The company announced:
" .... Beijing Taojin Law Office had on 11 December 2017 tendered their resignation due to the difficulty faced by Beijing Taojin Law Office in conducting the due diligence in relation to the litigations investigation such as (i) the Courts had not been cooperative; and (ii) the number of court cases and the amounts claimed cannot be conclusively determined yet at this juncture.
In view of Beijing Taojin Law Office’s resignation, the subsidiaries of the Company, Jinjiang Zhenxing Shoes & Plastic Co. Ltd and Maxwell (Xiamen) Co. Ltd, have appointed Guangdong Kingbridge Law Firm in the People’s Republic of China, who are familiar with Guangdong and Fujian provinces area legal matters, to conduct special due diligence on the litigations investigations involving the subsidiary of MAXWELL.
Guangdong Kingbridge Law Firm will also conduct special due diligence on the cash deposits placed with the asset management company and Maxwell (Xiamen) Co. Ltd’s advertisement expenses.
The Company has requested Guangdong Kingbridge Law Firm to issue the special due diligence legal opinion report by middle of January 2018."
This is a case that is dragging on for more than two years. Shareholders should not expect to get the clarity that is very much needed suddenly in one month time.
Showing posts with label Maxwell. Show all posts
Showing posts with label Maxwell. Show all posts
Wednesday, 13 December 2017
Thursday, 30 November 2017
Maxwell: what does Mdm Li know?
I have written several times about Maxwell International, not in a very positive way, to put it mildly.
The company announced its quarterly results and again the revenue was exactly RM 0.00.
Optimists will say that it can't get much worse than that.
According to the balance sheet, the asset value per share is RM 1.00, mostly backed by cash.
The share price is lingering around RM 0.02.
So apparently not many people believe the balance sheet. I can't blame them for that.
Mdm Li, President and major shareholder, disposed of 20 Million shares at a price of RM 0.02 each.
Does she not believe the balance sheet either? If the cash is real, then surely the company can distribute it to the shareholders, who would hugely gain from it. And Mdm Li, as the controlling shareholder, can set that process in motion.
So why does she sell her shares, what does she know?
This is one of several China based companies listed on Bursa where the regulators should have acted in a decisive manner a long time ago.
The company announced its quarterly results and again the revenue was exactly RM 0.00.
Optimists will say that it can't get much worse than that.
According to the balance sheet, the asset value per share is RM 1.00, mostly backed by cash.
The share price is lingering around RM 0.02.
So apparently not many people believe the balance sheet. I can't blame them for that.
Mdm Li, President and major shareholder, disposed of 20 Million shares at a price of RM 0.02 each.
Does she not believe the balance sheet either? If the cash is real, then surely the company can distribute it to the shareholders, who would hugely gain from it. And Mdm Li, as the controlling shareholder, can set that process in motion.
So why does she sell her shares, what does she know?
This is one of several China based companies listed on Bursa where the regulators should have acted in a decisive manner a long time ago.
Thursday, 4 May 2017
Maxwell: More Mayhem (2)
Maxwell finally published its annual report, bit too late, but better late than never.
The start is promising:
"Moving Forward", interesting motto, but how to move forward when the revenue of the last three quarters has been exactly zero? In other words, the company has ceased all its business.
Regarding its financial position, the company remarks:
"The Group owned a cash and cash equivalents of RM360.673 million (2015: RM366.713 million) with zero debt as at the end of the financial year 2016. The Group has been in net cash position for the past 6 financial years since it was listed on the Main Market of Bursa Malaysia Securities Berhad back in 2011."
That sounds good, RM 361 Million cash, but the accounts are again heavily qualified by the auditors, and again in relation to its alleged cash (among many other items):
As disclosed in Note 10(b) to the financial statements, during the financial year, Jinjiang Zhenxing Shoes & Plastics Co. Ltd., a subsidiary company of the Company, placed RM337.21 million (RMB510.00 million) with an asset management company, Jinjiang Jin Chuang Private Capital Management Co. Ltd., (“Jin Chuang”) (晋江晋创民间资本管理有限公司). The management of Jinjiang Zhenxing Shoes & Plastics Co. Ltd., are unable to provide the relevant information and supporting documents to the Company in respect of the placement of the cash with the asset management company.
