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Re: LAS
Where was it when the GEO "short and distort" piece was published? About $2.20? Lentuo might have a case for suing them.
Re: OSN Presentation
Key fact is the pie chart on page 7 showing estimated demand for prestressed steel materials. It's all infrastructure and infrastructure spending is increasing in 2014. OSN has little or no exposure to the slowdown in the real estate market that is hurting mainstream steel companies.
Re: OSN
see message #8103 (Link
Re: LAS
The rebuttal doesn't sound too forceful, but upon closely re-reading the GEO article, I don't think the evidence they provide supports their conclusion. That is, they don't give any evidence that LAS assets were pledged as collateral to secure the Chairman's loans.
Re: AMCF
What kind of company can you buy for eighty thousand dollars? Does it operate from a pushcart in a shopping mall?
LAS Halted T1 - News Pending
So this is likely to be the rebuttal.
Re: LAS
My initial read on this is that if it's true then it's still not a knockout blow like LPIH or LLEN. It seems more like something that company management is likely to perceive as a grey area while foreign investors are likely to perceive as as black area. Perhaps akin to the brief related party loan made by the VIE supposedly "controlled" by KGJI. Management may describe the guarantee as a formality that will never be called upon.
There is likely to be a rebuttal and it could be that GEO has some facts wrong or has told some half-truths - facts that are literally correct but don't support the conclusion that GEO draws from them.
Given the market's response so far to the publication of the hit my guess is that it's better to be long and play for the counterattack. That's just guesswork; if I was actually playing it myself then I wouldn't be posting about it.
Even if the story turns out to false, the possibility that a guarantee like the one described could be issued is an illustration of the risk in investing in VIE structures.
LAS Hit piece finally out
Link
Now the shorts will cover. Too bad for the guys who got the story late and shorted at $1.75 ...
Re: NUIN
NUIN has cash and Fearon in common with ACTS. A few differences:
1) According to its financial statements NUIN is extraordinarily profitable and shareholder value is rapidly compounding. So I would not call it a value trap.
2) NUIN's business is in an onshore VIE so its cash is not readily available for dividends or buybacks.
ACTS: They got a message from the Action Man
Link
ACTS has been a classic value trap. It's obviously cheap, but there has been no way for shareholders to realize the value. When the value is not compounding due to a weak business then the IRR for long-term holders becomes unattractive.
China easing controls on the Housing market.
Blurb from ML:
According to an official from Ministry of Housing and Urban-Rural Development (MoHURD), cities (except for tier-1 cities) are allowed to adjust their home purchase restrictions (HPR) according to the situation in the local property market. But he said that MoURD would not issue a formal notice to allow cities to freely adjust HPR. (Guandian)
Steel Ranking in my opinion
1) OSN - infrastructure spending is rising so OSN has an opportunity to increase sales in 2014
2) SUTR - quality business with ecommerce upside. CFOs share sale (margin call?) looks bad
8) CHOP - debt guarantees make it uninvestible
9) GSI - insolvent, kept alive by local partners
10) CPSL - effectively bankrupt
CPSL to delist
SHANGHAI, May 21, 2014 /PRNewswire/ -- China Precision Steel, Inc. (CPSL) ("China Precision Steel" or the "Company"), a niche precision steel processing Company principally engaged in producing and selling high precision, cold-rolled steel products, announced today that on May 15, 2014, the Company received a delisting notice from NASDAQ Stock Market, LLC ("NASDAQ") due to the failure to pay certain fees required by Listing Rule 5250(f). The Company elects not to appeal.
Trading of the China Precision Steel's common stock on the NASDAQ will be suspended at the opening of business on May 27th, 2014. The Company's security will immediately begin to trade on the OTC Bulletin Board under the trading symbol CPSLQ.
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Q symbol normally means bankrupt. Company appears to be insolvent but hasn't filed yet.
Stock is going to zero, but borrow is very thin and tight - 55% rate at IB
GIGM "Cash burn positive"? - Does that mean they are losing money?
GIGM is also "part time CEO positive" and "falling revenues positive", but at least it's not "accounting fraud positive". And one positive sign is that the company is "insider selling negative".
WH could be a beneficiary of the 2500km Russia-China gas pipeline deal. Link
ONP $10mm Shelf Registration
The company doesn't absolutely have to sell any securities, but it would be prudent to do so.
