Strong Buy on China Sunsine Chemical Holdings Singapore CSS

China Sunsine Chemical Holdings Ltd

SGX: CSS

Symbol CSS

Exchange SGX

Current Price 0.26

52 Week High/ Low 0.021/0.029

Shares Outstanding 477.36 M

Market Cap (in $ mn) 126.5

P/E Ratio 5.42

Recommendation:

Price target $1.30c

Strong Profit Growth and a very Low P/E make

China Sunshine chemical an outstanding buy.

Key Developments:

• 3QFY2010 net profit rises 35% to RMB33.8m on 32% increase in revenue

to RMB267.1 m

• 9MFY2010 net profit at RMB92.5m has exceeded the full year FY2009 net profit

of RMB88.3m

• Strong demand pushes 3Q volume 24% higher to 14,585 tons, consecutive record

quarter volume

• Expects demand for its products to

remain strong because of the robust PRC

and Asia Automobile Market

About the Company

China Sunsine Chemical Holdings Ltd (China Sunsine) is an investment holding company. It is

engaged in the production of rubber accelerators in the People’s Republic of China and globally. The

Company’s products are sold under the Sunsine brand. It includes a range of rubber chemicals, such as

accelerators, anti-oxidant TMQ, vulcanising agent insoluble sulphur, as well as anti-scorching agent CTP.

The Company’s production facilities are located in Shanxian, near Heze City in Shandong Province. The

wholly owned subsidiary of the Company is Shandong Shanxian Chemical Co., Ltd, which is engaged in

the manufacture and sale of rubber chemicals, comprising rubber accelerators, anti-oxidant agents, anti-

scorching agents and insoluble sulphur.

Company’s Website: http://www.chinasunsine.com/

Business Overview

Quarter 3/2010

Full Year 2009

Daily Chart

Outlook

Expansion Plans Update

During 9MFY2010, the Group has completed the following expansions:

• structural construction of the R&D centre and office facilities at Facility 2 in June.

• capacity expansion of insoluble sulphur to 10000 tons pa in September along with the commencement trial production.

• construction of 15000-ton 6PPD plant at Facility 2 in September with trial production commencing in 3Q2011 after completion of its intermediary material (4-Aminodiphenylamine)

production plant construction.

The Group will continue with the following projects:

• Complete the interior works of the R&D centre and office facilities at Facility 2 by end FY2010.

• Complete Phase 1 of Facility 3 at Weifang plant (15,000-ton MBT) by 1QFY2011.

• Complete the shifting of all production facilities from Facility 1 to Facility 2 by 1H2011. As a

Consequence, we shall recognise impairment of plant and equipment progressively. Due to

Facility 1’s proximity to commercial development within Shanxian city, the local government

Intends to rezone this site for commercial and residential use. The Group is negotiating with the

