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Interesting analysis
USD $3000 of monthly salary is about CNY$20,000.
For comparisons:
It is about the same as a salary paid to a general or a high ranked professor (both are considered highly paid professionals.)
Average factory work earned about CNY$1,000 (USD$150) per month last year and it jumps to to CNY$2,000 (USD$300) /month this year due to labor shortage.
Average white collar in second tier city earns about CNY 3000-6000/month. Only in first tier cities, you will see managers with salary in the CNY$12,000 to $20,000 range.
In US, the average household income outside of Wall Street used to be USD$3000 or CNY$20K per month. Now could be less thanks for a crisis created by Wall Street in 2008.
"How much is CCME paying its employees? It only has 170 employees. So assuming CCME pays $1M for rent per quarter... then it's paying $1.51M/170 employees = $8900 per quarter for salary + benefits. What a tight-wad. Uh... hmm... $3000 usd per month is hmm... actually not that bad in China. "
This is a stupid post starting with a stupid hypothesis.
You will need to prove your hypothesis first before associate the name of a fine company with words such as false, illegal, unethical.
If you are short and tried to distribute misinformation you are the ones who are unethical.
Interesting - it got the media attention of People's daily.
The report is fairly balanced with views form both sides. Wish US media can learn a thing or two from People's Daily. (I would have never dreamed that I said just that.)
If it is the Chinese version of the People's Daily, then it would be a really big deal.
CCME - Looks like Chimin's article is taking down. Is there any page that logs the action and states the reasons within Seeking Alpha?
TIA.
I am long on CCME and I am with a small loss right now(in red, not sold). I would not mind to have a bigger paper loss if it means long term we have a fair play field - Right now the game is rigged by the shorts with forged documents etc. We all can make more money this way.
People read headlines, intelligent people read more than just headlines. Those who read headline only have long left CCME. So why are we afraid of?
Chad - there are strong evidence that Chimin either forged, or use forged document to attack CCME.
Should someone report that to FBI instead?
After all, forging a document is against federal laws. Using a forging document for personal profit breaks multiple laws in addition to security law.
Any laywers who care to chime in?
TSTC - the company and insiders did not sell any shares over the last 6 year (per my memory.) Now the CEO bought a ton.
As I said before, TSTC is the last company I would suspect a fraud. But if this is how a security fraud is committed, a fraud for the benefit of longs, I wish there are more of them.
CCME -
1) Joe, good job here. Thanks.
2) Tim (value1008), you probably have the most information.
Can you take the lead and put together the information?
(a well-presented case to SEC)
We will support you.
-Derek
Headlines such as this may help restraint Seeking Alpha.
"CCME short and Seekingalpha.com use forged documents to manipulate CCME's share price"
http://www.chinaplus1.com/content/ccme-short-and-seekingalphacom-use-forged-documents-attack-ccme
CCME - Chimin's forgery is blogged it here.
http://www.chinaplus1.com/content/ccme-short-and-seekingalphacom-use-forged-documents-attack-ccme
CCME - Chimin's SAT forms are not authentic.
Because of Rato's response to one of my posts in CGS board, I started reading Chimin's SA article. The key damaging evidence from the article were three attached SAT (State Administration of Tax) forms for year 2008,2009, and 1Q2010, packed in one PDF files. The forms were supposed used by CCME to pay tax to Chinese authorities during the period.
I am 100% sure (and I normally does not use 100% when expressing an opinion) that the SAT forms as presented by Chimin are not authentic SAT forms. Each of the SAT forms has CCME's Chinese name (Fujian FenZhong), a very low revenue and low tax amount, but no signature by the legal representative of the company (ie. the owner), as required by the form, and no company's official seal (red stamp) as is required in the form and custom in China for official business.
It is as if someone put up Obama's name on an empty Form 1040 in US and claims Obama did not pay any taxes.
Detailed findings:
Here is the link to Chimin's pdf file (directly from from SA.)
http://www.scribd.com/doc/48276706/Ccme-Saic-and-Sat-Filings
You can check the pages 5, 6 and 7. Each representing a tax year. You do not need to read Chinese or know the tax code to know there is is no signature or red stamps in each of those forms. Only computer generated lines, typed words and numbers.
