After their first success with Chaoda (I blogged about it here), Anonymous Analytics has exposed a second possible Chinese fraud: HuaBao International. Their 44-page report can be found on their website. A long but enjoyable article for people who appreciate these kind of financial detective stories.
Many red flags are raised, like:
- Backdoor listing (requiring less due diligence)
- Auditor resigning
- Related Party Transactions
- Extremely heavy insider selling by the chairwoman
- Impossible high margins compared to other companies in the same industry
Will AA again be proven right? I don't know for sure, but it looks quite likely.
More information in an article in Business Week.