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PRC co. with more cash than total capitalisation
fruitty
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04-Mar-2009 00:11     
 
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 Alert Admin 		FibreChem auditor is Deloitte Touche according to sgx

jensonlaw      ( Date: 02-Mar-2009 08:41) Posted:



Found this passage from another forum by Buffett_disciple which is quite interesting:

--

There is suspicion that S-shares have been faking their cashpile. If the company has so much cash relative to its stock price, it is only logical to give out as dividends or do stock buybacks. Cash is actually hardest to fake compared with receivables, asset values etc. So this is the most daring fake. All the auditor needs to do is go to the bank and verify the accounts showing cash. The most important thing is the auditor.

First thing to check is WHO IS THE AUDITOR?
If he is from one of the BIG 4 :

PricewaterhouseCoopers
Deloitte Touche Tohmatsu
Ernst & Young
KPMG

You're 95% safe. They rotate their auditors and have strict procedures to verify the cash.

2nd thing is look for dividends and buybacks but these is not fool proof.

I found some misleading things in today's Straits Times article which contain a table of companies with high cash pile. The problem is some of them on the list are audited by BIG 4 and/or give dividends. The 2nd thing is some of them have high debt so they need this high cash pile to service or restructure the debt - so the cashpile isn't too high if you take into account the debt. Putting up a table just like that makes the whole lot guilty until proven innocent. But that is not the way to invest in stocks. You have to go in and do the assessment in more detail.

My suggestion is do a 1st cut filter, by check the auditor. This is the simplest because you can find it at the SGX website. Click on the company name and then click on the information. It shows the address, auditor and IPO date...+ auditor. Please don't be impressed by ang moh names because many small accounting firms in China use these names to show false credibility MUST be from BIG 4 okay to be safe.

 
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jensonlaw
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02-Mar-2009 08:41     
 
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Found this passage from another forum by Buffett_disciple which is quite interesting:

--

There is suspicion that S-shares have been faking their cashpile. If the company has so much cash relative to its stock price, it is only logical to give out as dividends or do stock buybacks. Cash is actually hardest to fake compared with receivables, asset values etc. So this is the most daring fake. All the auditor needs to do is go to the bank and verify the accounts showing cash. The most important thing is the auditor.

First thing to check is WHO IS THE AUDITOR?
If he is from one of the BIG 4 :

PricewaterhouseCoopers
Deloitte Touche Tohmatsu
Ernst & Young
KPMG

You're 95% safe. They rotate their auditors and have strict procedures to verify the cash.

2nd thing is look for dividends and buybacks but these is not fool proof.

I found some misleading things in today's Straits Times article which contain a table of companies with high cash pile. The problem is some of them on the list are audited by BIG 4 and/or give dividends. The 2nd thing is some of them have high debt so they need this high cash pile to service or restructure the debt - so the cashpile isn't too high if you take into account the debt. Putting up a table just like that makes the whole lot guilty until proven innocent. But that is not the way to invest in stocks. You have to go in and do the assessment in more detail.

My suggestion is do a 1st cut filter, by check the auditor. This is the simplest because you can find it at the SGX website. Click on the company name and then click on the information. It shows the address, auditor and IPO date...+ auditor. Please don't be impressed by ang moh names because many small accounting firms in China use these names to show false credibility MUST be from BIG 4 okay to be safe.

 
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CWQuah
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01-Mar-2009 12:12     
 
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Correction to the last paragraph:

 "...only (3) weighs on investment sentiment currently." should read "...only (3) and (4)..

Also, under pt. 2, ignore "in particular". Missed it during the deletion.

 



CWQuah      ( Date: 28-Feb-2009 14:01) Posted:



Make money, yes, but within a more realistic timeline of 2-3 yrs.

It's a general lack of mkt confidence plus all the stories of Ferrochina, Fibrechem with their financial discrepancies that's pressing the stock prices down to below cash holding.


The key things to look out for over and above their financial statements BEFORE INVESTING are:

1. Realistic business prospects for next 2-3 yrs - are they going to burn more cash? If so, will they expect to issue rights? (For the very cash rich ones, unlikely.)

2. Any major expenditures coming up (existing loans? Capital asset buildup?) Capital/production asset buildup is ok for longterm growth provided demand really picks up. Loans on the other hand, are like leverage - gotta pay interest, and unless the company can create returns far above the loan interest, not worthwhile. In particular,

3. Market diversification - I'd prefer companies that actually produce something that would be consumed both within PRC and also be suited for exports. Exports from PRC are suffering now due to the global demand slump/yuan exchange rate, so internal consumption is necessary to sustain these companies in the near term.


