今天又一个好例子：China Minzhong
作假被狙击了
没想到来的这样快
希望在河边走的同学没有湿到鞋……
转一下报告
CHINA MINZHONG FOOD CORPORATION LIMITED (“Minzhong” or the “Company”) is a Peoples Republic of China (“PRC”) based producer of fresh and processed vegetables. In our opinion, Minzhong closely resembles Chaoda Modern Agriculture (SEHK: 0682) (“Chaoda”), another Fujian-based vegetable producer that has been halted since September 2011 under widespread allegations of fraud.
We believe that Minzhong, like Chaoda, has so significantly deceived regulators and investors about the scale of its business and its financial performance that we expect trading in its shares to be halted and its shares to be worthless.
1. Fabricated Sales
Publicly available filings indicate that Minzhong fabricated sales figures to its top two customers.
a. Top Customer Incorporated After The Track Record Period
Corporate registry records show that a Taiwan-based food distributor, which was supposedly Minzhong’s largest customer in the pre-IPO track record period (2007-2009), was only incorporated in November 2009, suggesting, in our view, that Minzhong simply fabricated the sales figures in its Prospectus.
b. SAIC Filings Indicate Faked Sales
SAIC files show that Minzhong’s second largest customer, which purportedly accounted for RMB 142 million in sales in 2009, had zero revenues and zero COGS in 2009.
c. Undisclosed Related Party
Minzhong reported in its Prospectus that its top customers were independent third parties. But SAIC filings show that Minzhong’s second largest customer was not only co-founded by Company Chairman Mr. Lin Guo Rong but that Lin Guo Ping, who served as a legal representative of a Minzhong subsidiary, simultaneously served as the supervisor of the Minzhong customer. It appears that Minzhong failed to disclose such material connections to investors.
2. Top Supplier’s Business License Revoked pre-IPO
SAIC filings show that Minzhong’s largest supplier during the pre-IPO track record period, which purportedly accounted for 18% of the Company’s total purchases in 1Q2010 and was the Company’s primary source of mushroom spores (reportedly its best selling product), was deregistered and stripped of its business license for violating PRC law in February 2010, a mere two months before Minzhong’s April 2010 IPO. In our opinion, the implication of this deregistration is that the supplier was not a major operating business and that Minzhong fabricated payments to its largest supplier.
Share plunged before the trading halt
3. Attempted Cover Up?
After a wave of accounting scandals and de-listings among other SChips in early 2011, it appears that Minzhong doctored the historical financials of certain subsidiaries in their respective SAIC filings to make them appear consistent with Minzhong’s Singapore-filed financials. Prior to the apparent cover up, SAIC filings suggest that Minzhong’s assets and earnings were a small fraction of what the Company claimed in its Singapore-filed financials.
4. Suspicious Capital Expenditures
S-Chips and US-listed reverse mergers engaging in fraud often overstate reported capital expenditures to mask fake sales on the balance sheet. In FYs 2011 and 2012, Minzhong claims to have spent around RMB 1.2 billion on the construction of a new industrial park in Putian. Yet SAIC filings show an increase of only RMB 203 million in PP&E during the same period.
More suspiciously, the industrial park was not pledged as collateral for the Company’s bank loans; instead, Minzhong’s creditors sought personal, unsecured guarantees from the Company’s Chairman and its suppliers. We believe that this is further evidence that Minzhong vastly overstated its capital expenditures. 5. Reinventing the Wheel. The Company’s business model is as old as agriculture itself, yet it so vastly outperforms other fresh produce growers that its reported financial performance defies credibility.
a. EBITDA
Minzhong’s reported EBITDA margins on fresh produce, its most profitable segment, averaged an absurd 66% during the past five years.
b. Ballooning Receivables
The Company’s receivables have skyrocketed of late, despite the fact that its credit terms have not changed. We believe that the persistent and unexplained growth in receivables is caused by the need to account for fake income on the balance sheet.
c. Negative Free Cash Flow
Since its IPO, Minzhong has generated negative free cash flow of RMB 1 billion. Much like other S-Chips which have been delisted under suspicion of impropriety, the Company relies on debt or equity financing as its primary source of cash generation.
