HuaBao made an official announcement to the HKEX. The typical legal kind of response that one can expect: the allegations of Anonymous Analytics (AA) are "incorrect and misleading" and the company will prepare a clarification. I hope it won't take too much time since many allegations were well known.
The company has dispatched delegates to verify financial information of some subsidiaries for the year ending December 31, 2010. Rather surprisingly, one would have guessed that that information was readily available in the headquarter.
Also there is mentioning of currency translations, different accounting standards and different dates for closing of the book year. This is all standard though and every accountant should know how to deal with that, it can't explain the allegations from AA.
More information about this case can be found here:
Buyersstrike
Bronte_1
Bronte_2
Bronte_3
Bronte_4
Cyberwarzone
This is Chu Lam Yiu, major shareholder and Chairman of HuaBao, "Queen of Cashout", a self-made billionaire who founded the company a decade ago:
The share of HuaBao is still suspended.
Both the blogs if Buyersstrike and Bronte stress the importance of which parties are involved in listed companies, for instance which promoter brought the company to the market, who is the accountant, who are the directors, who are the major shareholders, etc. Bronte calls it the most important factor in his analysis: Who is associated with the company? Cheating people do not suddenly change overnight.
The Securities Commission has asked journalists, bloggers, "influencers" etc to publish about corporate governance matters. A database where one can trace the above information in a simple way would be very helpful, and added to this a database with offenders (both companies and persons). The result would be more exposure and less damage from unscrupulous persons, and thus a more healthy share market. Huge amounts of Malaysian IPO's have failed to live up to the high expectations from their glossy brochures. Aggregated information who was involved with the many failed ones would be very helpful.
If David Webb can run this kind of database all by himself and one assistant for the much larger share market in Hong Kong, then surely it should be easy to setup a similar service in Malaysia?
I really salute some of HuaBao's investors! The accusations are extremely firm and its too obvious that HuaBao is a fraud. Yet they can ignore AA's accusation and said that we shouldn't believe an anonymous coward like AA. They believe it is genuine because tons of fund managers into the counter but there are more than 500 fund managers invest at Enron yet they were all cheated by Enron. Some even dreams that when the share started to trade again HuaBao is able to clear all the doubts, the chairwoman will bought back the shares she sold and increase the dividend payout. The shares might rise 10 fold. That fellow even criticize me I shouldn't accuse HuaBao a fraud because when it raises 10 fold I will be cursed forever. lll I really salute their attitude. If they can't improve their mindset they will never become a successful investor.
ReplyDeleteYou are following the HK blogs? Unfortunately I can't read Chinese but I am very curious. There must be a lot written about this case, it is pretty big, I read that the founder owned USD 2.8 billion, either stock or cashed out. The first part might decrease, the second part is locked in .....
ReplyDeleteNo! It's a Malaysian's chinese forum. They accept posts in English but most of the posts are in Mandarin. I had alredy fed up with them. They believe something invested by mutual fund must be genuine but Enron had 500 mutual funds invested in it. Their reasons are damn funny none of them are rational but yet they are able to convince themselves that they didn't made a stupid investment decision. Since they wish to die why not I just let go. John Hempton & AA had already done their part. I am no body why should I care on their money. I am now waiting for Huabao to be traded again so that I can short.
ReplyDeleteBtw how to detect off balance sheet liability in HuaBao? The financial statements seems genuine but from what my teacher had taught me there should be off balance sheet liability inside it.
By the way would you like to comment Corporate Governance on Jobstreet? Jobstreet looks good to be but it invest quite a number of its cash in SG Reits and other securities. Although Dr. Lin See Yan is in its board but I still feel uncomfortable by Jobstreet's decision to put some of their cash in securities.
ReplyDeleteI don't like companies investing in securities, better pay it back as dividends. However, sometimes it is difficult to get money (from the bank or rights issue), so companies like to hold on to some money, and with interest rates so low, it is understandable, to some degree. But I still don't like it.
ReplyDeleteJobstreet is one of the rare Malaysian IT success stories, I just talked to someone who knows the founder, unfortunately the founder has not turned in an angel investor (growing the so much needed eco-system for startup companies).
I just discovered some interesting fact in Huabao. Although the revenue grow tremendously but the PPE growth is slower than the grow of intangible assets. It grows from 155,171,000 in 2007 to 536,373,000 in 2011 but intangible assets grow from 11,992,000 to 2,879,958,000, investment in associates grow from 3,975,000 in 2007 to 61,009,000 in 2011. How come the grow of intangible assets are higher than PPE? Does HuaBao become a financial company?
ReplyDeleteThanks. They bought some companies from the chairman at a very high price (defintely high compared to their other acquisitions), if that was above NTA (it probably was) then that might explain it.
ReplyDeleteYeah! I know they are buying at inflated price from the chairwoman but what i meant is the figure is not justifiable. HuaBao is a manufacturing how come the companies they acquire consist of tons of goodwill. They are not technologies companies or financial institutions at which the most valuable assets are their brand.
ReplyDeleteBtw