Celestial Nutrifoods AGM

Attended the CN AGM yesterday.

- Biodiesel project on track, I poised a question on the prospects of Biodiesel, and according to Ming DQ, the project is viable, as it is using low quality and recycling waste oil. It should be running by next month

- on why CN continued to spend on Capex although the CB conversion is about 8-9 months away. According to Ming DQ, when they embarked on the plans it was before the financial crisis hit and there was no way they anticapted this. There is no way they could stop/cancel the payment as the projects have already started.

- On the CB (Zai Quan) topic which was a very hot heated topic, CN is still negotiating with banks for refinancing (rong zhi). Overseas banks are short of funds themselves, and although China banks are willingly to lend, the process is quite long, and may require tedious process on endorsement from government/state. They are now discussing and the chockpoints seems to be the valuation of the company to be used for collateral. (eg, roads and capital equipment have less/ little value) , interest rate etc.
They have been instructed to update every month to the SGX on the progress. When prompted further, they seem reluctant to say too much, maybe because they wanted to make a public disclosure first which will be out the next day or so.
The board have been trying different ways to including raising capital (gu ben) through rights, unfortuantely with the share price so low now, that option is absurd. Although this is also in the AGM, this is just going through the motion.

- when asked whether he had pledge his shares, Ming confirmed that he has not done so.

- when asked why he had not bought more, he says that if anybody lend him money now, he will do so...... I think that he has also been affected by the financial crisis, with his money maybe tighted up with some other things (property / other business ventures)

My thoughts: Ming seems to come across as rather an honest person, and sometimes we have to use out gut feeling to sense out the character of a person. If Ming and the other board members are dishonest, they will not have come for the AGM.

I also asked Zhou CN on the protein Milk schedule (dan bai nai), it seems it should be ready by next year end. This product future seems good as there are many Chinese in China, and the milk may not be enough to support the population. Throw in the Milk Scandal, and also Asian who are more lactose intolerant, I think they can penetrate and gain market share in this.

Some thoughts also, I have been looking at Celestial Nutrifood top investors, Cheung Wai Kwok was a major investor previously. ( >5%) and he has presumely sold out. He is also a chairman of Shenzhen Skyto Investment & Development Co, a company engaging in investment in PRC. Presumely, with the financial crisis, he had to cut his stake in this valuable company as well.

As investors, sometimes we have to use certain risk reward ratio and intelligent guessing to see whether it is worth investing when the future is murky and with short term setback. With risk appetite coming slightly back, Celestial price has been going up. The advantage to retail investor is that we can go in right now, but for many funds, they cannot do so unless they can ascertain a bright future for their invested company (and when this is so, the price has already gone up alot)