YaSheng Group (HERB)

[RealDutch]

Of course the big question is, what happened to the plantations? I have a new theory. But first something else.

I think there are several signs that point to an acquisition by the Shanghai sister company. They have been working on this since 2017 when a lawyer called Zhang said some things she probably shouldn't have. So let's just say there is a 50% chance of that happening, and the company preparing for it. In which case, HERB as is now, should be worth $1.50/share at some point. And you get another $1.50 from the art spin-off.

Now back to the plantations. WTF is going on? Hasn't anyone noticed that net assets are very high relative to revenues/earnings? IOW, Return On Equity is very low.

Intangible assets consist of 30 years use rights of Fruit vegetable franchise

Ginkgo or herbs is not fruit, is it? And I already checked this weeks ago - the Fruit plantations do have 30 years use rights, from 2010 until 2039.

The 5 plantations should be worth close to $70M today after depreciation. They booked $130M worth of land use rights as per June 2021. So this could consist of the $70M plantations (generating $200M in profits annually) plus the newly acquired ginkgo and herb plantations.

For this theory to work they must have moved out the surplus cash to Equity Art Corp (as they prepare to be acquired by the sister company, perhaps). In either case, they don't need any cash because the plantations are generating plenty.

And, for this theory to work, they must have reduced the 2019 and 2020 earnings by the same amount BECAUSE they moved the profits out. It's possible. I'm not an expert in accounting.

So in this case, they are NOT spinning off $2.3 billion worth of plantations. Only the art. Would make more sense, wouldn't it? And it's kind of important to know, especially as we approach the ex-date.

The company has informed me btw, that they are working on audited financials as well, but it will probably take more than 3 months. I didn't ask why.

And I just noticed something else. I don't see a lot of depreciation or amortization either, only $277k in 2020. More support for my theory?

I'm sticking with it anyway.