Research

IN-BRIEF: CHINA HONGQIAO (1378 HK)

China Hongqiao’s post-suspension share price appreciation might lead some to believe that fraud allegations have been addressed, but we are not entirely convinced. Even if investors can accept that the company had four different auditors in two years, they still have to grapple with a less than satisfactory response to fraud allegations and a very worrying set of financial statements containing similar traits to past frauds. The stock might be trading on 5x 2018 PER (assuming profits are real) but we would still be sellers. The cost of shorting is expensive at 9% but might be a strategy for risk…
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TICKING TIME BOMBS

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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IN-BRIEF: IMPERIAL PACIFIC

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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NEWSLETTER 17

Asia’s most manipulated market is…

Gillem Tulloch · 8 February 2018

Are Hong Kong-listed companies the most manipulated in Asia? Of the 6,000 largest companies in Asia, 16 rose by more than 10% in the ten trading days before New Year and then fell by more than 10% in the ten days after. Although Philtrust Bank in the Philippines took the top spot with a total 20-day swing of 71%, the list was dominated by companies listed in Hong Kong. Some familiar names appear, including China High Speed and China Greenland Broad Greenstate. We wonder whether the Hong Kong Stock Connect has created a regulatory blind spot that allows stocks to…
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