China Stationary, unable to contact the 2 remaining directors

Today China Stationary announced the suspension of its shares.

It also announced:


 ..... that the Company is unable to release its Third Quarter Results by 30 November 2017 (“Timeframe”) to Bursa Securities as required under Paragraph 9.22(1) of the MMLR.

The failure to issue the above Third Quarter Results is due to the following reasons:

1. unable to obtain confirmations from third parties (i.e. bankers, debtors, creditors, courts in China etc) to perform verification checks in relation to all litigation cases involving the subsidiaries of CSL;

2. unable to contact the two remaining directors i.e. Mr Chan Fung @ Kwan Wing Yin and Mr Angus Kwan Chun Jut. Hence, no Board of Directors' meeting is held to approve the Third Quarter Results; and

3. unable to undertake the necessary assessment on the impact to the CSL’s financial statements and its operations without the issuance of legal opinion report by Zhi Jun Law Firm of Fujian.


What a joke!

Except of course if you are an investor in this company, in which case you probably have not read this blog.

To rub further salt in the wound, the company accounts were approved until the very end, year 2016:

And according to these numbers the company still had more than RMB 1.8 Billion (!) cash.

That is, if one would actually believe these numbers, the auditor (RT LLP from Singapore)  apparently did so, I don't.

Bursa did indeed issue a directive, which included:


(b)     Verification of CSL’s existing cash and bank balances ....


Unfortunately, much too late, they should have done this many years ago. This company had so many red flags that I lost count.

I hope that Bursa and SC learn from this case and will issue the same directive to all China listed companies. The bad apples will fail, while the good ones (if any) will gain from this exercise.

Will there be any justice in this case? I hope so, but it might be rather difficult, the company is listed in Malaysia, incorporated in Bermuda, has operations and assets in China and its auditors are Singaporean. Good luck with that!

China Stationary: questions regarding accounts

I wrote before about China Stationary's latest accounts, and the many red flags. The company announced amended accounts, correcting the PBT of last year.

Unfortunately, no other changes were made, as far as I can see. Apart from the many questions that I have regarding the accounts (questions that hopefully will be answered in the audited accounts), there is one number that I think can't be right, the number in red, "894,674":

Also, it is much too much coincidence that it would be exactly the same as the number the year before.

However, if the number is indeed wrong, then at least one other number is also wrong, since the numbers have to add up. My guess is that the number below the red number, "455,415", is also wrong. Although the Renminbi did fluctuate relative to the Ringgit, it did so by a small margin, I don't think it can explain RM 455M in "effect on exchange rate on cash and bank balances".

Wishing all readers who celebrate the festival a Happy CNY and a healthy and prosperous 2015.

Announcements: Tanjung, Dufu, Sasbadi, China Stationary

Tanjung Offshore announced:

"We refer to our previous announcements on 8 January 2015, 5 February 2015 and 6 February 2015. Tanjung Offshore Berhad (“Tanjung” or “Company”) wishes to announce that it has on 11 February 2015, lodged a Police Report against two directors, Tan Sri Tan Kean Soon (“Tan”) and Muhammad Sabri bin Ab Ghani who have been suspended from their executive positions following the findings of the Company’s Independent Committee. 

We also refer to the following articles: “Tan Kean Soon breaks silence over allegations at Tg Offshore”, published by Bernama on February 9, 2015; and “Tan Kean Soon declares he is blameless over Tanjung Offshore issue”. 

In reference to Tan’s allegations in these articles, the Company would like to state that Tan was given ample opportunity to present his concerns before the Independent Committee. However, Tan declined to attend interviews with the Independent Committee, or to make any statement to the Committee despite several reminders to attend the interviews. When the Board of Directors (“Board”) of Tanjung formed the Independent Committee at the meeting of 8 January 2015, Tan had agreed to and consented to it. The Board also agreed to his request to include Tan's personal legal advisor as an ex officio member of the Independent Committee. Tan’s personal legal adviser attended only the initial two (2) meetings out of daily meetings conducted by the Independent Committee over a two (2) week period."

This in relation to statements like "I am certainly blameless", as made by Tan in an article in The Star. Time will tell if that is correct.


Dufu announced:

The Board of Directors of DUFU (“the Board”) wishes to announce that it had on February 4, 2015 received an allegation letter against certain Senior Management of the Group on misappropriation of the Company’s fund of approximately RM3.9 million. Further to the emergency Board of Directors’ Meeting held on February 9, 2015 to address such allegation, the Board still unable to ascertain the factuality of such allegation for the time being. In consequent thereto, the Board has set up an Independent Committee (IC), comprising 3 Independent Directors of DUFU to coordinate and oversee the investigation process of the case. The composition of the IC are as follows:-

Chairman: Mr. Ong Choon Heng;
Members: Mr. Khoo Lay Tatt and Mr. Ang Siak Keng.

The IC has been authorized to perform the following duties at its sole discretion:-

• To appoint an Investigation Auditors to investigate on the remittance of fund to U.S. during the year of 2013;
• To request the existing Auditors of the Group (Messrs. Crowe Horwath) to investigate on the remittance of fund to U.S. during the year of 2014;
• To investigate on the potential related party transactions.

