Research

CHINA EVERGRANDE (3333 HK)

In our opinion, CBRE has gone to extremes to give Evergrande’s property assets the most favourable valuation. Its methodology allows Evergrande to increase valuations by simply revising up planned floor space, even at projects which our site visits demonstrated were failed developments. Furthermore, the lack of rental income on investment properties means CBRE has adopted a comparable transaction approach as opposed to income capitalisation. This produces a stellar valuation despite a pathetic rental yield of just 0.1%. In our report, CHINA EVERGRANDE: Auditors Asleep, we estimated these properties could be worth less than half their RMB122bn balance sheet value and…
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Insights

ACCOUNTING & GOVERNANCE SCREEN

Our latest version

Gillem Tulloch · 20 June 2017

Please download the latest version of our Accounting and Governance Screen by clicking on the link provided below. This screen is an excel-based spreadsheet linked into Bloomberg which means that subscribers can check any company globally for more than 60 potential accounting and corporate governance red flags. Importantly, it not only quantifies whether a ratio is unusual relative to its global industry peer group, but whether the one or three year change in that ratio is unusual. After all, incremental changes are arguably more important than the outstanding number. It incorporates well-known mathematical models aimed at highlighting profit manipulation (Beneish’s…
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ASIAN SHORT-SELLERS

The Bogeyman Is Coming…

Gillem Tulloch · 15 June 2017

The number of anonymous short-seller reports targeting Hong Kong listed companies is likely to rise, primarily due to their low quality which is, in part, a result of regulatory shortcomings. While the win rate of short-sellers is very high, not all are equal. Investors should be particularly concerned with Emerson and Glaucus given the high quality of their research and level of success. However, there is some hope for investors: Companies accused by short-sellers of Fake Cash Flow Fraud all score poorly under our scoring system and we urge investors to check their stocks with our Accounting & Governance Screen….
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MAN WAH (1999 HK)

Comfortably profitable or heavily padded?

Mark Webb · 9 June 2017

Sofa maker Man Wah has been targeted by short-seller Muddy Waters over its profitability, taxes, export sales and debt. So far, the main publically available accusations levelled (via twitter) concerning undisclosed debt appear to lack credibility. In management’s favour, it has lifted the stock’s suspension after issuing a speedy and robust rebuttal. Furthermore, the amounts of cash Man Wah has returned to shareholders via dividends and share buybacks are inconsistent with past frauds. However, our Accounting & Governance Screen reveals some fraud like traits within its financials, such as the build-up of non-production assets, window dressing of heavy trading activity,…
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