6. Valuation
As of March 31, 2013, Minzhong had approximately RMB 1.1 billion of onshore liabilities outstanding, including bank loans and trade payables due to unsecured onshore creditors in the PRC. In a liquidation scenario, the holders of onshore liabilities have historically taken priority over offshore equity holders. Because we believe that the Company has significantly overstated its sales and its capital expenditures, we doubt the authenticity of its reported receivables, cash balance and PP&E.
Given the limited offshore assets available for seizure (cash denominated in USD, SGD, or Euro was limited to RMB 8 million as of 6/30/2012) and the difficulty recovering onshore assets (property and equipment) from alleged fraudsters under China’s byzantine judicial system, we put a price target on Minzhong’s shares of SGD 0.00.
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Link https://glaucusresearch.com/wp-content/uploads/downloads/2013/08/GlaucusResearch-China_Minzhong_Food_Corp_Ltd-SGX_K2N-BBerg_MINZ_SP-Strong_Sell_August_26_2013.pdf
Glaucus Research 这次有备而来，可能要对龙愁股大开杀戒
转edge上August 19, 2013的文章
"We start with about 1,500 names in Hong Kong and Singapore and then run them for 20 to 30 operational metrics, ranging from aggressive growth to any other statistical outliers that might appear unusual,"
另外卖空早就开始了，sgx显示最近2个星期平均每天1M卖空。
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Corporate: Short-seller Glaucus eyes Singapore targets as China Metal Recycling
by Assif Shameen
The noose had been tightening around beleaguered China Metal Recycling Holdings (CMR) for some weeks, but on July 29, Hong Kong's Securities and Futures Commission (SFC) moved decisively by taking steps to liquidate the firm.
The appointment of a provisional liquidator - the first in Hong Kong's corporate history by its securities regulator - which is now being challenged in court, was quickly followed by arrests over the past week of four company officials, including the firm's founding chairman Jacky Chun Chi-wai and his wife and co-founder Lai Wun-yin.
As the curtain fell on the long-running saga of CMR, one of the men behind the firm's swift downfall was sipping a latte in a lounge at Mandarin Oriental Hotel that overlooks Marina Bay, stunned at how quickly the once-high-flying firm had run aground. Soren Aandahl, director of research for California-based short-seller Glaucus Research Group, who started the ball rolling in January with a scathing report that described the firm as a fraud, seemed amazed at how CMR had been able to perpetuate the fraud for so long under the watchful eyes of investment bankers, IPO promoters and sell-side analysts, all of whom had lofty price targets on the stock until recently. CMR executives weren't very clever about what they were doing. It didn't take the duo too long to figure out the scam.
Founded in 2000 by the husband-and-wife team, CMR, which described itself as China's biggest scrap-metal recycler, had dramatically inflated the size of its business by falsifying a majority of purchases from its three main suppliers from 2007 to 2009 to gain a listing in Hong Kong in 2009.
Aandahl, 32, and his former college dorm mate Matthew Weichert had begun looking at CMR in mid-2012 in the aftermath of the Chinese reverse-merger scam in the US and the arrival of aggressive short-sellers and independent research outfits such as Carson Block's Muddy Waters Research, which helped drag Toronto-based Sino-Forest and others like China MediaExpress and RINO International to ground between 2010 and 2012. Several other independent outfits-cum-short sellers such as Citron Research have rattled China-focused firms with their caustic reports.
Damaging report
"We published a report on CMR with a 'strong sell' on Jan 28 this year, just after 9am, and within minutes of the report's publication, the company suspended trading of its shares," Aandahl tells The Edge Singapore in a recent interview.
Glaucus' report said CMR, which claimed to be the largest scrap-metal recycler in China and one of the largest in the world for the collecting, inspecting, sorting, shearing, cutting, shredding and bailing of scrap was "a lie... a blatant fraud that has deceived the market about the size of its business". The report cited multiple independent sources that "CMR could not be sourcing anywhere close to the volume of scrap necessary to produce its reported volume of processed metals".
For its part, the company officially vehemently denied the allegations and the stock remained suspended for over six months until the Hong Kong SFC actually moved in to take legal action.