1) All three STA forms have CCME's Chinese name (Fujian FenZhong), each with a very low revenue and low tax amount.
2) On each of the forms, it requires a signature from the legal representative of the company. The signature is to certify that the amounts as reported are "accurate, true, and complete".
In CCME's case, CEO Cheng Zheng should be the legal representative of the company and should sign this line.
There is no signature from CCME, period, in all three forms. Without a signature, those forms are not considered legal documents.
3) At the bottom of the SAT forms (page 5 and 6), there are three boxes, each with three lines. Those boxes are
- a) (left box) Legal seal from the company/person reporting the tax, the name of the person who file the return, and filing date. All empty per Chimin's form.
- b) (middle) Legal seal from the tax preparer (such as a CPA), the license number for the preparer, and the reporting date: All empty (Note: This part is optional, but if (a) is empty this part must be filled.)
- c) (right box) Legal seals from the local State Administration office, the name of the tax inspector who processed the form, and processing date.
All of those box and lines are empty.
3) Typo and fonts in all three forms are the same. Remember that those three forms came from three different years (2008, 2009, 2010). If the forms were submitted by the company over three years, the inputs were likely typed in by different persons using different computers/typewriters. The fonts at each input line are too similar to smell like a creation by one person at one time.
4). In each of the document, the computer fonts between the form and input lines are the same. This is likely to happen when the forms and inputs are created by one person, using one set of computer program.
All in all, I am 100% sure that the SAT forms as presented by Chimin are not authentic SAT forms.
CCME - Chimin's SAT forms are not authentic.
Because of Rato's response to one of my posts in CGS board, I started reading Chimin's SA article. The key damaging evidence from the article were three attached SAT (State Administration of Tax) forms for year 2008,2009, and 1Q2010, packed in one PDF files. The forms were supposed used by CCME to pay tax to Chinese authorities during the period.
I am 100% sure (and I normally does not use 100% when expressing an opinion) that the SAT forms as presented by Chimin are not authentic SAT forms. Each of the SAT forms has CCME's Chinese name (Fujian FenZhong), a very low revenue and low tax amount, but no signature by the legal representative of the company (ie. the owner), as required by the form, and no company's official seal (red stamp) as is required in the form and custom in China for official business.
It is as if someone put up Obama's name on an empty Form 1040 in US and claims Obama did not pay any taxes.
Detailed findings:
Here is the link to Chimin's pdf file (directly from from SA.)
http://www.scribd.com/doc/48276706/Ccme-Saic-and-Sat-Filings
You can check the pages 5, 6 and 7. Each representing a tax year. You do not need to read Chinese or know the tax code to know there is is no signature or red stamps in each of those forms. Only computer generated lines, typed words and numbers.
1) All three STA forms have CCME's Chinese name (Fujian FenZhong), each with a very low revenue and low tax amount.
2) On each of the forms, it requires a signature from the legal representative of the company. The signature is to certify that the amounts as reported are "accurate, true, and complete".
In CCME's case, CEO Cheng Zheng should be the legal representative of the company and should sign this line.
There is no signature from CCME, period, in all three forms. Without a signature, those forms are not considered legal documents.
3) At the bottom of the SAT forms (page 5 and 6), there are three boxes, each with three lines. Those boxes are
- a) (left box) Legal seal from the company/person reporting the tax, the name of the person who file the return, and filing date. All empty per Chimin's form.
- b) (middle) Legal seal from the tax preparer (such as a CPA), the license number for the preparer, and the reporting date: All empty (Note: This part is optional, but if (a) is empty this part must be filled.)
- c) (right box) Legal seals from the local State Administration office, the name of the tax inspector who processed the form, and processing date.
All of those box and lines are empty.
3) Typo and fonts in all three forms are the same. Remember that those three forms came from three different years (2008, 2009, 2010). If the forms were submitted by the company over three years, the inputs were likely typed in by different persons using different computers/typewriters. The fonts at each input line are too similar to smell like a creation by one person at one time.
