Research

COMING UP SHORT

Investors increasingly view the income statement as unreliable; instead modelling cash flows to gauge performance. But the cash flow statement is flawed from an investment perspective as it only aims to reconcile movements in cash. This means that purchases funded with debt or equity are excluded which can materially distort operating and free cash flows. In this report, we discuss the most common practices affecting cash flows and highlight those stocks most impacted, such as China Southern, JD.com, Ctrip.com, China Resources Pharma and CKH Holdings. GET PDF VIEW SLIDES Payments using debt Items paid directly with debt, rather than cash,…
Read more ›

Log In

Insights

IN-BRIEF: CHINESE SPORTSWEAR

Another one bites the dust

Gillem Tulloch · 13 September 2018

Yet another sportswear company has blown up. In June, Hosa’s share price mysteriously collapsed 90% in a day. It has since been targeted by a short-seller, delayed its dividend, failed to submit interim financials and is now suspended. Hosa’s financials have similar traits to the nine previous frauds highlighted in our recent report on the Chinese sportswear sector, lending credibility to our argument that companies faking their sales have a unique set of financial characteristics. Furthermore, background research shows that many of Hosa’s management had links to companies embroiled in past scandals. We have devised a slightly more generic scan…
Read more ›

IN-BRIEF: COMPLICIT AUDITORS

PWC gives Sunac and R&F a free pass

Nigel Stevenson · 29 August 2018

Imagine if fund managers could immediately revalue new investments to what they considered fair value. It would make a mockery of the industry and be considered unethical. In RARE circumstances, such as a forced sale, accounting rules allow buyers to book an immediate gain on the revaluation of acquired assets. Unfortunately, highly indebted Hong Kong audited companies are using this loophole to inflate their profits and equity. PWC has set the benchmark by allowing Sunac and R&F Properties to push through questionable revaluations of acquired assets. Incidentally, embattled commodities trader, Noble Group used similar gains on acquisitions to pad its…
Read more ›

A&G MASTER SCREEN

New Product Launch

Gillem Tulloch · 23 August 2018

We’re pleased to launch our Accounting & Governance (A&G) Master Screen, a major new addition to our product line-up. This enables users to evaluate portfolio accounting risk, and to search for companies with specific accounting traits. A significant development is the introduction of positive accounting flags, as opposed to negative ones. This will, hopefully, help users find companies with desirable accounting traits, not just problematic ones. The screen has been pre-loaded with over 10,000 companies globallly, based on the latest year-end scores from six of our accounting modules, including Profit Manipulation (Beneish and Montier), Fake Cash Flow, Excess Capital, Acquisition Accounting and Debt…
Read more ›

Free Newsletter

GET OUR FREE NEWSLETTER

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