Chun and his wife Lai, who owned a controlling stake in the recycler through their ironically named investment holding firm Wellrun, had just begun selling out in a big way when Glaucus was readying to release its report in late January. The stock's suspension meant they couldn't proceed with dumping their stake and riding into the sunset.
In order to reopen trading in the stock, Hong Kong regulators asked CMR to provide further information. Unfortunately, the company tripped on the information that it had itself provided to the regulators, which led to a case against it and the recent spate of arrests.
In documents filed in Hong Kong's courts last week, the provisional liquidators of CMR said the company had paid out more than
HK$1 billion ($163.78 million) of the HK$1.6 billion that it had in its coffers in the two weeks before their appointment in late July. Unable to cash out in January, Chun and Lai were busy cleaning out the recycling company just as the regulators were moving in.
Born in Vancouver, Canada, Aandahl went to the University of Chicago, where he met Glaucus co-founder Weichert. He later attended Harvard Law School and worked at the US Attorney's Office in southern California on the Enron task force. "It was a great experience working on one of the highest-profile white-collar criminal cases in US history," he recalls. He later served as a clerk for a judge in Ohio, and then ended up in a New York law firm, working on capital-market and private-equity deals for three years.
With his background in economics, training as a lawyer and experience in capital markets, Aandahl knew his calling was in the investment world. His friend Weichert, meanwhile, had joined an investment bank in California.
After the global financial crisis and Chinese reverse-merger scam, Weichert set up independent research house Glaucus and roped in Aandahl. "We had watched the unravelling of Chinese reverse-merger companies and Sino-Forest with interest," Aandahl recalls. By mid-2012, the reverse-merger bubble in the US had burst, so the duo got together and decided they needed to look at other Chinese companies. They had a hunch that Hong Kong-listed Chinese companies were where they might find some gems. They were right. In the aftermath of the global financial crisis, while economies in the US and Europe were still on the mend, money was pouring into Asia, particularly into emerging markets in search of growth. "A lot of low-quality companies had seen a loss of investor confidence or were suddenly subject to regulatory scrutiny," Aandahl notes.
Weichert and Aandahl saw the potential of independent research in the post-crisis world. "The future of independent research was more of a 'skin in the game' model, where the market was going to be more receptive to listening to people who had their money where their mouth was," says Weichert. "When we first set up Glaucus, we believed that investors and their appetite for hot emerging-market stocks had lured disreputable management teams to the capital markets," he says. "So, we set out to provide original research on companies that we believed were fundamentally misunderstood by the market." The way he saw it, there was a fundamental disconnect between the market perception of some of the companies and what he believed was their true value.
Prophetic role
Why Glaucus? In Greek mythology, Glaucus was a sea god blessed with the power of prophecy who frequently came to the rescue of distressed sailors and fisherman. Aandahl and Weichert started Glaucus Research mainly to help investors navigate treacherous financial waters in search of good investment opportunities.
Why recommend short-selling ideas in Asia? For starters, in a crowded environment where sell-side investment bankers had long cornered the "long-only" space and with virtually no really independent research available, the best space open to the duo was one where none had treaded before. The way Aandahl sees it, it is easier writing gushing reports touting the virtues of a stock based on "guidance" of chief financial officers and CEOs and justify your lofty price targets than undertaking serious research that tears apart business models or pick holes in a balance sheet.
"It's hard work, and you will be surprised at how few sell-side analysts actually bother to read through the fine print in company filings," he says. Sell-side research, he notes, is an oxymoron. "Most sell-side analysts are just trying to generate business for their investment banks."
Glaucus is actually helping to make it easier for Asian companies to raise money by separating the wheat from the chaff, says Aandahl. "There are just too many bad apples out there, and that only means higher cost of capital and genuine companies finding it hard to raise money and grow."
So, how does Glaucus do it? Much the same way as Muddy Waters was able to home in on Chinese reverse-merger stocks and, eventually, Singapore's own Olam International late last year. "We start with about 1,500 names in Hong Kong and Singapore and then run them for 20 to 30 operational metrics, ranging from aggressive growth to any other statistical outliers that might appear unusual," says Aandahl.
