Chaoda (0682): forked tongues and deceit

Chaoda has announced a sale of 80m new shares at $5/share and at a 10% discount to market price. Mr Kwok HO is up to his usual modus operand - first reassure investors there will be no fund raising then surprise them with just that. 

SCMP 22nd Oct 2008:

"Chaoda Modern Agriculture (Holdings), the mainland's biggest vegetable grower, said it would spend between 2.5 billion yuan (HK$2.84 billion) and 2.8 billion yuan to add farmland during this financial year, after reporting 13 per cent growth in annual profit yesterday.

Chairman Kwok Ho said Chaoda would use internal resources to fund the expansion of 100,000 mu amid the global financial crisis. It currently has 494,800 mu of vegetable land, tea gardens and fruit orchards. One mu is one-fifteenth of a hectare.

'It's impossible to raise funds right now, so our plan is mapped out in accordance with our own ability,' Mr Kwok said.

The Fujian-based company had enough cash to redeem its convertible bonds, worth 1.37 billion yuan, due in May 2009, he said. At the end of June, Chaoda had cash and equivalents of 1.28 billion yuan, down from 1.67 billion yuan a year earlier.

'I am a very conservative man,' said Mr Kwok. 'We have adequate financial resources for the bonds redemption.'

Chief financial officer Andy Chan said the company's gearing was 30 per cent, and its strong net cash inflow would help fund the expansion."

20th Feb 2009: 

The Placing Price represents a discount of approximately 11% to the closing price of HK$5.62 per Share as quoted on the Stock Exchange on 19 February 2009 and a discount of approximately 8% to the volume-weighted average closing price of approximately HK$5.42 per Share for the last 10 trading days up to and including 19 February 2009. The 80,402,000 Placing Shares represent (a) approximately 3.15% of the existing issued share capital of the Company of 2,549,019,421 Shares at the date of this announcement and (b) about 3.06% of the issued share capital of the Company as enlarged after the Top-Up Subscription.

What is worrying is this raises $390m however, there is $1.6B worth of convertible bonds which may be redeemed on 8 May 2009 . This is in addition to their annual capex runrate of $2.5B. At the end of June 2008, Chaoda had $1.28B in cash and cash equivalents, they have an operating cashflow of ~$2B anually. It appears that the convertible bonds have been converted, Chaoda has issued shares to cover the shortfall and their cash position now is low.

In the meantime, in celebration of the HKex/SFC climb down on the black out period proceed to dump their shares ahead of this announcement and after the Dec 2008 financial end:

Kuang Qiao dumped 3,200,000 shares

Ip Chi Ming dumped 700,000 shares

And these are just the employees who HAD to declare their trades to the HKex.

Moody's got it right for a change. There may be more fund rasing to come...

Hong Kong-listed Chaoda Modern Agri (HKG:0682) ratings outlook cut to “negative” - Moody's
[Date:12-08-2008]     Source: XFN-ASIA 
Moody's Investors Service said it has downgraded the outlook on Chaoda Modern Agriculture (Holdings) Ltd's (HKG:0682) "Ba2" corporate family and foreign currency debt ratings to "negative" from "stable" on the company's "limited" financial flexibility in terms of servicing upcoming debt obligations.

"The company's entire outstanding debt will be maturing as two bullet repayments totaling 2.9 bln yuan over the next 15 months," Moody's analyst Ken Chan said.

"Refinancing alternatives from the banking and international capital markets are currently limited, so it has to rely solely on accumulating operating cash flow of around 800 - 900 mln yuan per quarter for debt servicing," he said.

Despite such major debt-servicing requirements, Chaoda maintains an aggressive capex plan of 2.5 - 2.8 bln yuan per annum and this is further pressuring its cash flow, Chan added.

(1 usd = 7.8 hkd, 6.85 yuan)