4. Management credibility/integrity - Good businesses can be ruined by unscrupulous mgmt, but bad businesses can be turned around by astute management.


My opinion is that (1) and (2) are the least of concerns for these cashrich PRC companies, only (3) weighs on investment sentiment currently. So another option to play is, dun just dump all your cash onto a single PRC company. Diversify over those that meet the criteria stringently. Of course, this type of investment is pretty much higher risk since we are looking at distressed valuations with all the rumors/bad news floating around.

 


 
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CWQuah
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28-Feb-2009 14:01     
 
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Make money, yes, but within a more realistic timeline of 2-3 yrs.

It's a general lack of mkt confidence plus all the stories of Ferrochina, Fibrechem with their financial discrepancies that's pressing the stock prices down to below cash holding.


The key things to look out for over and above their financial statements BEFORE INVESTING are:

1. Realistic business prospects for next 2-3 yrs - are they going to burn more cash? If so, will they expect to issue rights? (For the very cash rich ones, unlikely.)

2. Any major expenditures coming up (existing loans? Capital asset buildup?) Capital/production asset buildup is ok for longterm growth provided demand really picks up. Loans on the other hand, are like leverage - gotta pay interest, and unless the company can create returns far above the loan interest, not worthwhile. In particular,

3. Market diversification - I'd prefer companies that actually produce something that would be consumed both within PRC and also be suited for exports. Exports from PRC are suffering now due to the global demand slump/yuan exchange rate, so internal consumption is necessary to sustain these companies in the near term.


4. Management credibility/integrity - Good businesses can be ruined by unscrupulous mgmt, but bad businesses can be turned around by astute management.


My opinion is that (1) and (2) are the least of concerns for these cashrich PRC companies, only (3) weighs on investment sentiment currently. So another option to play is, dun just dump all your cash onto a single PRC company. Diversify over those that meet the criteria stringently. Of course, this type of investment is pretty much higher risk since we are looking at distressed valuations with all the rumors/bad news floating around.

 


 
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jensonlaw
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28-Feb-2009 08:01     
 
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 Alert Admin 		Definitely can make $$ one - even a kid can tell you to buy over these PRC companies using a loan, and then paying back the loan with the $ these PRC companies have on hand. You even get some remaining cash, plus a money making enterprise. Don't need FT to know that, do you? But why nobody is making a kill?
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jensonlaw
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26-Feb-2009 20:46     
 
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 Alert Admin 		The auditors are supposed to confirm with the banks that the amount of monies the company have with the banks. So if otherwise, the auditors are to be taken to task for failing in their job. That's what they're paid to do.


trader88.sg      ( Date: 26-Feb-2009 09:56) Posted:



Quoted from Business Times on Fibrechem's news...


"Its cash and cash equivalents at Sept 30, 2008 were HK$1.17 billion, double the HK$597.46 million a year earlier."

Moral of the story: Many China listed companies listed may show tonnes of cash in thier balance sheet, but how much is true?

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AK_Francis
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26-Feb-2009 10:25     
 
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Ha ha, there are con men, including shim n women everywhere around the world.

By population proportion, Chinese nationals inevitably contribute more loh. Some of our unlucky people, ie businessmen at China or even old folks at local, who are keeping their CPF, kena telok telok before. Hv heard n got it fr papers.

Be vigilant thats all. Cheers.



trader88.sg      ( Date: 26-Feb-2009 09:56) Posted:



Quoted from Business Times on Fibrechem's news...


"Its cash and cash equivalents at Sept 30, 2008 were HK$1.17 billion, double the HK$597.46 million a year earlier."

Moral of the story: Many China listed companies listed may show tonnes of cash in thier balance sheet, but how much is true?

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knightrider
Elite
26-Feb-2009 10:10     
 
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http://moneynews.newsmax.com/streettalk/switzerland_broke/2009/02/23/184520.html?utm_medium=RSS
Economist Warns Switzerland Could Go Broke

Monday, February 23, 2009 10:05 AM

By: Julie Crawshaw
Article Font Size  



Economist Artur Schmidt says Switzerland could go broke because Swiss banks extended billions in credit to Eastern European countries which now can't pay back the money.

“Switzerland, like Iceland, is threatened with a potential national bankruptcy,” Schmidt told the Swiss daily Tagesanzeige.