4). In each of the document, the computer fonts between the form and input lines are the same. This is likely to happen when the forms and inputs are created by one person, using one set of computer program.
All in all, I am 100% sure that the SAT forms as presented by Chimin are not authentic SAT forms.
CCME - my post was a response to a prior post, which stated the $100m number there.
One thing for sure: Chimin's SAT form is not authentic.
Because of Rato's response, I started reading Chimin's SA article. There was an attached SAT form. Strange thing is, the SAT form has CCME's Chinese name (Fujian FenZhong), a very low revenue and low tax amount, but no signature by the legal representative of the company (ie. the owner), as required by the form, and no company's official seal (red stamp) as is custom in China.
I am 100% sure (and I normally does not use 100% when expressing an opinion) that the SAT form as presented by Chimin is not an authentic SAT form. It is as if someone put up Obama's name on an empty 1040 and claims Obama did not pay any taxes?
PS. Here is the link to Chimin's pdf file (directly from from SA.)
http://www.scribd.com/doc/48276706/Ccme-Saic-and-Sat-Filings
You can check the pages 5, 6 and 7. You do not need to read Chinese to know there is is no signature or red stamp. Only typed words and numbers.
CCME - You can talk to any Chinese bankers, they would probably tell you that the money (CNY$480B, or roughly US$80B) would likely go to
1) State own companies - which could be for fancy projects like high speed rails, bridges, subways, oil pipelines, new mines, etc,
2) Real estate deals if you are not a state owned company - with land or building as collaterals.
Nobody will lend you $100m if you do not have 1) the connection, AND 2) the collaterals, AND 3) a good and low risk project plan. Without those three, you are lucky to get $100K with some bribes, but even bribes will not get you $100m. Do I have to remind you that committing a large security fraud will not be considered a low risk plan since lender's head could be on the chopping board?
"As crazy as the theory may sound, what is happening to this money? Chinese banks ... to loan a massive 480 billion yuan in December."
CCME - Cash loan theory. This is the most preposterous theory I can ever image. The story is getting really wild.
If you are the CEO of a company with a $600K revenue per year (like Chiming said), and you can barely make the ends meet since you have to spend a lot of money on expensive big 4 auditors (~$300K), an expensive CFO (100K), office space (a few 100K?), and consultants (CTR alone probably costs another $100K). How much money is left for bribing people to loan you $100m?
Assume you get the $100m. What would be the first thing you do? Put $100m on the bank to generate a fake cash flow statement with a faint hope of defrauding US (and Chinese) investors, or you would do something immediate: take the money and run. It is a much easier fraud to take the money and run.
Now lets talk about lenders. Who is stupid enough to "loan" $100m to someone who could not afford it, with the intent to help this person to commit a fraud? What could the lender get in return? Some 20% interest plus 100% guaranteed loss of principle, and a definite jail sentence? I said 100% guaranteed loss of principle since either the "CEO" would run away with the money, or Chinese authority will knock at your door to take the money away after the the fraud is exposed.
On top of that, there is a booming economy there and there are plenty of legal ways to make money. Why risk it all if you are a lender?
" I believe Chimin Sang is about to publish another article claiming that CCME is borrowing all of their reported earnings (~$100 million) and depositing just prior to the end of the quarter to fool Deloitte... "
Premarket - 14.25, vol 35K, bid/ask: 14.27/14.35
Rato - best post from you in many months.
A calm and reasonable response. I agree with you 100% here.
CCME - Tender offer.
It would be nice if CCME is so pissed off that they will go for a nuclear option against the shorts. I may make small changes if they do - via some loss at the current prices on my holdings. But it is unrealistic and unhelpful to expect a good management team goes nuclear each time there is a crisis. After all, if normal company could have many crisis during its existence, most directly impact the operations.
Back to the tender offer, I am absolutely opposed to any "tender" offers at the price of $10 or $12. That offer sends a wrong signal to the market about the company's worth. I have paid more than that for my current holdings.