List of current financing arrangements in the 10-Q goes on and on. Loans from banks and credit unions. Leases. Lots of assets pledged as collateral. Big capex plans in 2014. The company could slow the capex spending and pay out of operating cash flow, but it would be prudent to have a cash cushion.
So they will probably issue something and a $10mm registration usually means equity. CCCR showed what can happen to the price of a stock while it waits for a placement to close.
RE: AMBO (Y)
Wow, just traded at 25 cents. I'm trying to figure out the conversion terms of the refinancing. Link
Sounds like the loan may be convertible into 973mm shares. That would be extremely heavy dilution for pre-halt shareholders.
I could have the numbers wrong, but I suggest that anybody thinking of buying the stock today needs to figure it out for themselves. The difference between the pre-halt price of 94 cents and the current price of 36 cents may be meaningless.
Re: LIWA
If the shares were "sold" in exchange for some financial consideration then the shares must have value.
These filings were submitted by the CFO. I haven't followed the company so I have no opinion about her competence or qualifications, but I think it's a positive sign that the CFO did not resign amidst this crisis and must be working with the remaining management and BOD.
If I owned the stock then I would be feeling better than I did last week.
Re: AMBO
Might be tradable grey market as AMBOY
XIN: New York Times Real Estate story heavily features XIN's Williamsburg project. Mentions units are expected to sell for $1000/sqf. Saleable area is about 370000 sqf so that implies total revenues of about $370mm. One the cc XIN mentioned all-in cost would be about $240mm and said only that revenues would be "well in excess of $300mm".
Chinese Real Estate Developers Take the Lead on New York Projects
Re: XIN
They've got something weird going on with the tax rate. Offshore interest interest (from bond issues) can't be deducted from onshore income. On the cc they said they were working on a solution for this. At a normal tax rate of 25% 1Q EPS would have been $0.26.
Call was very strong with a lot of project detail. Clearly stated that they will continue buying back shares.
China c.bank tells banks to quicken mortgage lending-sources (Big news for oversold residential property developer stocks)
May 13 (Reuters) - China's central bank has asked commercial banks to quicken the pace of extending home mortgages and to set mortgage rates at reasonable levels, four sources told Reuters on Tuesday, underlining efforts to support the cooling property market.
The sources said the request came at a meeting between the People's Bank of China and some commercial banks on Monday.
Tight mortgages are considered one of reasons for the cooling of property market this year, as banks have raised mortgage rates for first-time home buyers or slowed the pace of extending mortgages due to tighter liquidity.
The central bank was not available for comment.
China's home prices rose at double-digit rates in most cities last year, but the market has shown signs of cooling since late 2013 as authorities clamped down on property speculation, and as banks made it harder for home buyers and small developers to get loans.
CCCR finally priced its secondary Link
China Scraps Price Caps on Low-Cost Drugs [any winners from this?]
Move Comes After Some Manufacturers Cut Corners on Production
By LAURIE BURKITT CONNECT
May 8, 2014 1:15 a.m. ET
A woman packs pills at a pharmaceutical plant in southeast China. European Pressphoto Agency
BEIJING—China will scrap caps on retail prices for low-cost medicine and is moving toward free-market pricing for pharmaceuticals, after price controls led to drug quality problems and shortages in the country.
The move could be a welcome one for global pharmaceutical companies, which have been under scrutiny in China since last year for their sales and marketing practices.
The world's most populous country is the third-largest pharmaceutical market behind the U.S. and Japan, according to data from consulting firm McKinsey & Co., but Beijing has used price caps and other measures to keep medical care affordable.
Price caps will be lifted for 280 medicines made by Western drug companies and 250 Chinese patent drugs, the National Development and Reform Commission, China's economic planning body, said in a statement Thursday. The move will impact prices on drugs such as antibiotics, painkillers and vitamins, it said.
The statement said local governments will have until July 1 to unveil details of the plan. In China, local authorities have broad oversight over how drugs are distributed to local hospitals.
The pricing reversal comes as some manufacturers—aiming to meet low-cost standards—cut corners on production, exposing consumers to safety risks, said Helen Chen, a Shanghai-based partner and director of L.E.K. Consulting. Many also closed production, creating shortages of low-cost drugs such as thyroid medication.