Loans made in Swiss francs stimulated rapid economic growth in many Eastern European countries, Schmidt says, making Swiss currency very important.

Swiss banks lent francs to local banks, which in turn lent them to their customers. Such loans were especially attractive because interest rates were much lower than required for loans in local currency.

The system worked as long as exchange rates between Swiss and Eastern European currencies remained reasonably stable.

Now Eastern European currencies are falling and more borrowers are having problems repaying their loans.

“Because of the devaluations of the national currencies, the debt to Switzerland has increased by more than one-third,” Schmidt notes.

“Many of the Eastern European countries have serious payment difficulties and are virtually bankrupt.”

Schmidt says the value of Switzerland’s currency could drop severely or its credit rating could be massively downgraded, creating economic trauma in a country traditionally regarded as a stronghold of financial stability.

“The franc could become an unstable, soft currency,” Schmidt says.

“Then Switzerland would perhaps be forced to abandon the franc and take on the euro.”

According to a report from the Bank for International Settlements, worldwide franc-denominated loans of about $675 billion are in circulation, with about $150 billion of that total from Switzerland.

© 2009 Newsmax. All rights reserved.
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trader88.sg
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26-Feb-2009 09:56     
 
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Quoted from Business Times on Fibrechem's news...


"Its cash and cash equivalents at Sept 30, 2008 were HK$1.17 billion, double the HK$597.46 million a year earlier."

Moral of the story: Many China listed companies listed may show tonnes of cash in thier balance sheet, but how much is true?
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jensonlaw
Member
26-Feb-2009 08:37     
 
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Now you know the reason why their share price is languishing. Caveat Emptor.


--


FibreChem investigates questionable transactions

Posted: 25 February 2009 1443 hrs

SINGAPORE: FibreChem Technologies has appointed an independent corporate investigator to look into some questionable transactions after encountering "difficulties" in the audit of its trade receivables and cash balances.
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Andrew
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25-Feb-2009 12:49     
 
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I saw a nice article about this subject on Asiaone website.  Net Cash more than Stock Price and the writer put forward his reason on this..

http://www.asiaone.com/Business/My%2BMoney/Opinion/Story/A1Story20090223-123931.html

 

 

 
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jensonlaw
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25-Feb-2009 07:48     
 
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 Alert Admin 		This is not an inducement to buy - do your own homework, read their AR. Then you decide. Caveat Emptor. 

des_khor      ( Date: 24-Feb-2009 19:18) Posted:

pls list out the company as i want to invest ...

jensonlaw      ( Date: 23-Feb-2009 08:45) Posted:

There's a quite a few PRC companies hoarding tonnes of cash in the bank, while it's stock price is languishing. Why aren't corp. raiders like OHL offer a buy-out, and profit from the exercise? 


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des_khor
Supreme
24-Feb-2009 19:18     
 
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 Alert Admin 		pls list out the company as i want to invest ...

jensonlaw      ( Date: 23-Feb-2009 08:45) Posted:

There's a quite a few PRC companies hoarding tonnes of cash in the bank, while it's stock price is languishing. Why aren't corp. raiders like OHL offer a buy-out, and profit from the exercise? 

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Laulan
Master
24-Feb-2009 17:04     
 
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 Alert Admin 		These are hard times and probably harder ones ahead.  So many people are running short of cash to buy.  There could be a situation where the company is selling for free plus giving you some bonuses in terms of assets.
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CWQuah
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24-Feb-2009 16:57     
 
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There are some with not only hoarded cash, but ZERO debt, and current assets far greater than current liabilities. I know of one where current assets exceeds their current liabilities by 6 times. Hehehe.

If their business model is sustainable and even recession-proof (think hard ah... what are the fundamental needs of ppl??), these are good for keeping under the pillow.
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Hulumas
Supreme
23-Feb-2009 09:16     
 
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 Alert Admin 		They want to play safe perhaps.

jensonlaw      ( Date: 23-Feb-2009 08:45) Posted:

There's a quite a few PRC companies hoarding tonnes of cash in the bank, while it's stock price is languishing. Why aren't corp. raiders like OHL offer a buy-out, and profit from the exercise? 

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jensonlaw
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23-Feb-2009 08:45     
 
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 Alert Admin 		There's a quite a few PRC companies hoarding tonnes of cash in the bank, while it's stock price is languishing. Why aren't corp. raiders like OHL offer a buy-out, and profit from the exercise? 
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