It is wise, however, for company to announce a standing buy back program that will catch any share when and if the price drops to a certain level, such as $10. The purpose of the buy back is to stabilize the market, not to reduce the floats. With $100m, the company can essentially lock up its entire float at a worst case, but not likely scenario. This will set up a floor and prevent panic selling.
The rest will have to sort out through the market. While the current market is unfriendly to Chinese stocks. Things can change as long as the people realizes that CCME is indeed a very profitable company.
Best post I ever read! Highly recommend.
Rato -
Guess who are those worthy companies that the PE funds are chasing after in China.
Many of them are the CGS stocks such as LPH, CVVT, YUII, CELM, etc. I had heard some more CGS companies were chasing by those funds. Remember most CGS companies sold their secondary to funds, not to individuals over the secondary market.
Funny that you immediately turned around and decried many of those names.
"The chinese private equity markets are overflowing with investment capital seeking a destination. Worthy companies can get that capital. Unworthy companies can't. Simple as that. "
Muddy Waters and Fish 2
Muddy Waters Research - the name comes from Chinese phrase hun shui mo yu, which literally means "fishing in muddy water".
The phrase started as a military strategy in China per ancient Chinese military strategy book - "Thirty Six military strategies". It is the 20th out of the 36 strategies described in the book.
The literal meaning is to to get the water muddy, the fish will be confused and disoriented, providing a best opportunity to capture the fish. As a military strategy, it is paramount to create chaos and confusion using whatever means, like faked attacks from different fronts. Then destroying the disoriented enemy and win victory.
What Muddy Waters did to CCME was copied exactly from this military book. It is actually pretty simple: 1) Set up a short strategy and positions, 2) Create massive confusions/chaos on the market by publishing a detailed report at most opportunistic time. The accusation has to look authentic but facts does not matter here. 3) At a panicking market, people rush to the exit, bring down the share price big time, and 4) Muddy Waters principles reap the profits and move to next target.
I agree w you on the buy back. I wish they declare to buy back all floating shares at $10 from those who are willing to sell.
CCME - Rato, point to point rebuttal is unnecessary. It is well known that nobody wins in a mud fight, except those who sold the tickets before the fight.
The only way to fight is to declare a special dividend. The $30m reserved for buyback should be distributed to share holders as part of the first dividend payment. This shall clear majority of the shorts.
Here is the google translate of eading.com. It clearlys states that Eading has distribution agreement with Apple, HP, and many others.
http://translate.google.com/translate?js=n&prev=_t&hl=en&ie=UTF-8&layout=2&eotf=1&sl=zh-CN&tl=en&u=http://www.eading.com/web/eadingcompany/aboutus/
CCME - I was reading through the document. First pass and will read again some other time.
Revenue Estimates:
if you can get over all the fluffy stuff of buses/demographics, the whole MW reports rely on two key assumptions:
1) Revenue per (sales) employee is assumed to be 250K
2) Sales team of 70 persons.
If those two numbers are good estimates, multiplying those two numbers, you have $17M (=250K*70) revenue for CCME, not the 95.6M as claimed by CCME.
However, those assumptions are not necessarily true:
1) Revenue per sales employee could be as high as $412K, per AMCN, which MW quoted in Page 20 of the report.
2) The attachment within the MW report (Page 24 of the report, or the second page of appendix) clearly shows that CCME has 110 direct sales, plus agency distribution channel not figured in MW's revenue estimates.
Direct revenue = 110x412K = 45M (almost 3x of MW's estimates.)
Agency revenue =?
If you add the agency channel, which was the primarily sales channel for CCME, you could reach $95.9M revenue, as stated in the begining of MW report (page 2).
Cash is King
As we said before, the cash is key. CCME consistently insist that they have plenty of cash ($160M), mostly in retained profits. MW claims that CCME is not profitable (or barely profitable - hard to have profits with only $17m revenue.)
So validate the cash - and the history of the cash.
There is no way that people will put in $160m cash just to do what? - get 1x or 2x of cash back through pumping? There are easier and legal ways to double or triple the value of $160m+ cash in China than pumping a stock with a risk of losing all, and get arrested at the same time.
