China Growth Stocks

[derek2000]

Muddy Waters and Mud




Re: "I found at least some of the MW's allegations are legitimate."

The whole point of their exercise is to throw enough mud so some sticks, at least to the surface. The ensuring panic is all they need.

One of the central damming evidence: Lack of trucks/traffic on the day they visit. The lack of traffic means that it is impossible for ONP to generate the volume needed to meet its stated annual revenue.

ONP countered that on the day of visit, the weather was bad. So
I Googled the weather reports on Jan 3,4, and 5.

I found that ONP's statement is true: Basically Beijing and Tianjing (ONP's customers) and Hebei (ONP's production base) were at standstill at the time due to the heavy snow.

What I do not understand is that Muddy waters knew of the horrible weather on Jan 5 (they were there) and did not even try to connect the dots. I would hope that Sean Regan, as an operations expert, to connect the dots between weather and transportation, and between new year holiday to the level of production (Jan 5 is just coming off the new year holiday, some customers may have longer holiday.) At least they should observe the company under a normal condition - they could do so by paying a second visit, and they did not.

Here were some weather reports:

Jan 3:

http://news.xinhuanet.com/english/2010-01/03/content_12749169.htm

"China's Central Meteorological Station (CMS) on Sunday evening issued the third orange alert since the first one on Saturday, extending the warning against a strong cold wave and strong wind."

11:09, January 04, 2010
"Heavy snowstorms hit Northern China

http://english.people.com.cn/90001/90782/90872/6858594.html

Northern China has started the new year with heavy snowfall. In Beijing, Tianjin, and areas of Hebei province, the snow has piled up on roads and has caused headaches for many drivers.

Experts are warning that Beijing may see its coldest winter in nearly 40 years. More than half of the planes at the city's airports have been delayed."

Jan 5:
Heavy snow hits north China, disrupting traffic, classes


http://www.ebeijing.gov.cn/BeijingInformation/BeijingNewsUpdate/t1098445.htm

Here is another report on Jan 5, the day of the visit:

http://news.xinhuanet.com/english/2010-01/05/content_12758794.htm

BEIJING, Jan. 5 (Xinhua) -- A cold wave across much of China since Saturday has brought heavy snow to major cities in the north, causing a surge in fuel demand and traffic chaos on roads and at airports.

PS:

Since I do not own ONP at this time, it is not my intent to defend ONP. ONP could be the biggest fraud since the sliced bread, for all I care. However, I am deeply troubled by the cavalier attitude Muddy Water exhibit when they make a major accusation. They dress up their accusation as an equity research report that could, and indeed did, cause major loss to thousands of retail investors over the last few days.