Among some of the company's initial targets last year were China Medical Technologies, Shougang Fushan Resources and West China Cement. "One thing that popped up for us on CMR was its revenue per employee figure," he notes. "The number was way off the charts. Their revenue per employee was about 10 times higher than other metal recycler peers in the US." That was one red flag. Indeed, he adds, its revenue per employee was six times higher than Apple Inc, one of the most profitable companies in the world. "We were really shocked, but the numbers were out there - total revenues and employees - and it wasn't hard to calculate."
Aandahl and Weichert thought that maybe the firm was outsourcing everything and therefore didn't need many employees, but that is not what metal recycling companies do in China. "We then looked at other unusual things, such as insider selling and notable top management resignations, and we found that the CFO had resigned just a few months after the IPO," he says.
The insider selling didn't come until the very end, or just before the Glaucus report came out, when Chun sold a big chunk of his shares, but that was the last straw. The duo knew they had to put their report out immediately. CMR was ripe for the picking. "The key with CMR was how did it grow so quickly with such a low-capacity utilisation," recalls Aandahl. "Very early on, we had a sense that something just was not right and the whole thing just didn't add up."
The research head of Glaucus says he was pleasantly surprised at the help he got from Chinese officials in calling CMR's bluff. "A lot of people told us that China was pretty opaque, but we found that Chinese officials were as forthcoming as any other officials on a lot of data." The Ministry of Environmental Protection was helpful in giving Glaucus data on scrap-metal imports. "They gave us details on quotas for specific companies, which helped us verify just how much CMR was importing. They couldn't be importing what they claimed to be importing to make up their figures. We were happily surprised at the level of transparency at the ministry," Aandahl notes.
So far, Glaucus has published 10 reports. Two of the companies are now suspended from trading and one - CMR - is facing liquidation. Aandahl and Weichert say that's proof that they are doing a great public service by forcing bad companies out of the market before they inflict further damage. The sell-side analysts at investment banks who gave "buy" recommendations on the stocks that Glaucus targeted are not doing their job, Aandahl and Weichert say.
Value of independent research
What's next for Glaucus? More of the same ruckus. "We want to be seen as an independent research house that produces high-quality research and original ideas," Aandahl says. "A lot of the ideas are going to be short because that space is not covered well, but there will be long-only ideas as well. We won't limit ourselves to just equities."
But whatever Glaucus does, it will do so without fear or favour and in an open and transparent manner, he insists. "We do our own research. We fund our own research, we generate ideas. We have been approached in the past to do contract work, but we have turned it down because we don't want to be hired guns."
Fresh from its success at CMR, Glaucus has tackled other China companies. Its most recent target is SouFun Holdings, the real-estate website. Glaucus alleges that SouFun chairman Vincent Mo has diverted resources from the company for personal use, a charge that he fiercely denies. But SouFun's New York-listed American depositary receipts have doubled in price since Glaucus came out with its report in April and indeed are up more than threefold over the past year.
Over the next few years, Glaucus' primary focus will be to generate short-selling ideas in Hong Kong and Singapore. "We believe there are a lot of companies in these two markets that can do with some scrutiny," Aandahl says. For far too long, Singapore and Hong Kong have only had investment banks pushing long-only ideas to generate business, he notes. That was probably good 20 or 30 years ago, when they were truly emerging markets. Asia has dramatically transformed over the past two decades. "There was so much capital pouring into Asia over the last few years. Asian capital markets attracted a lot of high-quality companies, but also a lot of low-quality and mediocre companies." That always happens when there is too much capital chasing too few companies. "As these markets develop and mature, there is clearly a need for a more thorough look at some of the companies that an independent research firm like ours can do," Aandahl points out.
While initially Glaucus' Singapore reports will be mainly ideas for short-sellers, over the medium term, Aandahl and Weichert hope Glaucus will find some companies that are long ideas as well. "We don't want to have a reputation as pure short-sellers like Muddy Waters, but as guys who can generate high-quality investment ideas, whether they are short or long," says Aandahl. Glaucus, he adds, will look at fundamental value, whether it is a long or short idea. "We believe there is a clear disconnect between market perception and intrinsic value in Asia."
