Looks like it may go down to retest the recent low 0f $1.25. Breaking down of this level and see it fall further towards $1.20 with extension to $1.07 then $1.00. Not a call to buy or sell. pls do you own due diligence.
China Sunsine Chemical Holdings Ltd., an investment holding company, engages in the manufacture and sale of rubber chemical products in the People's Republic of China, rest of Asia, the United States, Europe, and internationally. The company offers rubber accelerators, anti-oxidant agents, vulcanizing agents, anti-scorching agents, and insoluble sulphur used for the production of tires and other rubber related products, such as shoes, belts, and hoses. It is also involved in the production and supply of heating power, including preparation and implementation of the project; and hotel and restaurant business. The company offers its products under the Sunsine brand name. It primarily serves the tire companies. The company was incorporated in 2006 and is based in Singapore. China Sunsine Chemical Holdings Ltd. is a subsidiary of Success More Group Limited.
First, we look at the compounded annual growth rate (CAGR) in revenues for China Sunshine for the past 5 years from 2013 to 2017.
Total Revenue - is the sum of cash inflows, increase in operating accounts such as receivables and occasionally, unrealized gains generated in the course of Company's Business activities.
Total revenue has been increasing in double digits growth of almost 50%(CAGR) which is superb. The total revenue has grown from $353M to $562m.
Next, we are looking at the Net Income which is growing at a multiple of almost 4 times which is $16M from 2013 to a whopping $70.1m for 2017.
Now , we are going to take a look at the Normalized diluted EPS - Normalized Net Income divided by the diluted weighted average share outstanding. It is growing at a CAGR % of 40% which is amazing from 3.3 cents from 2013 to 12.8 cents from 2017.
Next on to their efficiency. China Sunsine's return on assets (ROA) and return on equity (ROE) have maintained well from 2013 to 2017. In fact, I looked at their past trend these two return Metricsand they have maintained well at current levels of ROA (above 25%) and ROE (above 22%). We must realise that it is not easy to maintain the ROA and ROE in any business while it is growing it's assets and shareholders' equity through time. To be able to maintain the same level or even increase the level of ROA and ROE would mean the business has high efficiency. China Sunsine justdemonstrated their high efficiency in their businesses. If they can continue to maintain these same levels of returns, I will be even much more impressed with them.
ROA - is a measure of company profitability relative to total assets. It is calculated by dividing Tax Effective EBIT ( earning before interest and tax) by average total assets over a twelve months period.
ROE - is a measure of company profitability relative to total equity. It is calculated by dividing Tax Effective EBIT ( earning before interest and tax) by average total equity over a twelve months period.
Now on to their liquidity. We see that China Sunsine just got much better at their cash conversion cycle. Now on to their liquidity. We see that China Sunsines just got much better at their cash conversion cycle. The number of days in their cash conversion cycle has decreased significantly over the past 5 year meaning that it takes them much lesser time in number of days to convert cash on hand into even more cash through their operations.he number of days in their cash conversion cycle has decreased significantly over the past 5 year meaning that it takes them much lesser time in number of days to convert cash on hand into even more cash through their operations.
It is taking lesser nos of days to collect the cash from 121 days to 101 days.
We now look at how their balance sheet has changed over time.. I will tabulate the comparison of some important metrics between close to 5 years ago (2013) versus latest financial report (2017).
Current ratio = 1.67 (2013) vs 3.69 (2017) . It measures the company's ability to cover current debts with current assets.It it calculated by dividing total current assets by total current liabilities.
Quick ratio = 1.30 (2013) vs 3.14(2017). It measures the company's ability to cover current debts with liquid current assets. It is calculated by dividing the sum of the cash, short term investments, and account receivable by total current liabilities.
Net Profit Margin = 4.53 (2013) vs 12.46 (2017)
EBITDA Margin = 11.61 ( 2013 vs 21.14 (2017)
I also noticed that they are now a net net company with their current assets more than their total liabilities.
Total Current Assets - $292.607m vs Total Current Liability of $79.139m.
The Operation cashflow has a great improvement from $27.59m to $79.37m.
Net Change in Cash inflow from $7.11m to $45.56m
I have roughly workout the intrinsic fair value for EPS for past 4 years (2013 - 2017) with CAGR of 40% and discount factor of 25% to come up with a value of $2.51.
I would further factor in a further discount of 20% i.e.$2.51 X 0.8 = $2.00.
The current price of $1.35 may present a further upwards potential of 48% to reach $2.00.
If using the Cash flow to work out the intrinsic value for past 4 years with CAGR of 50% and a discount factor of 25% we may roughly drive the fair value of $1.828.
Let say we factor in another 15% discount which is $1.828 x 0.85 that would give us a estimated fair value of $1.56.
The potential to rise from current price of $1.35 to $1.56 is another 21 cents..That may translate to about 15% upwards potential to reach $1.56 price level.
The current market sentiment is being clouded by import tariff between the 2 giants, it might be good to take smaller position or to lock in any profits.
Dyodd
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