Saturday, November 20, 2010 5:33:27 AM
HRBN - but that's consulting. Rememer that Deloitte is a consulting firm as well as an audit firm.
My point is that Deloitte or some other top 4 firm will need to actually do a full on audit--especially now that FF has lost credibility. That may have already been in the plans. Either way, it opens the door for untoward events--revisions (or worse).
Recall that Harbin has a curious income statement.
Compare net margins at Harbin with mainland and international motor manufacturing competitors from 2006 - 2009:
Zhongshan Broad Ocean - 8.44% 11.90% 8.87% 14.43%
Wolong Electric - 10.85 8.03% 7.01% 10.00%
Mabuchi Motor - 10.60% 10.83% 6.08% 4.29%
Johnson Electric - 8.04% 8.95% 3.47% 7.83%
Harbin Electric - 34.65% 36.24% 28.48% 25.00%
In fairness, Harbin may be able to generate higher net margins because they are a smaller company, but the net margin differences are pretty substantial, and the gross margins are off too. People can talk about how Harbin is exposed to "high-speed rail" and so forth, but I'm not convinced. I definitely want to see the details on how that part of their business--and it's only a part--specifically allows them to generate the kind of numbers they are generating. From what I can tell, it's not their main source of revenue.
Harbin is an interesting situation. They could very well be rock stars, industry trailblazers with, but I definitely would be more confident if they had closer peer comps. It's tough for a commodity business with low levels of R&D expenditure and IP to generate margins that are so much better than competitors. A name brand can do it, a MSFT can do it, but a commodity business?
Until I see the $700MM deal signed, sealed, and delivered, with money secured from lenders and directly paid into brokerage accounts, I'm going to be somewhat skeptical. Show me the money
Now, that's not to say that you don't get a good risk-reward at 17.00. I'm thinking of buying myself (or selling puts) if it continues to deteriorate. If the company is legit, which I think it probably is given the fact that the CEO and Baring are making this offer (though I'm hardly positive and fully admit that I don't know jack about the real "truth" wrt to many of these companies), it easily warrants 17.00 on its own, without any buyout offer.
My point is that Deloitte or some other top 4 firm will need to actually do a full on audit--especially now that FF has lost credibility. That may have already been in the plans. Either way, it opens the door for untoward events--revisions (or worse).
Recall that Harbin has a curious income statement.
Compare net margins at Harbin with mainland and international motor manufacturing competitors from 2006 - 2009:
Zhongshan Broad Ocean - 8.44% 11.90% 8.87% 14.43%
Wolong Electric - 10.85 8.03% 7.01% 10.00%
Mabuchi Motor - 10.60% 10.83% 6.08% 4.29%
Johnson Electric - 8.04% 8.95% 3.47% 7.83%
Harbin Electric - 34.65% 36.24% 28.48% 25.00%
In fairness, Harbin may be able to generate higher net margins because they are a smaller company, but the net margin differences are pretty substantial, and the gross margins are off too. People can talk about how Harbin is exposed to "high-speed rail" and so forth, but I'm not convinced. I definitely want to see the details on how that part of their business--and it's only a part--specifically allows them to generate the kind of numbers they are generating. From what I can tell, it's not their main source of revenue.
Harbin is an interesting situation. They could very well be rock stars, industry trailblazers with, but I definitely would be more confident if they had closer peer comps. It's tough for a commodity business with low levels of R&D expenditure and IP to generate margins that are so much better than competitors. A name brand can do it, a MSFT can do it, but a commodity business?
Until I see the $700MM deal signed, sealed, and delivered, with money secured from lenders and directly paid into brokerage accounts, I'm going to be somewhat skeptical. Show me the money
Now, that's not to say that you don't get a good risk-reward at 17.00. I'm thinking of buying myself (or selling puts) if it continues to deteriorate. If the company is legit, which I think it probably is given the fact that the CEO and Baring are making this offer (though I'm hardly positive and fully admit that I don't know jack about the real "truth" wrt to many of these companies), it easily warrants 17.00 on its own, without any buyout offer.
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