Local investors are likely to hear from Glaucus soon. The short-seller is almost done with its first report on a Singapore company, although Aandahl refuses to be drawn on the name or even the sector, or when the report will actually be published. "Just look out for it on our website," he says.
我自己走进河里了
跌的太猛，看它从10%跌到30%多，可以了吧，下单0.765 20手，几分钟后，到0.68了，再下20手。再过会，0.50了。一个贪字。顺便把yamada也斩了。 听从天意了
一身冷汗。。
谢谢大侠两个月前出手阻止～小心使得万年船，要好好学习大侠的脚踏实地
深表同情
小弟我2007年花了若干千买了名叫contel的一双外表光鲜的鞋子，金融海啸过后，被腐蚀的只剩鞋垫，真是历历在目，让人刻骨铭心。
S-CHIPS: Warning signs （转帖）龙愁股早期不良征兆
S-CHIPS: 10 Warning signs
Readers should note there could be sound reasons behind some of these “warning alerts”, so the discerning investor would investigate further before writing any stock off.
1. Extremely low deposit rate for cash
This is a major warning alert.
Using China’s annualized cash rates as an example:
0.72% Demand deposits
1.8% 3-month time deposit
2.5% 12-month time deposit
It is thus reasonable to expect interest on bank deposits for S-chips to exceed 1%.
JP Morgan screen
-Deposit rate for cash <1%
-Total cash/market cap > 5%
2. High cash reserves, but high debt
A high-cash and high-debt scenario indicates poor financial discipline since companies can logically cut finance costs by paying down their debt with excess cash.
Investors begin to wonder there is “balance sheet management” around the book closure date, or in the worst case scenario, a possibility of fraud or embezzlement of cash.
JP Morgan screen
-total debt/market cap > 30%
-total cash/market cap > 30%
3. Much higher capital expenditure for the same capacity
If a company’s fixed asset investment per ton of production capacity increases sharply over its expansion schedule, investors begin to wonder if the increasing depreciation expense that shows up on the profit and loss statement could in fact be excesses in other operating expenses.
Inability to sustain growth
4. High gearing, high working capital requirement
High working capital requirements, low net margin and high gearing will slow growth.
JP Morgan screen
-High net working capital to sales ratio (>20%)
-High gearing ratio (>35%)
-Net working capital to sales ratio – net margin > 15%
5. Frequent fund-raising
JP Morgan screen
Issues of new shares or convertible bond more than twice during 2004-2007.
Changes with key officers
6. Hit-and-run
When a controlling shareholder dilutes its stake to below 50% within a few years of listing, there may be reason for investors to ask questions.
Another situation would be a passive investor holding the controlling stake.
7. Resignation of key managers, directors or auditor
Most auditor replacements in Asia are related to unsettled disputes on accounting practices.
Investors should be alert if senior managers resign without a proper reason.
If the company was doing well, why would they leave instead of enjoying the corporate spoils?
Often, the resignations potentially indicate corporate governance issues that investors were unaware of before, said JP Morgan.
Poor corporate governance
8. Acquisitions that do not make sense
Investors require acquisitions to show synergy, and a fair acquisition price.
This is especially so if the seller is an interested party or an affiliated company. Volume and size of transactions could mask sharp unwarranted jumps in certain accounting items.
9. Lack of sufficient disclosure
This could include failure to disclose large payments related to subsidiaries acquired from a related party, and such payments were subsequently highlighted by independent auditors.
10. High cash reserves, but low dividend payout
JP Morgan screen
-net cash/market cap > 10%
-rising cash level in the past two fiscal years
-dividend payout ratio < 20%
Originally published on www.nextinsight.com.sg. This article is reproduced here as part of our collaboration with Next Insight.
Sim Kih NextInsight’s senior writer and photographer, who was an investor relations consultant for several years after working in equity sales at OSK-DMG & Partners. She has cleared all her Chartered Financial Analyst (CFA) examinations.
有几间是在市场不断融资
包括昂贵的股本融资，拿到的现金就这么放着，这时你就要想想为什么了。
好贴不得不顶!
想起了十大原则!
党娣
yes.. i paid my expensive lesson in this
we should have that 10 principals on top of this board :)