CCME - I was reading through the document. First pass and will read again some other time.
Revenue Estimates:
if you can get over all the fluffy stuff of buses/demographics, the whole MW reports rely on two key assumptions:
1) Revenue per (sales) employee is assumed to be 250K
2) Sales team of 70 persons.
If those two numbers are good estimates, multiplying those two numbers, you have $17M (=250K*70) revenue for CCME, not the 95.6M as claimed by CCME.
However, those assumptions are not necessarily true:
1) Revenue per sales employee could be as high as $412K, per AMCN, which MW quoted in Page 20 of the report.
2) The attachment within the MW report (Page 24 of the report, or the second page of appendix) clearly shows that CCME has 110 direct sales, plus agency distribution channel not figured in MW's revenue estimates.
Direct revenue = 110x412K = 45M (almost 3x of MW's estimates.)
Agency revenue =?
If you add the agency channel, which was the primarily sales channel for CCME, you could reach $95.9M revenue, as stated in the begining of MW report (page 2).
Cash is King
As we said before, the cash is key. CCME consistently insist that they have plenty of cash ($160M), mostly in retained profits. MW claims that CCME is not profitable (or barely profitable - hard to have profits with only $17m revenue.)
So validate the cash - and the history of the cash.
There is no way that people will put in $160m cash just to do what? - get 1x or 2x of cash back through pumping? There are easier and legal ways to double or triple the value of $160m+ cash in China than pumping a stock with a risk of losing all, and get arrested at the same time.
CCME - Video
This is an important DD video that everyone should see. It documents travelling to a third tier city in China and saw buses equipped with CCME LCDs.
http://ccme-info.xanga.com/740387101/february-3rd-2011--inter-city-bus-videos/
The fourth video shows a variety of commercials broadcasted via CCME channels. From the video you can see the bus was fairly seated with people of young urban kind.
Good job wctbills. I am going to accumulate more CCME as it is getting cheaper.
CCME - needed cash?
"That doesn't answer the question....they needed the cash right?"
I think you are confusing multiple concepts here. Selling shares to a reputable sponsor and needing cash are two different things.
There is a culture thing here. Almost all of the private companies in China want to get listed either in China or US. It is as if being on the market give companies prestige, honor, and legitimacy.
Within China, only profitably companies got listed on the exchanges. While in general, all the companies need cash to grow, those publicly traded companies are the ones which need less cash than their peers.
In other words, in Chinese CEO's mind, it is perfectly acceptable and makes sense to sell shares to get listed no matter you need money or not.
Plus, cash is always good. It gives companies flexibility to move onto other areas. Buying another company? SWITOW? Accumulating land/buildings? Diving into a new business? With cash there are endless possibilities in a growing economy. After all, it takes money to make money.
CCME - The part one is really fluffy, part two, if any, will be weaker.
Glance through the pieces, amazed how flimsy of reseach is by the author. Take, for example,
"In order to add to the confusion over the story and possibly to further themselves on someone else’s reputation, we would like to point out something very odd. In Chinese, the name of the CCME’s operating corp. is “Fujian Focus Media” — Fujian being the province they are domiciled. Focus Media is the largest and most respected advertising company in China. To make your name so similar would be as if someone were to open a software company in New York and called it “Microsoft New York” This does not seem like behavior of a company that wants to build a brand, but rather a company opting for deception instead of brand-building."
Deception, a really serious accusation.
The only issue: The company's name is Fujian Fenzheng, which translated into Fujian Focus Media (or Fujian divided media). In Chinese, Focus Media is not a company name. It is a term relative to Mass Media. Mass media = broadcast information to everyone using TV or newspaper. Focus media (fenzhong, or divided media)-> push information to a particular segment of people (like people in the bus, elevators, airplanes, etc.) Fujian Focus Media, just like China Focus Media, just tells that the company is media company specializing in focused audiences. Nothing to do with "stealing" name from China Focus Media.
I knew this because I got confused when I first researched CCME. Cleared the confusion in 15 min by calling a Chinese friend.
The author, on the other hand, thought it was a major discovery. What an idiot!!!