Local government

Financial Statement

VALUATION RATIOS

Company Industry Sector S&P 500

P/E Ratio (TTM) 5.42 11.42 27.52 17.84

P/E High - Last 5 Yrs. -- 0.23 0.56 18.98

P/E Low - Last 5 Yrs. -- 0.08 0.06 4.83

Beta 0.79 1.12 1.39 1.27

Price to Sales (TTM) 0.70 0.59 2.21 2.09

Price to Book (MRQ) 0.97 1.08 2.91 2.84

Price to Tangible Book (MRQ) 0.99 1.28 3.33 19.10

Price to Cash Flow (TTM) 4.60 5.22 27.68 10.46

Price to Free Cash Flow (TTM) -- 9.39 6.92 47.74

% Owned Institutions -- -- -- --

DIVIDENDS


Dividend Yield 7.55 2.05 1.07 1.68

Dividend Yield - 5 Year Avg. -- 1.53 1.70 2.46

Dividend 5 Year Growth Rate -- 6.11 11.82 -6.46

Payout Ratio(TTM) 19.33 26.82 10.07 39.62

GROWTH RATES


Sales (MRQ) vs Qtr. 1 Yr. Ago 32.42 25.33 54.79 9.36

Sales (TTM) vs TTM 1 Yr. Ago 41.87 18.33 10.58 8.94

Sales - 5 Yr. Growth Rate 24.69 2.10 13.97 9.86

EPS (MRQ) vs Qtr. 1 Yr. Ago 35.34 187.24 78.52 5.76

EPS (TTM) vs TTM 1 Yr. Ago 73.00 -- -- --

EPS - 5 Yr. Growth Rate 29.79 -3.04 13.71 6.98

Capital Spending - 5 Yr. Growth Rate 35.61 -3.33 21.02 4.90

FINANCIAL STRENGTH


Quick Ratio (MRQ) 2.58 1.61 1.69 0.67

Current Ratio (MRQ) 2.93 2.09 2.12 0.99

LT Debt to Equity (MRQ) 0.00 42.40 23.22 118.67

Total Debt to Equity (MRQ) 13.46 57.17 40.32 173.06

Interest Coverage (TTM) -- 0.19 0.07 19.01

PROFITABILITY RATIOS


Gross Margin (TTM) 23.63 22.33 20.21 32.87

Gross Margin - 5 Yr. Avg. 24.30 23.38 25.63 29.18

EBITD Margin (TTM) 17.82 -- -- --

EBITD - 5 Yr. Avg 16.96 11.82 19.60 18.55

Operating Margin (TTM) 15.16 7.57 7.66 --

Operating Margin - 5 Yr. Avg. 14.88 6.78 13.80 16.25

Pre-Tax Margin (TTM) 15.16 7.38 7.65 15.01

Pre-Tax Margin - 5 Yr. Avg. 14.41 6.63 13.57 15.86

Net Profit Margin (TTM) 12.94 5.31 4.76 11.14

Net Profit Margin - 5 Yr. Avg. 12.57 4.22 9.54 11.64

Effective Tax Rate (TTM) 14.64 25.83 16.16 50.15

Effecitve Tax Rate - 5 Yr. Avg. 12.76 44.54 28.16 25.24

EFFICIENCY


Revenue/Employee (TTM) -- 28,644,531 49,242,125 676,313

Net Income/Employee (TTM) -- 1,471,714 -49,517,005 84,785

Receivable Turnover (TTM) 4.83 4.38 9.82 10.51

Inventory Turnover (TTM) 12.31 5.64 2.40 6.76

Asset Turnover (TTM) 1.14 0.82 0.34 0.55

MANAGEMENT EFFECTIVENESS


Return on Assets (TTM) 14.73 5.64 4.28 6.01

Return on Assets - 5 Yr. Avg. 17.44 3.83 9.90 5.77

Return on Investment (TTM) 19.24 7.75 5.31 7.71

Return on Investment - 5 Yr. Avg. 25.03 5.40 14.30 7.46

Return on Equity (TTM) 19.24 13.88 7.06 18.04

Return on Equity - 5 Yr. Avg. 25.10 6.96 19.07 9.25

CONTACT:

Mr. Woraphop Viriyaroj

Corporate Account Executive

Heffernan Capital Management

Email : [email protected]

Mr Woraphop Viriyaroj passed Level 1 of the Chartered Financial Analyst (CFA) in the year

2010 and Certified Investment and Securities Analyst (CISA) Level 2 in 2010 and holds a degree

in Industrial Engineering.

Price Estimate by Shayne Heffernan PhD

Shayne Heffernan of Ebeling Heffernan holds a PhD in Economics serves as CEO of Heffernan

Holdings Inc and Co Founder of Ebeling Heffernan www.ebeling-heffernan.com

Bangkok

Suite 53 Athenee Tower 63 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 THAILAND

Tel: +66 2 126 8000 Fax: +66 2 126 8080

New York

347 5th Avenue, Suite 1402-508 Ny, NY 10016

Tel: +1 646-403-9881 Fax: +1 646-403-8014

Singapore

3 Raffles Place #07-01 Bharat Building Singapore 048617

Tel: +65 6329 6408Fax: +65 6329 9699

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Documents

Strong Buy on China Sunsine Chemical Holdings Singapore CSS