"It means the [commission] recognizes that forcing prices down and focusing purely on price does sacrifice drug safety, quality and availability," said Ms. Chen.
Several drug companies, including GlaxoSmithKline GSK.LN -0.64% PLC, didn't immediately respond to requests for comment. Spokeswomen for Sanofi S.A. SAN.FR +0.59% and Pfizer Inc. PFE -0.51% said that because implementation of the new policy is unclear, it is too early to understand how it will affect their business in China.
The industry was dealt a blow last summer when Chinese authorities accused Glaxo of bribing doctors, hospitals and local officials to increase sales of their drugs. The U.K. company has said some of its employees may have violated Chinese law.
The central government, which began overhauling the country's health-care system in 2009, has until now largely favored pricing caps and has encouraged provincial governments to cut health-care costs and prices. Regulators phased out five years ago premium pricing for a list of so-called essential drugs to be available in hospitals. Chinese leaders, like those in the U.S., want health care to be more accessible and affordable.
But there have been unintended consequences in attempting to ensure the lowest prices on drugs. Many pharmaceutical companies registered to sell the thyroid medication Tapazole have halted production in recent years after pricing restrictions squeezed out profits, experts say, creating a shortage. Chinese patients with hyperthyroidism struggled to find the drug and many suffered with increased anxiety, muscle weakness and sleep disorder, according to local media reports.
In 2012, some drug-capsule manufacturers were found to be using industrial gelatin to cut production costs. The industrial gelatin contained the chemical chromium, which can be carcinogenic with frequent exposure, according to the U.S. Centers for Disease Control and Prevention.
"Manufacturers have attempted to save costs, and doing that has meant using lower-quality ingredients," said Ms. Chen.
Yet experts say the pricing reversal won't necessarily alleviate pricing pressure for these drugs. To get drugs into hospitals, companies must compete in a tendering process at the provincial level, said Justin Wang, also a partner at L.E.K. "It's still unclear how the provinces will react to this new national list," Mr. Wang said.
If provinces don't change their current system, price will remain a key competitive factor for drug makers, said Franck Le Deu, a partner at McKinsey's China division.
"The bottom line is that there may be more safety and more pricing transparency, but the focus intensifies on creating more innovative drugs," Mr. Le Deu said
Re: LIWA
So who's in charge now? CFO resignation hasn't been announced - maybe she's still there or maybe there's nobody left to announce that she's gone.
Sounds like the BOD is still active. The China business is a WFOE so the Board should be able to appoint a new CEO with full and access and control over all the company's assets and operations (whatever they are). Hopefully there's some recovery for shareholders.
CHOP guarantee risk
In a tight credit environment these guarantees could sink the company. 20-F excerpts:
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During 2013, we were not in compliance with the financial covenants. The terms of the loans prohibit making advances or providing guarantees to other unrelated parties without prior consent of the bank. Although the banks have not called the loans or assessed a penalty on us for these violations, there is no assurance that the banks will not call the loans because there is no standstill agreement reached between us and the banks. We do not believe that any penalty will be assessed by the banks for these violations. In addition, as of December 31, 2013, we provided guarantees for certain non-related parties. We believe that if those non-related parties are unable to repay its debt or guarantees, we may be required to pay up to $132.1 million related to their debt and guarantees. No provision has been made in our financial statements for this obligation as we have not been called upon to date to perform under our guarantee and we believe the chances are less than probable.
Typically, no fees are received for this service. Thus, in those transactions, unrelated parties would have a contingent obligation related to the guarantee of payment in the event the underlying loan is in default.
On October 22, 2013, the Company's subsidiary, Henan Green, entered into a cross-corporate guarantee agreement with Henan Shaolin Auto Co., Ltd, a non-related company. Under the agreement, both companies are contingent as guarantor with maximum aggregate potential amount of future payment approximately of $33.0 million. Guarantor can request debtor to guarantee not less than 120% of the amount being guaranteed. The guarantee period is effective when the borrower entered into the borrowing agreement.