On 26 April 2016, the Company announced that Jinjiang Zhenxing Shoes & Plastics Co. Ltd., had on 6 April 2016 notified Jin Chuang to transfer all the funds. On 19 July 2016, the Company announced that the funds placed with Jin Chuang would be transferred into Jinjiang Zhenxing Shoes & Plastics Co. Ltd.’s bank account or a bank account nominated by Jinjiang Zhenxing Shoes & Plastics Co. Ltd., upon maturity.
We were unable to obtain sufficient appropriate audit evidence on the cash and cash equivalents as at the end of the financial year. Therefore, we could not determine the effect of adjustment, if any, on the financial statements of the Group.
It really seems that the company is dragging its feet in proving that the funds (RM 337 Million) really exist. One possibility (which is rather likely, in my humble opinion) is that the cash is simply not there, it probably never was. It would not exactly be the first time that this would happen to a company from China.
The company further stated:
On 14 April 2017, the Company announced that the Company, Jinjiang Zhenxing Shoes & Plastics Co. Ltd. and Maxwell (Xiamen) Co. Ltd. appointed a legal firm in PRC, namely Shanghai Zinger Law Office (上海致格律师事务所) to conduct a special due diligence on Advertising and Promotion Expenses (Note 30.1(1)) and funds placed with Jinjiang Jin Chuang Private Capital Management Co. Ltd. (晋江晋创民间资本管理有限公司) (Note 30.1(2)) and to issue a special legal opinion thereon. As at the date of this report, the lawyer has yet to issue any legal advice on this matter.
I wrote about this marketing issue 18 months ago, why wait so long to appoint a legal firm to conduct due diligence? What have the independent directors and/or the regulators done all this time? Has there been any activity and/or pressure from their side, or do they let the company continue in this rather shameful way?
Monday, 5 September 2016
Xingquan: heavy losses (2)
Bursa queried the company and the company replied.
Good that Bursa took some action and indeed through its questions highlighted relevant issues.
But I think this is not enough, the only correct action is to have an investigative audit on the operations of Xingquan, similar to what happened regarding the marketing issues of Maxwell.
Only that way we can get deep insights what really happened from an objective third party with experience in handling these kind of matters.
For more background on China based companies listed on Bursa, please read the following article at the website of The Edge:
China-based firms now going cheap, any takers?
One snippet:
"When Bursa started looking beyond the shores for potential IPO candidates, its move met with scepticism about attracting the rotten apples, instead, having seen the slew of corporate scandals in Singapore. Simply put, the scepticism seems to have proven that it is not that harsh after all."
Good that Bursa took some action and indeed through its questions highlighted relevant issues.
But I think this is not enough, the only correct action is to have an investigative audit on the operations of Xingquan, similar to what happened regarding the marketing issues of Maxwell.
Only that way we can get deep insights what really happened from an objective third party with experience in handling these kind of matters.
For more background on China based companies listed on Bursa, please read the following article at the website of The Edge:
China-based firms now going cheap, any takers?
One snippet:
"When Bursa started looking beyond the shores for potential IPO candidates, its move met with scepticism about attracting the rotten apples, instead, having seen the slew of corporate scandals in Singapore. Simply put, the scepticism seems to have proven that it is not that harsh after all."
Tuesday, 30 August 2016
Maxwell: zero revenue!
I have warned many times regarding this counter (and other China listed companies on Bursa), but zero revenue, even I am shocked, any hawker stall will do better than that.
Monday, 8 August 2016
Maxwell: More Mayhem
Maxwell published its annual report and The Star wrote an article about it:
Maxwell to delay capacity expansion on slowdown
"Li noted that the group had a huge cash reserve of RM366.7mil as at the end of last year.
This, she said, allowed the group to look out for potential business opportunities and to expand beyond the core sports shoes OEM (original equipment manufacturer) and ODM (original design manufacturer) businesses."
