China Stocks Listed Locally An Embarassment
OK, this is the umpteenth time
that I am warning not to touch China stocks listed on Bursa. Seems like an old
record, but when syndicates are appointed to play up these shares, there are
still bound to be followers. Bursa has kind of avoided the wreckage caused by
scandalous shenanigans in some Chinese counters listed in Singapore, Taiwan and
the US. Surprisingly, the ones listed as red chips in HK did not suffer a
similar fate, maybe those were much larger in market cap?
What is most galling is the supposed
cash in bank for these counters. Some even had the audacity to raise funds via
rights issue when they supposedly have so much cash in bank, citing no more
cashflow to buy raw materials. So, are you admitting that there is really no
such cash balance in your bank account ... or are you telling us that there is
no fucking way you could withdraw the funds. Either way, the company is crewed
and so too will the minority shareholders.
The Edge did a nice
Shares that their "cash per share" is
LESS than their share price. This is a no brainer, but to me, at least these
company can and have used up their cash. To me, they are A LOT better than those
with multiples of cash in hand to their share price.
Share Px Cash Per Share
China Ouhua 0.11
Shares with their price equaling their
cash per share. this makes more sense. May be the better ones in the group but I
would still avoid them if I can. Because its not the fundamentals that are the
problem, its the whole huge tidal wave of negative sentiment that is almost
impossible to turn around. Just imagine, would you buy into a new Madoff fund
Global 0.07 0.078
China Auto 0.34
Star Sports 0.115 0.14
The following are the ones that really
piss you off. Their cash balance is in multiples of their share price, and some
had the audacity to make rights issue. Very dubious, when things do not smell
right, it is usually bad.
China Stationery 0.125
Sports 0.225 0.522
Cash balance - OK, that is one portion
of valuing a share, what is galling is that most of them trade at PER of around
2-4 x... that has to be the cheapest shares in the world, and many are backed by
cash as well. If all is true, WHY AREN'T private equity firms and IBs offering
loans and Management Buyout deals??? I am sure many have done their homework ...
and almost just as many declined to proceed further. Whats up
Although we did not have any major
scandals with China listed firms here (yet), their share prices ALREADY has been
adjusted to a level worse than an already erupted company with scandals. So we
had our very own quiet correction.
What should Bursa
a) Nothing - As long as promoters/IBs
keep bringing these China companies over, and as long as they fulfill the "basic
requirements", fill in the blanks, you can list or do an RTO with a China
company. This is because Bursa is a gatekeeper, not a market predictor or market
selector or stock selector.
b) Something - From the evidence, Bursa
can see that there is little or no interest from retail or institutional funds
with these companies. You should be very wary of these companies STILL WANTING
to list on Bursa, when all data shows very clearly that their share price will
more than halve or be decimated after listing!!!
c) More Than Something - Reject rights
issue if a company's cash per share is more than their share price unless
reasons provided are solid (i.e. doing something that would use up their cash in
hand as well). Protect the integrity of the markets by vetting and following all
shares holders of promoters/owners of these companies and their transaction
trail for two years after listing. Follow up with queries/fines/barring from
industry if there are shenanigans.
1 day ago