at its IPO on Nov 11, 2009.
    The low valuations accorded by the market had sparked rumours that its major shareholder may take the company private, one source said. This could not be immediately confirmed at press time....
One source... said major shareholder MAY TAKE THE COMPANY PRIVATE!

All it takes is just one source.... and the stock flew up, up and awayyyyyy!!!


Nice eh?

Just one source. Don't care who the source is lah. It could be tea lady. The toilet cleaner. The car jockey. It's just one source and don't bother about finding out who that one source is lah. The EdgeMalaysia would not reveal their source.

So who cares, yes?

The stock flew!

The next day on BusinessTimes: Decisive year for Xidelang


  • His company’s profit has been soaring over the past three financial years only for the shares to keep heading south.

    “It is a bit frustrating ... the investment community tells me that this has a lot to do with perception of being a mainland China company,” Ding, who is also the managing director of the company, told Business Times in an interview.
  • “Ever since then, mainland companies have been painted in one brush. Look, Xidelang is not a fly by night company. We have been here three years, been profitable and have been building on a dividend track record,” said Ding.

Then in mid afternoon, the EdgeMalaysia came out with this piece: Navis Cap keen to buy Hong Peng's stake in Xidelang
  • Navis Cap keen to buy Hong Peng's stake in Xidelang Written by Joseph Chin of theedgemalaysia.com
    Thursday, 05 January 2012 15:10

    KUALA LUMPUR (Jan 5): XiDeLang Holdings Ltd (XDL) says Navis Capital has approached the former's major shareholder Hong Peng International Holdings Ltd to acquire its stake.
    It said on Thursday that 'Navis Capital had indicated their intention to acquire the entire shareholdings of Hong Peng in XDL during an informal discussion'.

    Trading in the shares of XDL was voluntarily suspended from 2.30pm to 3.30pm following the announcement.
    According to filings to Bursa Malaysia, the British Virgin Islands' registered Hong Peng owns 240 million XDL shares or 60% as at Nov 11, 2009.

    XDL share price was up one sen to 37.5 sen before trading was suspended
And the next morning, BTimes followed it up: Navis makes offer for major stake in Xidelang - Business Times
  • Xidelang, China’s second second largest maker of running and skateboard shoes, is some 54.6 per cent owned by HongPeng International Holdings Ltd.

    HongPeng in turn is controlled by Mark Ding Peng Peng, who is also the managing director of Xidelang.

    Analysts said Navis’ plan to buy out HongPeng’s entire shareholding in XDL would trigger a mandatory general offer as its shareholding would breach the 33 per cent level.

    “The likely outcome will be the new owners taking the company private,” Mercury Securities Sdn Bhd head of research, Edmund Tham, told Business Times.

    Tham believed that Navis might offer between 60 sen and 90 sen apiece for the shares it did not already own in the company.

    “It is obvious that Ding is looking to exit the company as he is disappointed with the performance on the local bourse but he may strike a deal with Navis to stay on the board,” Tham said.

    In a filing to Bursa Malaysia yesterday, XDL said Navis had indicated its intention during an informal discussion with HongPeng International....
Yeah.. it is so obvious that Ding is frustrated with the stock performance on Bursa Malaysia... but ... the announcement just mentioned Navis intention during an INFORMAL discussion with HongPeng International...

Just an informal discussion hor... err... correct me if I am wrong.... but this is like a coffee shop chit chat isn't it?

INFORMAL discussion hor...

But yet XDL decided that it was improtant to announce it ....

The SunDaily also carried this 'NEWS' ... XiDeLang confirms takeover interest

With such 'news', the stock had a WILD trading day!



It opened higher at 38 sen (previous day closing price was 36.5 sen). The stock soared to 44.5 sen but soon plummeted to close the day lower at 35.5 sen!!!

Did the market realise that all the hoo-ha was based on an INFORMAL discussion? And yeah, no price was even mentioned!

Star Biz wrote on XDL the next day: XiDeLang: Navis showed interest in 55% stake
  • ... Its announcement was in response to a news article published in a local Chinese daily which stated that Navis Capital was interested to acquire XiDeLang shares.

    There was no discussion on Navis Capital's offer price during the informal discussion,” it added.
The local Chinese daily mentioned was Nanyang Press.

Getting fuzzy?

Yeah, XDL had to make another announcement yesterday evening on Bursa website: OTHERS

Some 'interesting facts'  mentioned in that announcement. (Thanks TK for your comments! )
  • XDL, after having made due and diligent enquiry with our major shareholder, namely HongPeng International Holdings Ltd (“HongPeng”) and the Board of Directors, wishes to inform that the discussions between Navis Capital and HongPeng held during October and November of last year were solely exploratory in nature and there was no offer being made or a price range indicated by Navis Capital.
    These exploratory discussions were discontinued in late November 2011.
The so called talks were made during Oct and Nov 2011!!!!!!!!!!!!!