KiniBiz wrote about Sasbadi, a company that only listed half a year ago:

"Law En Ruey, the chief operating officer of recently listed book publisher Sasbadi Holdings Bhd, has moved to retire from his post at the ripe old age of 30, according to an announcement on Bursa Malaysia."


When one invest in a stock one bets on the horse (read: company), but also the jockey (read: the management team). An important change has occurred so soon after a listing, which is rather remarkable.


China Stationary announced its 4th quarter results, a selection of some red flags:

• Revenue has fallen hugely this quarter to only RM 36M
• But PPE (Property, Plant & Equipment) is strangely up a lot, about RM 80M
• However, depreciation is down
• Loss over the year before tax is RM 216M
• Trade & Other Receivables is up to RM 200M, strange in relation to the low revenue
• Selling and Distribution expenses fallen from RM 34M to only RM 1M
• Cash is down almost RM 300M
• But interest received is hugely up, from RM 4M to RM 29M

Next to that, losses due to the fire, late delivery and 10% deviation in reported earnings:

The cash flow statement is also puzzling, despite the losses and spending on PPE the cash as measured in RM went actually up because of RM 455M due to the exchange rate? The Chinese Renminbi did indeed change somewhat relative to the Ringgit, but not that much.

High cost for small transactions on Bursa

I wrote about the issue of high transaction costs on relatively small orders before.

By chance I run into the following share buyback by China Stationary:

China Stationary bought 100 shares at a price of RM 0.13 for a total amount of RM 54.01.

In other words, the shares cost only RM 13.00, the commission however a whopping RM 41.01!

In one word: madness.

If Bursa Malaysia actively wants to encourage more retail investors to participate (many of whom might trade for smaller amounts), they really should solve this issue.

In my previous blog posting I gave two simple solutions:

• either raise the minimum board lot size for shares trading at lower prices (in Hong Kong for instance penny stocks go in lots of 10,000 shares)
• or lower the minimum brokerage for these small orders.

China Stationary to be suspended

China Stationary announced that "the trading of CSL's securities will be suspended with effect from 9.00 a.m., Wednesday, 9 July 2014 until further notice."

On the same day a non-executive independent director announced his resignation "Due to his advanced age and health condition".

The share price took a dive.

Maemode, Golden Plus, China Stationary, HB Global

I wrote about the possible delisting of Maemode. I am afraid that nothing has happened (as was expected), the company didn't announce any plans or objection against the delisting, and thus it was announced that Maemode will be delisted on July 2, 2014.


This is in contrast with Golden Plus, about which I wrote here. The company again announced delays in all their financial reporting, but still remains listed (although the share is suspended).


China Stationary announced that Bursa "rejected the Company’s application for a further extension of time of one (1) month from the Extended Deadline till 31 July 2014."


HB Global announced  "that the Company requires an additional time of approximately two to three weeks to finalise its Audited Financial Statements for the financial year ended 31 December 2013 (“AFS 2013”) and the Company is expecting the said AFS 2013 will be completed on or before 21 July 2014."

Fire in China Stationary plant (2)

I wrote before about China Stationary:


"Hopefully the administration is still in order, the administration office is mentioned as being damaged. In Singapore there was a China listed company where suddenly the whole administration went up in fire."


I am afraid that my fear that the administration was destroyed was indeed correct, according to the following announcement:


The Company’s auditors, Messrs RT LLP had communicated the following statements in their Audit Summary Memorandum for the financial year ended 31 December 2013:

“As a result of the fire incident, we are unable to proceed with their planned schedule to obtain walk-in bank confirmations, sight of fixed assets, as well as complete our audit fieldwork for the PRC subsidiaries. The aforementioned procedures are crucial for us to issue an audit opinion on the Group’s financial statements for the financial year ended 31 December 2013.

As at the date of this memorandum, management has not been able to provide us with the post balance sheet financial information and make the necessary arrangements to fulfil the aforementioned procedures as the financial records and company legal stamps that were stored in the administration office were destroyed by the fire as advised by management.”


The Singapore listed China company that I mentioned before was Sino Techfibre. A link to a Business Times article can be found here:


Blaze in Shandong facility may further obscure ongoing probe into its books

A FIRE at the China factory of mainboard-listed Sino Techfibre could further obscure an ongoing probe into its books as key financial records have reportedly been destroyed in the incident.

According to a statement released by the firm late Friday night, a fire had broken out at the administrative premises within its primary production facility at Longkou City in Shandong province in the early morning of April 20.

While the blaze did not cause any deaths or injuries, the financial records that were kept in the affected office have been destroyed, Sino Techfibre revealed.

‘The company has reported the incident to the local police, and the latter has commenced the necessary investigations,’ it said.

‘The cause of the fire and actual extent of the damage are currently still unknown, pending the completion of the police investigations into the fire and issuance of their report,’ it added.

