CCCL I've been in this since the SPAC conversion. My biggest disappointement was the surprise capex at its old plant, not mentioned or anticipated in the SPAC proxy statement docs. So my hot button with this company is the adequacy of disclosure regarding capex and the liklihood of dilution to fund it.
In that regard I note a change in language in this 20-F. Last year's 20-F said this:
"In China Ceramics’ opinion, its working capital, including its cash, income and cash flows from operations, and financing from the Investors of the Gaoan facility, is sufficient for its present requirements.
"However, China Ceramics may sell additional equity or obtain credit facilities to enhance its liquidity position or to increase its cash reserve for future acquisitions and capital equipment expenditures. The sale of additional equity would result in further dilution to its shareholders."
Now the 20F says this:
"We believe that our working capital will be sufficient to meet our present operation needs and the commitments and capital expenditures in the foreseeable future, together with expected cash flows from operations."
That makes me cautiously optimistic.
Looking for potential issues, I note this odd arrangement:
"We use 11 design patents owned by our chief executive officer, Huang Jia Dong pursuant to license agreements of indefinite term and for no consideration. However, we have not registered the license agreements and, in the event Mr. Huang breaches such license agreements and does not continue to allow us to use such design patents, we would not be able to enforce the license agreements and would therefore not be able protect our intellectual property rights and our operations may suffer."
This would allow the CEO to pull the rug out from under the shareholders. In that regard, I note this risk factor:
"British Virgin Islands companies may not be able to initiate shareholder derivative actions, thereby depriving shareholders of the ability to protect their interests."
After my experience with CCME, I am no longer willing to overlook such potential problems.
AI
