ZSTN Axler's well timed article on SA certainly saved his sorry short butt today. He has been short ZSTN since at least 9/20 which means he was about 30% underwater. I can only say to him:Liar, liar, pants on fire
His main complaints are:
Negative cash flow- This is not that unusual for a company rapidly growing revs. ZSTN revs doubled from Q1 to Q2. Also, how convenient not to include Q3 revs where the growth rate slowed down and positive cash flow was very impressive, +21.1 mil on 13.6 mil in income.
Poor collection of AR-Axler claims that days recievables outstanding reached over 200 in Q2. This is a total lie. Q2 revs were 33 mil while AR was 28.9 mil. That is a DRO of 79 days. Furthermore the DRO dropped again in Q3 to 64 days. (27.5M/38.5Mx90).
Inventories too low for sales. Axler conveniently left out advances to suppliers when calculating inventories. Those are for inventories that haven't been shipped to ZSTN yet. It could well be that many products go direct from their suppliers to the buyers without stopping in ZSTN's warehouse. Note- advances dropped to zero in Q3, watch Axler complain about that next. Advances vary widely from one point in time to another.
Change in auditors: It seems to me it is a good thing that ZSTN changed from auditors with little China experience to BDO China, one of the most respected auditors in the world last April.
I could go on but I wouldn't let this guy whose fund has managed to lose money for their investors in both 2009 and 2010 (a rather amazing feat in itself) influence me.
AI