The incident happened a week after the firm was red-flagged by external auditors Ernst & Young (E&Y) for accounting irregularities, adding to recent scandals surrounding the bookkeeping practices of several other China-linked companies.

Specifically, E&Y uncovered some discrepancies in the invoices issued by the firm and its suppliers.
Sino Techfibre said that it could not locate the sales manager who is at centre of this controversy, and has since lodged a local police report.

As E&Y did not obtain a satisfactory explanation on the issue, it could not complete and issue the audit report on Sino Techfibre.

In an update last Friday, the Chinese maker of polyurethane (PU) and microfibre synthetic leather products also announced that it has appointed an interim chairman and CEO following E&Y’s findings.

Sino Techfibre’s existing CEO Li Wenheng has been ‘re-designated as an executive director’ until further notice, the firm said.

Independent director Tay Wee Kwang has taken over as Sino Techfibre’s interim chief while Lee Wing Hang, another independent director, has been appointed as its interim chairman.

As part of his responsibilities, Mr Tay will oversee the independent investigations into the company’s audit issues as well as review the investigation report on last week’s fire. He will also take over the company seals of Sino Techfibre and all its subsidiaries.

Sino Techfibre is currently finalising the appointment of E&Y for an expanded audit.

In anticipation of this move, Sino Techfibre said that it has been ‘making the necessary preparatory work in respect of the relevant books and financial records of the company’ prior to last Wednesday’s blaze.

Fire in China Stationary plant

Announcement on Bursa Malaysia website:


The Company regrets to announce that a fire had occurred at the Company’s production plant located at No. 2899, Jin Jiang West Road, Hanjing District, Putian, Fujian Province, The People’s Republic of China (“PRC”).

The fire started at about 1.30 a.m. on 4 April 2014 (PRC’s time). No injuries had been reported. The fire department is still conducting investigation to ascertain the cause of the fire.

A site examination revealed that a section of the Plant No. 4 measuring approximately 10,000 square metres, out of the total floor area of 15,000 square metres was gutted by the fire. The affected area involves the production floor, materials, finished and semi-finished products kept within the production floor as well as the administration office. There is substantial damage of goods, machinery and equipment that needs to be ascertained.

The production capacity is seriously affected. On a conservative estimate, the loss of production capacity is estimated more than 12,000 in tonnage. Hence, this will cause some disruption to certain operations of the Group for at least the next two or three months.

The Company is taking urgent steps to start rehabilitation of the affected building and other measures to try to recover the installed capacity of the plant.

The Company, with its insurer is working to ascertain the extent of the damage. An assessment on the financial impact caused by the fire is being carried out and the Company will make further announcement of the financial impact to the Group.


Luckily it sounds like there are no casualties.

But one important question seems to be: if the fire happened on April 4, 2014, why did the company only make an announcement on April 8, 2014?

Hopefully the administration is still in order, the administration office is mentioned as being damaged. In Singapore there was a China listed company where suddenly the whole administration went up in fire.

I wrote about China Stationary before.

China Stationery: too many red flags and what does "demised" mean?

I was alerted to Common Sense Investing's posting about China Stationery, one of the China listed companies on Bursa.

The posting referred to an article of Tong Kooi Ong in The Edge. The discrepancy in interest rate received versus the interest rate paid is worrisome. It has been observed in other China companies, in which reported cash was simply hugely overstated. China Stationery claims it owns more than RM 1 Billion cash, an unbelievable amount, that is, if it is for real (I have my doubts).

Common Sense Investing also wrote a previous article about the company, about a puzzling announcement that the CEO was "demised".

One website writes about the uncertainty:


"There is uncertainty surrounding Jiang Danping, the CEO of Chinese manufacturer China Stationery. In an 8 October filing to the Malaysian stock market to announce a boardroom change, China Stationery said that 54-year-old Jiang Danping had 'demised' on 1 October. A number of Malaysian publications have interpreted the wording of the stock market filing as meaning that Jiang Danping has died, although this is still being questioned on some financial forums. We'll provide an update as soon as we have more information."


But the update never came.

Here is one of the definitions of the word "demise" (I only give the first two):

1. death or decease.
2. termination of existence or operation: the demise of the empire. 

If the CEO really passed away (the first definition), one would expect a date of passing, plus on the company website an eulogy, but I can't find any.

If the CEO did not pass away (the second definition), then what was the reason for his termination? Surely shareholders are entitled to know that.

Also, the CEO owned shares in the holding company of CSL, rather important. And in most companies, the CEO is the most important executive, should he not be replaced?

The confusing situation around the CEO is puzzling, to say the least.

The following information I found in the last year report:

Many China companies were listed on the SGX during that time (and many failed), the fact that CSL's IPO was aborted in 2010 must be a large red flag.

The CFO has also resigned, in 2012.

The auditor is oddly enough from Singapore.

Too many red flags, and the trust has gone, the graph of the share price is not pretty:

In an interview with KiniBiz, the Chairman mentioned:

“The stock market moves up and down like the ebb and flow of the tides,” he explained when asked if he was concerned about the sorry performance of his company’s stock.

But I only see the share going down.