Research

CHINESE PROPERTY DEVELOPERS

Nigel’s report on the Chinese property developers exposes many of the accounting tricks being used to understate leverage….and even then it remains one of the most highly leveraged sectors globally. Deteriorating terms of trade suggest that the sector is in the later stages of the cycle. It is, therefore, worrying that an almost tripling of assets over the past five years has been almost entirely debt financed. Balance sheets are not structured to weather an economic downturn but are positioned for aggressive growth that is already beginning to wane. This in-depth report is a compelling read for those wanting to…
Read more ›

Log In

Insights

ON THIN ICE

Cash flow shortfall risks are rising

Mark Webb · 17 July 2019

An inability to generate operating cash flow will, at best, cap dividends and long-term investment; however, it can indicate more serious problems, such as profit manipulation or solvency. We have scanned across almost 1,300 large Asian companies and highlight nine that have either suffered from prolonged operating cash flow weakness, or recently reported a sharp deterioration. We have concerns that China Everbright Intl, Beijing Enterprises Water and China State Construction Int. are front-loading profits; CR Pharma, CIMC, Shanghai Pharma and Vipshop look to be window-dressing balance sheets and cash flows; meanwhile, there is alarming inventory accumulation at Celltrion Healthcare and…
Read more ›

THE US EQUITABLE ACT

Nuclear option

Nigel Stevenson · 11 July 2019

Recently announced draft legislation could result in Chinese companies being delisted from US exchanges if they fail to allow US regulators access to their audits. While companies are not in any immediate danger, it is another sign of rising tensions between the US and China which investors should not ignore. In the near term, the proposed law could increase the popularity of Hong Kong and mainland exchanges for new listings, and may ultimately result in existing stocks transferring to these markets. GET PDF A long-running dispute between securities regulators in the US and China over the auditing of US-listed Chinese…
Read more ›

FAKING CASH 3

Kangde Xin Composite and Xinyi Glass

Gillem Tulloch · 8 July 2019

Xinyi Glass’ rebuttal to our report confirms what we already knew: (i) that dividends have been primarily financed with offshore debt and (ii) the company has never transferred onshore profits offshore, making it difficult to validate domestic profits. Other than that, the rebuttal was uninformative. Again, we ask management to respond to the questions provided to them. On a related note, last week’s disclosure that Kangde Xin Composite faked four years’ worth of profits adds to concerns over companies running highly liquid balance sheets, like Xinyi. We would like to see Xinyi transfer surplus cash from China to Hong Kong…
Read more ›

Free Newsletter

GET OUR FREE NEWSLETTER

Input your email address below to sign-up to our free newsletter.