China Animal Healthcare A Spent Force?

China Animal Healthcare announced on December 21, 2012 that talks of its delisting from the Singapore Stock Exchange were in advance stages. Shortly after, on January 9, 2013, Blackstone Capital announced that it was redeeming the bonds issued by China Animal Healthcare. This would have to be settled within 6 months from notice.

Did Blackstone made a gain from its investment of about 3 years? Here are some concrete numbers:

Cut loss on Stratech, TPV and ChinaAnimal Healthcare

I finally sold off three of the four stocks I said I would be selling. Stratech has been in the red for a long time. This was made worse by me subscribing to the excess rights which are not accounted for her. My initial investment of SGD 1,000 halved with no dividends in between.

Time to sell China Animal Healthcare?

I have four lots of China Animal Healthcare bought in January 2010 and am now contemplating selling it even though it remains slightly out of the money. For those unfamiliar with the stock, China Animal Healthcare is company that manufactures vaccines for livestock and its operations are based predominantly in China. This was what I said back then when I bought the stock:

"Thought I managed to get a bargain buying in at 26.5 cents. Turns out the bottom is even lower, closer to 22.5 cents that is despite an earlier runup to 30 cents. I don't think this is a bad stock. will have to see how the proposed qualifications to its manufacturing facilities will pan out. hope this S-Chip wont burn me."

China Animal Healthcare has had plenty of exciting developments. It has had strong revenue and earnings growth since listing on the Singapore Stock Exchange via an RTO at the end of 2008. For FY2011, the company recorded a 30% increase in revenue and a 86% increase in PATMI.

China Animal Healthcare has also had private equity firms like BlackRock take a stake in the company through the issuance of convertible bonds. China Animal Healthcare is also listed on the Hong Kong Stock Exchange.

From the chart above, after the strong run up in 2009 that saw it almost touch 40 cents, China Animal Healthcare's share price has since struggled the past 3 and 12 months. Year-to-date it is lagging the STI and year-on-year, it is down 27%.

Why do I want to sell China Animal Healthcare? The most important reason is that despite the stock's strong fundamental growth, it has not been realised in terms of share price. It is currently trading at 8 times earnings and I think that the market has priced in all its growth as well as possibilities of accounting fraud (guilt by association). Furthermore, its insiders an unknown group of investors have decided to sell off big chunks of shares during 1-2 months ago.

I should be selling it once I see the "correct" price. This selling may or may not happen the next 10 trading days, but I definitely will not be picking China Animal Healthcare's shares in the mean time.

Stuff I am thinking about : China Animal, Neratel and others

I had a quiet weekend spending money, buying stuff for my weekend football games. Unsurprisingly, I went to Queensway Shopping Centre to get my new pair of boots as well as some footballs.

But before I went there, I read a few posts online regarding China Animal Healthcare and its interesting sell queues. I spent a little time vexing over this issue because while the writer had put a positive spin on it, most of us cynics would try to understand the underlying reason as to why a substantial shareholder wishes to pare down its stake in the company. It is worrying because against the backdrop of a broader penny stock rally China Animal Healthcare's share price has been stuck at 24-26 cents. Furthermore, this selling is ahead of the company's announcement of its results. The truth will out.

The other thing that I was thinking about is ST Engineering's acquisition of Nera Telecommunications. The stock has not moved much in terms of share price, but it has rewarded those who hold it for its dividends with a decent yield. For some, it will be a pity. However, it is almost inevitable when a company that is consistently generating cash but not able to grow in size, to be swallowed up by a bigger entity. The alternative would be for the company to be taken private. In this case, I guess the offer by ST Engineering is too good to resist and maybe most of its senior management wants to take a break.

We are already into the second month of trading and things have started looking shaky as one head of equity research put it. I will hold my breath.

China Animal Healthcare Updates

China Animal Healthcare made an interesting announcement. In response to a Straits Times article that suggested the company was an attractive candidate for privatisation, China Animal Healthcare said that it was possible that a restructuring (not privatisation) exercise take place. This would involve only delisting those shares listed on SGX, while those on the Hong Kong Stock Exchange (SEHK) remain trading.

Just yesterday, the company announced its third quarter results for 2011 which were quite impressive. Revenue for the nine months increased 33.8 per cent while net profit rose 84.2 per cent. The strong results were attributed to strong sales of its powdered form drugs and biological drugs.

Putting the two pieces of news together, I would think that such a move is very likely to happen. This is because in general, S-Chips such as China Animal Healthcare have always felt that they are underpriced on the SGX compared to on the SEHK. This is something that the new SGX CEO Magnus Brocker has tried to refute.

China Animal Healthcare posts RMB 58.3m Profit for 1Q11

China Animal Healthcare posted a 14% increase in revenue on-year to RMB 131.3 million for the first quarter ended March 31, 2011. Net profit for the quarter was up almost 60% to RMB 58.3 million, from RMB36.6 million a year ago. China Animal Healthcare said the increase in revenue was due to the surge in sales of bilogical drugs.

Management said that it has commenced commercial production of animal foot-and-mouth disease. Also, it has said that it has obtained indicative orders of close to RMB 90 million in total, for compulsory vaccine sales. They are expected to be delivered in the next 6-12 months.


China Animal Healthcare's stock is closed $0.31 on Thursday.

Reflecting on GMG Global and China Animal Healthcare

I'm sorry it's another GMG Global post. Are all political risks the same. Does it really matter.

