Research

IN BRIEF: TIBET WATER (1115 HK)

Water and beer bottler Tibet Water Resources (TWR) has the dubious distinction of being accused of fraud by two anonymous short-sellers in just one week. Our analysis of its financials raises concerns that something is amiss: (i) Operating margins are super-normal despite minimal capex, which would appear to be a dichotomy. (ii) Free cash inflows have gone into acquisitions and, despite super-high cash balances, dividends have been reduced to zero. (iii) Unusually high investment flows are consistent with companies window-dressing their financials and, in some instances, past frauds. Management’s response to these accusations has been to threaten litigation as opposed…
Read more ›

Log In

Insights

SINA (SINA US)

Your vote now means nothing

Nigel Stevenson · 9 November 2017

Sina’s management has taken control of the company without shareholder approval through the issue of new preference shares, as allowed under Cayman Islands law, taking its share of the voting rights to 55%, from 11% previously. This comes in response to attempts by a US hedge fund to place two directors on its board. Other companies have similar provisions in their articles of association, which we detail within. We recently wrote about the corporate governance risks of investing in foreign incorporated US-listed companies, and this incident further highlights those risks. It raises the question: what rights do shareholders in these…
Read more ›

REVENUE RECOGNITION

Major changes ahead

Nigel Stevenson · 2 November 2017

Country Garden boasted that revenues were up 36% in 1H17 but neglected to tell investors that this was primarily due to an accounting change. The introduction of IFRS 15 in 2018 will result in major changes to how revenue is recognised and investors need to know which sectors and companies could be most affected. They also need to be aware that the transition could distort comparisons with prior periods. A small number of companies have implemented the standard early or quantified the impact on their financials. Not all companies will be revising up profits, other companies have experienced large profit…
Read more ›

IN-BRIEF: SINOPHARM (1099 HK)

From bad to worse

Gillem Tulloch · 31 October 2017

Sinopharm’s 3Q17 net profit decline of 16% YoY means that consensus expectations for 12% growth in 2017 just became a whole lot more unrealistic. The company is suffering from a double whammy of rapidly deteriorating operating performance stemming from regulatory changes, while finance costs are ballooning as it sells ever-greater quantities of receivables in an attempt to flatter financials. We think these trends will become more acute in 4Q and would not be surprised if there were a material profit miss. Given high leverage and an inability to generate recurring operating cash flows, a capital increase is likely. Results are…
Read more ›

Free Newsletter

GET OUR FREE NEWSLETTER

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