Yahoo Finance 
Investor CentralChina Dairy Group Ltd - MANAGEMENT REPLY: Why would someone pay RMB 6.7 mln to buy net liabilities of RMB 7.3 mln?
5/2/2014 – China Dairy Group Ltd has sold its subsidiary Yinqiao Dairy (Tianjin) Co Ltd, to Du Enmao and Zhao Xue for RMB 6.7 mln.
Though it says the deal is a "discloseable transaction", the announcement leaves us hanging for more details.
China Dairy Group Ltd says Yinqiao Dairy (Tianjin) Co Ltd was not operational since July 2010.
One thing we do know: Yinqiao Dairy (Tianjin) Co Ltd had net liabilities of RMB 7.3 mln.
Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.
1. What makes it a "discloseable transaction"?
Ironically, the announcement does not disclose why the disposal of Yinqiao Dairy (Tianjin) Co Ltd is a "discloseable transaction".
So, we went back on the company’s annual reports to find out more about the business.
But:
2. Why don't China Dairy Group's annual reports acknowledge Yinqiao Dairy (Tianjin) Co Ltd as a subsidiary?
We couldn't even find a mention of Yinqiao Dairy (Tianjin) Co Ltd in the annual reports of China Dairy Group.
See for yourself in its annual reports for 2012, 2011 and 2010.
3. How much of a stake did it own in Yinqiao Dairy (Tianjin) Co Ltd?
The announcement only mentions that China Dairy Group disposed its "entire" stake in the subsidiary.
We wonder how much of a stake China Diary Group Ltd owned in it to begin with.
4. When did it inform the shareholders about the regulatory action against Yinqiao Dairy (Tianjin) Co Ltd?
According to a Deutsche Bank research report (page 8), a high level of Melamine was found in the products of Yinqiao Dairy (Tianjin) Co Ltd in 2010.
According to a separate news report, Yinqiao Dairy (Tianjin) Co Ltd was one of the five companies that couldn't pass an audit of the Municipal Quality Supervision Bureau in 2011.
As a result, the Municipal Quality Supervision Bureau didn't renew the production licence of Yinqiao Dairy.
That's possibly why Yinqiao Dairy (Tianjin) Co Ltd was out of business since July 2010.
Looking back at China Dairy Group Ltd's announcements since 2010 on SGX's website, we couldn't spot any announcement about Yinqiao Dairy.
When did China Dairy Group inform its shareholders about such a major regulatory action against its subsidiary?
(Total number of questions in the full story: 9)
We have sent these questions to the company to invite them for an on-camera interview, and/or seek their written response.
So far, we have not had a reply (which is why you are seeing this message).
Key financial ratios
The ticks and crosses below indicate whether the stock meets the following value investing criteria.
Price-book: 0.76x - "Price is what you pay, value is what you get" - Are you getting more than you pay for?
Yield: - - Does the stock pay a risk premium over fixed deposit rates?
Cashflow: S$32.1 mln - "Profit is opinion, cash is fact" - Is the company generating cash?
Total cash & equivalents: S$138.5 mln - Does the company have cash?
Source: Reuters
Does the company have an internal auditor?: Outsourced to an undisclosed external firm
Management: China Dairy Group Ltd was ranked 566th in the Governance & Transparency Index, with a score of 25 points.
Major shareholder(s):
45.48% - Liu (Huaguo)
29.5% - Oasis Ventures Ltd
Consensus recommendation
Consensus call: Not Covered
Price target: Not Covered
Sources & further information
Statutory disclosure
While our purpose is to ask the questions which the man on the street would ask, and to help the everyday investor make informed investments, please note that:
Our articles and presentations ('our contents') are not investment advice nor should they be construed as investment advice or any recommendation of any kind; nor meant to cast allegations or insinuations of any kind against any individuals or entities. Before acting on the material in our contents, you should either seek independent advice tailored to your particular circumstances and intentions or rely on your own judgement.
Our articles and presentations express our observations, opinions and theoretical analysis based on the facts that we have gathered or have been provided to us. While we endeavour to ensure that our contents are accurate and are presented in good faith, we cannot and do not warrant the accuracy, adequacy or completeness of the material or that the material is suitable for its intended use; and we disclaim any such warranties express or implied that may be presumed by any party; neither do we take responsibility for the views of companies or other stakeholders or observers or sources quoted or hyperlinked in our contents. While every precaution has been taken in the preparation of our contents, we (and our principals) shall not be liable for any losses or damage or inconveniences due allegedly to errors or omissions in any facts or due allegedly to reliance on our contents in any way whatsoever; nor for any damage to any computer hardware, date information or materials allegedly caused by our contents.
All expressions of opinion and observations in our contents are subject to change without notice and we do not undertake a duty to update and supplement our contents or the information contained herein in the event we obtain any further or more complete information.
©2014 Investor Central® - a service of Hong Bao Media