On November 25, 2013, the Company's subsidiary, Henan Green, entered into a cross-corporate guarantee agreement with Henan Xibao Metallurgy Materials Group Co. Ltd, a non-related company. Under the agreement, both companies are contingent as guarantor with maximum aggregate potential amount of future payment approximately of $49.6 million. Guarantor can request debtor to guarantee not less than 120% of the amount being guaranteed. The guarantee period is effective when the borrower entered into the borrowing agreement.
On December 5, 2013, the Company's subsidiary, Henan Green, entered into a cross-corporate guarantee agreement with Zhengzhou Panhong Commerce & Trade Co Ltd, a non-related company. Under the agreement, both companies are contingent as guarantor with maximum aggregate potential amount of future payment approximately of $16.5 million. Guarantor can request debtor to guarantee not less than 120% of the amount being guaranteed. The guarantee period is effective when the borrower entered into the borrowing agreement.
On December 20, 2013, the Company's subsidiary, Henan Green, entered into a cross-corporate guarantee agreement with Henan Huatai Special Cable Co., Limited, a non-related company. Under the agreement, both companies are contingent as guarantor with maximum aggregate potential amount of future payment approximately of $33.0 million. Guarantor can request debtor to guarantee not less than 120% of the amount being guaranteed. The guarantee period is effective when the borrower entered into the borrowing agreement.
On January 8, 2014, the Company’s subsidiary, Henan Green, entered into a cross-corporate guarantee agreement with Henan Liantong Aluminum Co. Limited, a non-related company. Under the agreement, both companies are contingent as guarantor with maximum aggregate potential amount of future payment approximately of $16.5 million. Guarantor can request debtor to guarantee not less than 120% of the amount being guaranteed. The guarantee period is effective when the borrower entered into the borrowing agreement.
VISN Hit piece
http://seekingalpha.com/article/2181373-visionchina-chinese-bus-advertising-is-a-tough-business-to-make-a-profit
Borrow rate is 59% at IB and 56% at Fidelity. My limited experience has been that it's uncomfortable to hold positions when rates are that high.
Re: CCCL
4Q13 Revenue is basically in line with the weak guidance issued at the time of 3Q results so not really a surprise.
CCCL NT-20-F filed
Asset writedown - no surprise
Preliminary results - no surprise
Terminated Grant Thornton on 4/30 and hired Crowe Horwath. Unusual .... Crowe Horwath is a good auditor, but this sort of switch doesn't normally happen on the due date for the annual filing ...
Re: CCCL
If the CFO, audit committee members, and external auditor are still involved then one way or another things will work out. In some past scam cases resignations were not reported on a timely basis (e.g. a Director submits his resignation to the Chairman who does nothing, then the Director notifies the exchange and the SEC which go back to the company to ask what is going on, and sometimes the company just never responds). In this case the Chairman does not own a majority of the stock and the business is all in a WOFE so the Chairman can't walk away leaving shareholders with nothing.
Re: halt. I don't receive any kind of hslt alert. It showed up on my broker screens as a DJ newswire headline so I went to the Nasdaq site to find the code.
ex-dividend date is 6/11 :)
Re: CCCL
Here is the Nasdaq Honor Roll:
http://www.nasdaqtrader.com/Trader.aspx?id=Tradehalts
CCCL Halted - T12 Information requested by Nasdaq.
20F not filed yet.
LIWA ... not much of a rebuttal here ...
DANYANG, China, April 30, 2014 /PRNewswire/ --The Board of Directors of Lihua International, Inc.(LIWA) ("Lihua" or the "Company"), is aware of a decline in the Company's stock price and published allegations that Mr. Zhu Jianhua, the Company's CEO and Chairman of the Company's Board, may have diverted or attempted to divert Company assets and as a result may have been the subject of action by local law enforcement. Although they have not yet been able to verify this information, the Board's Audit Committee is taking steps to determine the facts and will take appropriate action. If the allegations prove true, the Company's financial statements may contain material misstatements.
Re: ZA
Earned $1.04 for 2013. Paying $0.20 dividend. Improving outlook for 2014. Will file 20-F today (on-time).
LLEN now trading OTC Link
First trade at 25 cents
ISS: Definitive buyout agreement at $5.70 Link
Podcast: Accounting Abuse Among Listed Chinese Companies Still Widespread Link
Excerpt:
Q: Now let's talk about Keywise Capital. Give us a brief introduction of the firm?