What??? What??? What????

Them talks happened few months ago?????

Huh????

Like this also can?

So what's the idea to highlight this issue to the media?

To stir fry the stock???????

Gee!!!

And the next statement obviously blew everybody's mind!!!
  • XIDELANG Holdings Limited's largest shareholder, Hong Peng International Holdings Ltd, has no intention of selling its stake in the shoe producer
WTH!!!!

HongPeng doesn't even have the intention to sell its stake in XDL!!!!

So what on earth were all the 'news' for?

Stir fry the stock, is it????

And then on Business Times this morning....

  • Xidelang board to meet over Navis' buyout offer

    By Francis Fernandez Published: 2012/01/10

    XIDELANG Holdings Ltd's board is expected to meet tomorrow to discuss the approach made by private equity firm Navis Capital to buy out the company's major stakeholder.

    Xidelang, China's second largest maker of running and skateboard shoes, is 54.6-per cent owned by HongPeng International Holdings Ltd.

    HongPeng is in turn controlled by Mark Ding Peng Peng, who is also the managing director of Xidelang.

    Days before Xidelang had informed the stock exchange of the offer from Navis, Ding had told Business Times that he was frustrated with the lacklustre performance of the company on the stock exchange.
    Xidelang is the third China-based company to be listed on Bursa Malaysia. Its share price had fallen by as much as 35 per cent last year.

    Up to the nine months ended September 30, 2011, Xidelang's pre-tax profit stood at RM84.52 million, while for the 12 months of 2010, Xidelang's pre-tax profit stood at RM106.78 million.

    Additinally, Xidelang also has about RM134 million in cash while its book value per share comes in at just under 60 sen.
    "Ding will reject the offer from Navis, and instead put in a rival proposal to create liquidity in the market place," a person familiar with the company said yesterday.

    The proposal, which Ding plans to table to the board, calls for the company to reward its shareholders.

    "It will be a script-based reward exercise," said the source.

    As such, Ding will likely propose that Xidelang understake a bonus issue and a warrant exercise so that shareholders who did not directly benefit from Xidelang's growing business will be rewarded in the market place.

    As it stands, Xidelang is the only mainland-based company which has a consistent dividend policy in place.

    Xidelang paid out a 1.5 sen dividend in 2010 and a one sen dividend the following year, giving shareholders a 12-month dividend yield of 2.63 per cent a year.

    Navis, run by former executives of Boston Consulting Group, manages about US$3 billion(RM9.3 billion) in equity capital and is believed to want to take Xidelang private.

    It also plans to group Xidelang with other shoe makers from China and list them as one entity on the Hong Kong Stock Exchange.
Sigh!

And so Mr. Ding feels so frustrated about the lousy stock performance from XDL.

I wonder why.

Yeah, if you open the announcement: Quarterly rpt on consolidated results for the financial period ended 30/9/2011, you would see that XDL have 136.5 million cash but its borrowing now totals 47.170 million!

Compare these figures to that posting I made on XDL last July 2011: Regarding XDL. Back then XDL had 98.3 million cash and loans of 19.3 million.

XDL's financial has weakened despite the strong earnings it announced.

And the issue mentioned in the posting Regarding XDL remains.

So XDL said it has so much money.

But yet despite having so much money, I CANNOT UNDERSTAND why XDL's cost of financing is more than its interest it gets for its cash deposits! Cash 136.5 million woh. Borrowings 47.1 million woh! So why XDL has financial costs of 905 thousand for the that quarter, while its interests received is only 315 thousand?

19 comments:

David Koay said...

With regards to its interest expense and interest received, you could refer to its annual report, notes to financial statements No.25. Its cash and cash equivalents has interest rate of about 0.36%-1% while its borrowing rate is about 6%. Actually, China banks' deposit rate (1day) is <1% whereas borrowing rate is 4-6% for 1 year period. This might explain why RM136mil cash would translate to just about 400-500K interest received and RM47mil borrowings with interest expense of approx 1.2M p.a. (Lower than 4% though)

Mun Wai said...

Ah Moo,

Here comes my guesstimate

China deposit rate = 3.5%

If place RMB funds in Hong Kong Deposit account, the rate is extremely low.

I do not look at XDL's accounts in detailed coz I am very scared of the wolf, the "lang" "

:P

Please correct me if my guesstimates are wrong.

