Since 2010, Celltrion has generated 98% of its sales from its sister company, Celltrion Healthcare, which has been unable to sell 55% of the product that it’s bought. Celltrion Healthcare appears to have been established to buy unapproved drugs from Celltrion. It is highly unlikely that an outside third party would have bought these drugs, and we question the economic substance of these past transactions for Healthcare. We think Celltrion’s profits are significantly overstated, by as much as two-thirds in 9M17, owing to continued channel stuffing at Healthcare and the capitalisation of R&D costs. We therefore apply a 50% discount…
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Slandering Fujian?

Gillem Tulloch · 14 March 2018

Fujian has gained a bit of reputation for being home to a large number of frauds. As a result, we decided to see if the statistics supported the allegations. We have records of 13 alleged or confirmed Fake Cash Flow Frauds at listed companies from Fujian where investors have lost almost everything. That’s the highest number recorded for any Chinese province and accounts for 17% of all alleged Chinese Fake Cash Flow Frauds in our database. And yet Fujian accounts for just 3% of China’s population, 3% of its large listed companies and 4% of its economy. Most of these…
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Stocks with similar traits to Steinhoff

Mark Webb · 22 February 2018

Steinhoff surprised the market late last year with an admission of accounting irregularities which led to its share price collapse. Interestingly, its financial statements showed early warning signs, such as unusually high profitability which failed to translate into free cash flows or dividends. A number of acquisitions also showed evidence of asset write-downs which likely inflated profits. Indeed, the company triggered two of our proprietary accounting models, Acquisition Accounting and Fake Cash Flow. We screened 3,500 large companies globally for those with similar traits and found 84 stocks of which 35 were in Asia. We have major concerns over five…
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How long before it goes to zero?

Gillem Tulloch · 16 February 2018

Gong Hey Fat Choy from Thailand! How long before Imperial Pacific (1076 HK) goes to zero? Now, don’t get too excited if you’re a short-seller as its market cap is only US$1.8bn and liquidity is just under a million US dollars a day; however, the story behind this casino stock is worthy of the annals of Asia’s craziest, and has just been exposed in a Bloomberg article titled “A Chinese Casino Has Conquered a Piece of America” (15 Feb 2018). It involves death, bribery, gambling, money laundering and lots more, all on the US-administered tiny island of Saipan in the…
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