China Growth Stocks

[ratobranco]

CKGT, SIAF - On what basis do you say they are profitable? Have you seen their chinese filings? If not, then you have no way to know what their actual earnings are. All you can know is what they are telling you their earnings are.

But if they are losing money, why would they tell you that? What incentive do they have to report losses to you? Are you going to buy into their equity raises if they tell you that their margins are actually 5% and not 30%?

The company is not generating any cash, all the cash flow conveniently goes into the black hole of capex. So how can you or some obscure rent-a-center auditor know that they are profitable?

http://finance.yahoo.com/q/cf?s=CKGT.OB

As far as I can tell, CKGT has never ever lost money at any point in its existence. That's quite unusual. The company has operating margins of 36%. Even the hottest Shenzhen listed companies look like total garbage in comparison.

And yet the best that poor CKGT is to hire shady pump and dump IR firms to help them do put offerings at 2 times claimed earnings?

Sorry to be abrasive, but people here need to wake the f up. You're losing money in these stocks b/c you're believing what you want to believe, rather than what you should believe based on evidence and good sense.

If these companies were as wildly profitable as they claim to be, then:

1) They would never have listed here via RM

2) They would be able to acquire short term loans from Chinese banks, and would be able to put some debt on their balance sheets

3) They would not raise money at nosebleed multiples despite being extremely well capitalized and flush with cash

4) They would buy back their shares en masse

5) They would make attempts to acquire each other

6) Chinese companies and investors would be making attempts to acquire them. Look at FMCN buying into VISN or SINA buying into MCOX. VISN and MCOX are hardly even profitable right now, selling at huge multiples, and yet they have been able to generate investment interest from the best and brightest in China. Why not the CGS names?

7) Their chinese filings would confirm their profitability, just as those filings confirm the profitability of tier 1 names such as TSL, SPRD, and FMCN that we know are legit. The fact that only tier 2 RTO's fail to match is most certainly NOT a coincidence.

8) The interest generated on their cash balances would not be impossibly low. Most of the CGS companies with cash located in China are generating an interest rate less than the demand deposit rate of .36%. That's impossible. At the same time, the tier 1 names generate normal interest rates. Another coincidence? No.

I could go on forever. At what point will people start listening? After all that has happened, how can people still believe these companies? I just don't understand.

SIAF may be profitable, I have no idea. It is probably a safer company than the average CGS name given that it has paid a dividend and has yet to raise money abusively. At the same time, don't fool yourself. There's definitely fraud risk in SIAF.

As for CKGT... Look, Zack has visited those guys. Go talk to him about what his impressions were before you get excited.