Research

IN-BRIEF: SINOPHARM

An apparently spectacular 4Q17 result for Sinopharm but, as usual, nothing’s quite what it seems. Earnings were distorted by numerous one-off and downright curious items which gives the impression that management was trying hard to impress. As usual, the main action was in the balance sheet with record amounts of assets sold at the year-end, seemingly to give the impression of operating cash inflows and lower reported leverage. The company’s financial statements are something of a riddle owing to the adoption of questionable accounting practices and inexplicable anomalies. We’ll find out more when the full annual report is released by…
Read more ›

Log In

Insights

IN-BRIEF: IQIYI (IQ US)

Watch carefully

Nigel Stevenson · 19 April 2018

Recently listed iQiyi, the Netflix of China, is loss-making and rapidly burning through cash. Our review of its financials reveals two main concerns: first, the company is substantially overstating operating cash flows by classifying spending on licensed content as an investing rather than an operating activity. Secondly, the company recognises a material portion of revenue from barter transactions, whereby programming is swapped with third parties. Such arrangements are open to abuse; Netease, for example, was caught overstating its revenue through bartering advertising shortly after its IPO. Therefore, while these practices are not illegal, they can distort the financials, and investors…
Read more ›

IN-BRIEF: THE CHINA HUSTLE

Reverse mergers (CBPO, HOLI)

Gillem Tulloch · 12 April 2018

If you haven’t already seen the latest finance documentary, The China Hustle, it’s well worth watching. Carson Block, Dan David and others take viewers on a captivating romp through the Chinese reverse takeover scam. Interestingly, our Fake Cash Flow model correctly identified eight of the nine frauds specifically mentioned in the movie. Of the RTOs still listed, Hollysys Automation and China Biologic raise concerns. This got us thinking: if we’re correct in that around 5% of Chinese companies (mainly small caps) are faking the majority of their revenues, what percentage are faking just 5-10%? As we discuss within, it’s probably…
Read more ›

IN-DEPTH: ACCOUNTING RISK

Assessing the top 100 companies in Asia ex-Japan

Gillem Tulloch · 23 March 2018

In assessing the accounting risk at the top 100 companies in Asia ex-Japan, our analysts highlight 36 companies with high risk, and short-list six where it is acute. We have previously written on four of these (CCC, CKH, Ctrip, and Sinopharm) and are in the process of following up with management at Gree and Mengniu Dairy. Furthermore, our quantitative scoring system highlights a further five companies with risky accounting, including Mahindra & Mahindra, New Oriental Education, Alibaba, Hikvision and Amcor. The report includes write-ups of all 100 companies with links to our screen and published financials. GET PDF VIEW SLIDES…
Read more ›

Free Newsletter

GET OUR FREE NEWSLETTER

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