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ChippyDude

7,114 Posts.

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06/03/19

13:30

Post #: 37671455
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Originally posted by denbo ↑

It's long been my opinion that if you're going to do business with China - no matter what type of business you're in - you need support from Chinese representation and distribution. Chinese culture is so different from our own no westerner really has a chance to succeed in business without local representation. Even Chinese people have trouble understanding each other depending on which part of the country they come from. (Mind you, I have the same problem with Scottish people).

BUBS has just got an MOU regarding that from a Chinese outfit - good on them. The problem is, MOUs, are generally no more than an agreement in principle - e.g. 'we'll product the product, you distribute it'. Given the flakiness of trade with China I'd be inclined to proceed with caution.

Two example are FBR and AUZ which had surges in their SP after MOUs were announced but which, over time, came to nothing. Those that bought in on the hype are now feeling a lot less happy these days. and experiencing 80-90% losses if they sell out now. I'm sure there's many other examples.

In KTDs case as far as I can make out, KTD already has Chinese distribution in place, almost like MOUs of it's own but more reliable - KTDs problem is volume of product it can manufacture - something it's addressing right now with new factories. Also, KTD is in a different place to the others as it doesn't manufacture the raw products it processes and has to rely on supplies of it's own - which must be increasing in cost because of demand.

Luckily, there's no doubt there's still plenty of room for ongoing growth in this market in China with it's increasing thirst for quality dairy products for it's growing population.

Time will tell.

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The raw materials side is over supplied and prices are low so KTD has some headroom there.

The demand is in processing as much as China wants to buy, in the formulas where there is demand.

And thats exactly what KTD is doing. By taking advantage of an over supplied raw materials market and Value adding the processing to be then able to Can and Tin the Milk to be stored and exported.

My Guess is that China is not only consuming these products but also stockpiling.

So I cant see any drop off in demand for a decade IMO.

Last edited by ChippyDude: 06/03/19

KTD Price at posting: 40.5¢ Sentiment: Buy Disclosure: Held
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