CCME - Great chart.
History often repeats itself. Just ask the shorts....
CCME - Talking about Psychology and perception: Even a super long like me perceived CCME as risky at $8 and became very comfortable when it was $18. Strange psychology.
BTW - This is officially the crazest stock I ever watched and participated. It is crazed in all regards: the insane amount of comments and articles generated all over the boards, the insane amount of the comments and articles I read regarding a single stock, the insane amount of short positions, and insane amount of time I spent watching the tapes.
It is like a long season of CCME Superbowl play off, just one team and two sides (LONG and Short).
(PS: Chicago bears lost to Packers, and did not get the chance to go for THE Superbowl.)
"CCME - Psychology and perception play a huge role for sure. At $8, the stock was "too good to be true". At $30, many will think it's cheap for a stock of this quality. At $50, people don't want to miss the train and they all scramble to hop in. "
Short plays
Well, you can always short CCME, I heard it is kind of popular to do that.
"Now 74% cash while everyone's all giddy. Anyone have any good short plays ?"
CCME Regsho
Good it made the list. We can start another count down to MOASS.
TSTC - give them a break. Three days is not too bad you consider all the hops they had to jump through. They had to translate the draft into Chinese into latin into hebrew and back to Chinese, which got revised and approved by the management, and then back to English to further editing and final PR approval. The PR approval process within CCG is something like from customer support (Chinese side) to customer support (English side) to analysts to PR to President.
The CCG PR finally expedited the process because they want a nice and peaceful long weekend.
Such is the story of life.
KGJI - No tracking this stock. Hopefully it is only one offer mismanaged by its underwriters (Rodman and Maxim), not three offers in one months.
Still, with the ever decreasing offer pricing, why not wait longer for a better climate?
JB - What you described is very interesting and makes sense when used as a strategy for a volatile stock that is trading sideways.
On the other hand, what he is doing is no different than a simple "buy low sell high" unless he starts adjusting his core short position. In fact, his short holding is a drag in his overall trading strategy if CCME is trending higher overall.
Congratulate to all the longs. The CGS stocks are doing reasonably well since the new year, in spite of the continuing noises from shorts and CNBC.
I own CCME, solar (JKS, CSUN, etc.) and HRBN, which are doing great right now.
Also, for the first time, I got direct hit by the shorties via TSTC. I bought a bunch near the year end for bottom fishing. I did not anticipate a new bottom just two days ago. To be honest, among all the companies, I would think TSTC will be the last to be attacked. I personally think TSTC is more fraud proof than GOOGLE. If it is an actual fraud, it would have reported better numbers on its AR. Also, the owners will have sold some shares to profit from it (like Google founders did to buy private jets.)
Last year, when the attacks ran rampant, I was lucky enough to avoid almost all the direct hits, and was brave enough to rush into the bottoms of some of them. I actually made some serious money from "buying the pains". I will continue to use this strategy this year.
CGSer in Chicago area.
Just wondering how many of the people here live in greater Chicago area.
It would be nice to have some offline meetings in addition to online exchange.
-Derek
HRBN/ABAX.
Interesting observation, Rick.
ABAX is a much more significant fund than Barring, the previous fund working with CEO Yang.
I google ABAX a little. Interesting about the founders' background:
"Abax, which is partly owned by Morgan Stanley (MS.N), was one of the most anticipated Asian hedge fund start-ups of 2007, launching with about $300 million of assets under management.
Its founders included Hsu and Frank Qian, who are both former employees of Chicago-based hedge fund giant Citadel Investment Group LLC and Donald Yang, the former head of Hong Kong and Greater China debt capital markets at Merrill Lynch MER.N."
Also, in 2007:
"THE first start-up independent Asian hedge fund to begin with more than $US1 billion ($1.27 billion) is expected to be launched in coming weeks, sources said, signalling a watershed for the asset class in the region."
http://www.theaustralian.com.au/business/news/abax-hedge-fund-a-milestone-for-asia/story-e6frg90x-1111113082266
Solar-this is great.
As a group, they are very undervalued.