I am no expert.

Do I want to designate this as "private" ?

Mun Wai said...

and....pay ONE big cent dividend makes so much of noice

LOL!

Collect just 1 cent how to buy truckloads after truckloads :D

Moolah said...

David: You said "Actually, China banks' deposit rate (1day) is <1% whereas borrowing rate is 4-6% for 1 year period."

Err... XDL has 135.6 million in cash woh.

Question is the 1 day deposit rate of < 1% the best option for its money?

And if this is the best option, with borrowing rate at 6%, why should XDL borrow? Wouldn't it better if XDL just pay off the borrowings?

Btw isn't there a 6 month or 12 month deposit rate?

Moolah said...

Mun Wai: Me no expert also lah but let's make easy guesstimate.

Assume XDL puts only 80 mil deposit at 3.5% per annum. (XDL last reported account said it had 135 million, so me using 80 mil is a much lower figure)

At 3.5%, if my math is not kaput, XDL should make 2.8 million in interest, which should equate to some 700k in interest gains per quarter. (corrrect ah? )

So, for the quarter, XDL only received some 315 thousand only.

Errr... why so little?

Mun Wai said...

Let's take theory.

That 135 mil is a snapshot as at balance sheet date.

They come in when?

Mun Wai said...

Ah Moo,

Someone mentioned that they borrow just to maintain the facility line granted.

Make sense ah, Moo. I dunno.

I am scared of wolf. Wolves released to market + the hot hot according-to-sources or "according-to-someone-familiar- with-the- deal" kind of news reports, mati la.

Moolah said...

Yeah.. i think that 135 mil is a snapshot as at balance date...

so how?

Which is why I used only 80 million in my guessing.

And even if I used a deposit of 50 million as my guessing... at 3.5%, this should equate to 1.75 million in interests gained per year or 437k per quarter.

But XDL said... it only gained 315k the last quarter...

So ..... how?

Mun Wai said...

Thousand apologies!

I saw 80 mil but my brain registered a stronger image of 135 mil.

Paiseh....!!!!

Moolah said...

Ooops... see I do make mistakes.

I said "At 3.5%, if my math is not kaput, XDL should make 2.8 million in interest, which should equate to some 700k in interest gains per quarter. "

It should be interest income and not interest gains.

( Yeah.. sometimes I talk AIR too much :P )

Mun Wai said...

Like this good cow!

Listen more often to me.

:D

Mun Wai said...

You lagi made one more mistake la Moo.

...."Yeah.. i think that 135 mil is a snapshot as at balance date..."

Balance "sheet" date

Why fingers follow brain buta-buta ? Last defence also fails.

Moolah said...

Fuyoh!

Aren't we getting picky?!

:P

Mun Wai said...

:P

Mun Wai said...

Ah Moo,

Could it be the co has below par cash management, I wonder.

Let's take it that 50% of the loans drawn down is to meet working capital requirement. Naturally, there will be cash pile in their BS.

LOL! I mean balance sheet not balance shit!

But, due to their below par cash management and possibly WC management,they end up paying int on borrowings and at the same time, getting extremely low return on the cash pile.

What do you think ? Come share your opinion.

:)

Note:
I am not a fan of wolf. So I am not defending them wolves.

Moolah said...

LOL!

Firstly I am surprised that no one else wants to talk about the series of announcements made by XDL and Ding.

Is it really acceptable behavior?

So Mun Wai...

My opinion on the low interest income?

Well there's two possibilities..

1. Utter lousy management of cash.

2. Where is Ze Moola??

Well... which one do you prefer?

Mun Wai said...

Sorry, I made so many mistakes in a day.

Put in wrong sequence. Set aside cash management first. :P

Tell me
2. Where is Ze Moola??

Did they ever exist?

How about management integrity (both parties involved, not just the wolf alone" ? Leak out some gone-case nonsence of "DISCUSSION".

Financial press integrity ? Very fun to spin news ?

Did any insider sold during the hot-hot stir frying fun time? At what price?

Why get listed here ? No other place want this wolf or this place is "conducive" to do "business" with such quality local daily & financial press ?

CNY coming, need $$$ to give out as angpau using a bygone story ?

Mun Wai said...

Can phrases such as the following not to be used in news :

According to sources
According to a party familiar with the deal
According to an unknown source
According to a an anonymous person

If want to report news, take them in own capacity, don't quote quote as though some other people is responsible for it.

solomon said...

Lang lai leh? Good bet for CNY or nobody trust you ah Lang next time?

Waiting to see carpet story 2 this week or next?? Sources said xyz is the takeover by carpet sellers, the stock would not fly for sure.......