For those who were young enough to watch the Matrix when it first screened in the cinemas, you will remember that there was one scene where the dialogue goes (you can find the scene here):

Oracle: I'd ask you to sit down, but, you're not going to anyway. And don't worry about the vase.

Neo: What vase?

[Neo turns to look for a vase, and as he does, he knocks over a vase of flowers, which shatters on the floor]

Oracle: That vase.

Neo: I'm sorry...

Oracle: I said don't worry about it. I'll get one of my kids to fix it.

Neo: How did you know?

Oracle: Ohh, what's really going to bake your noodle later on is, would you still have broken it if I hadn't said anything?

Unless you have been stuck in an airport in Europe due to the snow, you will most likely know that shares of GMG Global - China Animal Healthcare to a greater extent - have taken a beating, falling below the $0.30 mark with heavy volumes. The reason has been plastered in the papers, that the political turmoil in the Ivory Coast has affected GMG Global's operations there. This has affected its shipments of rubber out of the African country's ports.

The political strife in the Ivory Coast resulting from the elections was not entirely foreseen. If you read this article, GMG Global Poised For Big Things, written at the start of the year, you would have been informed of the possibility of turmoil buried all the way in the second last paragraph.

White, Grey and Black Swans

But the question is, would it have mattered at all? If you had not bought the stock at the start of the year because you were worried about the risks, you would have lost out on a 2-bagger up till this point in time. But if you did bought the stock only recently due to its proposed acquisition of Tek Bee Hang, you would have ended up losing a small fortune. There are just so many ifs in life.

The lesson learnt (on hindsight?) here for me is that if there are certain risks that are flagged from the beginning, the onus lies on the investor to keep track of the events that will cause downside. Already it was mentioned that the elections would be contentious. On my part, I could have and should have at least find out what are the latest developments with regards to the Ivory Coast elections.

I am sure that GMG Global is not the first and only SGX-listed company to be affected by political events. Banyan Tree Holdings, which runs resorts in the region, comes to my mind. It too had been affected by the political events in the kingdom which has since reach and uneasy stand still. Bangkok has only recently declared the lifting of martial law.

Factoring political risks in the long run

Political events have both upside and downside risks. If you have the appetite and ability to short, political events are golden opportunities for making loads of money. Just ask George Soros or any "special situations" or "event driven" fund manager.

But such events fall into a spectrum in terms of returns and probability and are very lumpy. Political events can be global or regional with the boundaries very blur. 9/11 can be considered a global event while the Ivory Coast election a micro one.

How should we factor these political risks when valuing the attractiveness of a stock? How would value-investors do it? I really have no answers to the question I posed. And to rephrase the Oracle, would you have not bought or sold the stock, even if someone no one told you that there will be conflict in Ivory Coast?

But there are things we can do to protect our portfolios. Diversification is the most common answer. Limit 10 percent of your portfolio in terms of total cost to any one stock, should dampen the downside. And by using percentage of cost to total portfolio cost, it does not force you to re-balance every year, something I find deleterious to performance.

Staying current is a more tiresome alternative. That would mean trawling the news everyday for developments that are linked to the political risks already defined for a particular stock. This is very demanding and further complicates the investing process, as the investor willingly gets bombarded by the noise in the media. Moreover, you can never really tell how an event will play out. Did you know that America would invade Iraq as a consequence of 9/11, even though Iraq had nothing to do with the whole incident?

I am not actively monitoring the happenings in Ivory Coast which are affecting GMKG Global's stock price negatively. I would preliminarily say that there will be another stalemate, since the incumbent which was voted out has refused to vacate the office. The light at the end of the tunnel won't be seen so early and blood will be shed. However, I am confident in the next 3 months that some sort of truce can be ironed out.

China Animal Healthcare Plans Dual-listing

Was going through today's filing and to my pleasant surprise, China Animal Healthcare says that it is intending a  dual listing on the SEHK!

I am definitely excited but right now, I am thinking how many shares will it place there and whether will the whole thing go through at all.

The stock has risen I think about 7cents there about prior to this announcement and any upside might have been factored in.


Moving forward, it is still waiting for that elusive GMP for one of its vaccinations and then it can bid for government contracts comes August. With 4 lots only but will monitor closely.

Full announcement on the rpoposed Dual-listing here

China Animal Healthcare: Snazzy 2009 Annual Report!

Probably from the same design team that did Oceanus Group recent annual report, China Animal Healthcare's (CAH) struck me as slightly snazzy. If you did not know, you would think that CAH was operating a Zoo!

Maybe it is a small cap stock thing doing up such eye catching covers, when I receive the annual reports from GMG Global or even the late Singapore Petroleum Company, there were quite plain, with the company's logo, a vague slogan and that is it.

In terms of share price, CAH has moved past the $0.30 mark in line with the broader market.The broader market was on steroids, gaining close to 50 points after giving up slightly as much the day before.

My outlook for CAH remains the same, relatively bullish in the medium with earnings growth from the successful receipt of certification from PRC authorities as the main share price driver. Fears of accounting shenanigans still remain, but with several institutional funds with stake in CAH, they can be useful signals should things really go wrong.

For those ardent surfers, you would also know NRA's Kevin Scully is positive on the stock. I give this stock at least 6 more months to realize the plans that its CEO has been touting, namely the mass production of the many vaccines and bidding for the relevant government contracts. If the mood is right, $1.00 is not impossible. Somewhat unnerving, fears of S-Chips might slowly slip out of our minds then.