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Author: mekong22 Big red star, 1000 posts Old School Fool CAPS All Star Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 259  
Subject: Re: Q1 2012 Date: 5/14/2012 9:33 AM
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They issue AR collection press release every year once most of the 12/31 AR has been collected, this is not anything new, hardly unusual if you've been following the company recently. They did it in early 2011, and again in 2012, and I'm sure they will do it again in 2013. It is management's responsibility to let their owners know when something significant has happened which would be material to making an investing decision.

The presumption that it took public opinion or "a village" to make them collect their receivables is just silly. Do you really think they wouldn't have otherwise collected their receivables?

Stating that there is a distinct decrease in demand for Shengmingsu as fact sounds like something one of the short sellers would say. If their new products are only sellable at the very start of the planting season and they have a finite capacity to manufacture and distribute product each week/month/quarter, any capable manager/executive team would focus on the new products in Q1 and Shenmingsu in Q2 and Q2 (when they've always historically had most of their sales, when the farmers actually want the product)

Year-over-year growth in revenue has never been this low in the March quarter.

Yes, absolutely, I would expect growth to slow every year going forward, you can't expect 50-100% growth to go on forever.

I agree with your comments on DSO, that is certainly one of the things that it would be nice to improvement in, however, until the bulk of this year's sales take place and are collected, we're talking about small data points that might not be representative of the overall business.

Capital expenditures were low in March at $14,723. The coalmine venture appears to be on hold. If investors are lucky, it may remain that way indefinitely. It will be a tremendous cash sink if they build infrastructure and buy equipment to do surface mining. The price of lignite is cheap and the decision to mine it in an effort to control costs is irrational. The price of lignite coal is around $10 to $15 per ton—it’s cheap and plentiful.

It's by no means on hold, but the earliest that coal will come out of that mine if everything goes according to plan is 2014. This is not new news. Management has said explicitly that they will not be building infrastructure or buying equipment to do surface mining. They again reiterated it on this month's earnings call that they would be using a third party. If the price of coal remains low, it's likely they will continue to buy it externally. Irrational would be not securing a supply of the primary material that makes up most of your top selling product. I would probably lose sleep over my YONG investment (for the fist time ever) if a market turn could cause them to lose access to the primary raw material that makes up most of their top selling product. Luckily owning the mine takes this out of the equation. But assuming that prices will always be low is short sighted and highly unlikely. Don't you think the value and cost of the coal field would increase signfiicantly when the price of lignite coal goes up? Wouldn't it make sense to invest in the mine when coal prices are cheap?

It's no secret that Kitkat and I have always had differnet opinions on YONG. However, stating some of these things as facts based on the small data point of Q1 (historically slow) sales quarter sounds like coming up with a conclusion first and then trying to make the facts fit afterwards. I'm all for the devil's advocate and, although I have a significant stake in YONG, I don't believe this investment is "guaranteed", but I'm willing to wait until at least a decent amount of 2012 has performed before making a verdict on the current year.
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