A: We are a Hong Kong-based hedge fund with $1.4 billion under management. Our strategy is long-short equities. We typically buy high quality names at reasonable prices, and short those with broken business model or accounting fraud in the Greater China region.
Q: A short position Keywise engaged in was China Metal Recycling Holdings, which has been wound up because of accounting fraud. Do you still see many opportunities to short Chinese companies based on accounting fraud?
A: Based on my experience and observation, I think there is still widespread accounting abuse among listed (Chinese) companies, even some large ones.
There are no strong forces in Asia, in general, to go against those companies. Due to culture issues and regulatory framework, hedge funds here have not been aggressive in pursuing those opportunities.
Q: What type of accounting abuse is there?
A: For example, revenue recognition. We are seeing some companies booking revenue on a gross revenue basis, which will massively inflate their revenue.
A lot of companies also have unfair related party transactions, such as acquisitions. They may be paying inflated price to a small business, which is damaging to minority shareholders.
Also, there is no segregation of duties between the CEO and the chairman. Often, the CEO and the chairman might have already committed some violation, such as inter-party lending.
Q: If like you say, accounting fraud is widespread, your short position based on accounting abuse might take a long time to materialize, or may never materialize?
A: Shorting is very difficult. You need to have faith in your investment decision, and also have guts. You have to strongly believe that companies that utilized accounting frauds to maximize short-term profits, the issue will surface eventually.
But sometimes, you might just be too early. The key is to keep a pace on the investment. Maybe initially putting only a small position, and add on the cost gradually.
Q: What do you think should be done to help improve the situation?
A: The Hong Kong Stock Exchange is still quite relaxed on independent director rules. In the U.S., if you are listed on the mainboard, the majority of the directors need to be independent. But in Hong Kong, the requirement is only one-third.
There is also no regulation on class action lawsuit in Hong Kong. As a minority shareholder, you can still sue a company, but it's very difficult and costly.
But in the class action lawsuit in the U.S., the lawyers actually get involved. They get contingency payment if the lawsuit is successful. So the government needs to set up a better framework for minority shareholders to enforce changes.
Q: Aside from accounting fraud, what other short opportunities do you see?
A: We are seeing a lot of companies whose business models are becoming obsolete. For example, in the education sector, we are seeing the online business taking market share and profit from the offline business.
We also see that a lot of companies let the market think they are doing something, but in reality they are doing something else. The key is to read the small prints in their securities filings. Not a lot of investors are paying attention to this, so this could be very good short opportunities too.
NPD - ML drops coverage
Termination of Coverage of NPD
We are terminating coverage of China Nepstar Drugstore (NPD). This reflects a
reassessment of our coverage universe. The final opinion reflects our analysis as of
the date of the Research Report and investors should not continue to rely upon
such opinions, price objective or estimates in the future.
Industry challenges remain
We believe the policy to facilitate pharmacy/ hospital separation in China should roll
out gradually in the next ten years and should benefit drug chain stores in capturing
more value in overall healthcare spending in the long term. However, such long-
term positive effect can be more than offset by negative impacts from EDL pricing,
strict guidelines on antibiotics usage and competition from community healthcare
networks.
Low near term growth visibility
NPD has had several quarters of losses and we believe the challenges will continue
in the near term 1) the business and policy environment are likely to remain
unfavorable to the drugstore industry, 2) benefits from change in product mix,
savings from closure of under-performing stores and effective cost control measures
will take several quarters to manifest, and, 3) transformation to a drugstore
convenience hybrid is a much longer term goal. Given current distort earnings, we
believe the best methodology to value the company is P/B.
Re: TRITF
Thanks. I can cover my high cost short. I lost a bundle owning this stock on the way down because it seemed like it was perfectly placed to address important water needs in China. And it was reporting excellent (but seemingly not unrealistic) earnings.
At this point it's not clear to me whether the company perpetrated a fraud or was a victim of fraud. Unfortunately the shareholders lose either way.
One lesson from this is to avoid any long-term investment in VIE structures. It's hard to get cash out to reward shareholders when times are good. And there are too many examples of the structure unraveling when times are bad.
Re: HGSH
Fundamentally it's a short, but the borrow is very tight. High rate and I got partially bought in at IB when I was short a few months ago.