Sounds all pretty good, doesn't it?
Unless one realizes that Maxwell's accounts were qualified by the auditors, a "tiny" oversight that the article forgot to mention.
The auditors needed a full eight pages to detail what was wrong, one of the worst lists I have seen for Bursa listed companies.
One of the auditors concerns is exactly the "huge cash reserve" as mentioned by Madam Li:
But unfortunately, it is not all.
The loss over 2015 was much larger (31%) than previously stated, as announced here.
Seven reasons were given, with one rather remarkable one, the salary of Madam Li herself. Apparently it was not known on February 29, 2016 what amount she would receive over 2015?
The remuneration committee should give a proper explanation regarding this matter.
Another matter is that the company has now entered PN17 status.
And then there are still many other concerns about which I have written before.
Malaysian journalists should really put in their effort, do some thorough research before they write about a subject. The above linked article is very disappointing and would leave an uninformed reader with a completely wrong impression about the well being of Maxwell.
Maxwell to delay capacity expansion on slowdown
"Li noted that the group had a huge cash reserve of RM366.7mil as at the end of last year.
This, she said, allowed the group to look out for potential business opportunities and to expand beyond the core sports shoes OEM (original equipment manufacturer) and ODM (original design manufacturer) businesses."
Sounds all pretty good, doesn't it?
Unless one realizes that Maxwell's accounts were qualified by the auditors, a "tiny" oversight that the article forgot to mention.
The auditors needed a full eight pages to detail what was wrong, one of the worst lists I have seen for Bursa listed companies.
One of the auditors concerns is exactly the "huge cash reserve" as mentioned by Madam Li:
But unfortunately, it is not all.
The loss over 2015 was much larger (31%) than previously stated, as announced here.
Seven reasons were given, with one rather remarkable one, the salary of Madam Li herself. Apparently it was not known on February 29, 2016 what amount she would receive over 2015?
The remuneration committee should give a proper explanation regarding this matter.
Another matter is that the company has now entered PN17 status.
And then there are still many other concerns about which I have written before.
Malaysian journalists should really put in their effort, do some thorough research before they write about a subject. The above linked article is very disappointing and would leave an uninformed reader with a completely wrong impression about the well being of Maxwell.
Tuesday, 19 July 2016
Maxwells Mysterious Marketing (4)
I wrote before (here, here and here) about Maxwell's puzzling decision to spend a huge amount of money on billboards with zero impact, for instance:
The company increased its marketing spending by a factor 39 (!) compared to the preceding year, but revenue was down 38%, while gross margin went from 24% to a pathetic 6%.
It all doesn't make any sense whatsoever.
It would be good if the auditor would demand a list of the locations (GPS coordinates) of all 390 billboards and would check a few of them randomly if they exist and if they really feature Maxwell's advertisements.
It seems that the auditor has indeed tried to do that, Maxwell announced today:
.... that the Board has been presented with the Report dated 19 July 2016 by Ferrier Hodgson MH Sdn Bhd (“FHMH”).
Some snippets:
A search on the Six Advertising Contractors (similar to the companies searches made in the Companies Commission of Malaysia) was carried out and it was revealed that two (2) out of the Six Advertising Contractors were not in existence whilst one (1) had already ceased operations.
Numerous requests were made to the MIHB Group’s management for assistance to arrange for meetings with the said Six Advertising Contractors. MIHB Group’s management had represented to FHMH that since the last 10% of the contract sum has not been paid to the Six Advertising Contractors, the relationship between the Six Advertising Contractors and the MIHB Group has gone sour. It was unlikely that the Six Advertising Contractors would be agreeable to a meeting with FHMH.
According to the contracts with the Six Advertising Contractors, 390 billboards were to be erected in cities across the PRC for a one year period from 1 March 2015 to 29 February 2016.
2. Since FHMH's appointment on 21 December 2015, we have not been able to visit any of these 390 sites as the billboards have been dismantled in October 2015 for non-payment of the remaining 10% of the consideration.
The management’s reason for not paying the remaining 10% was that the advertising activities were not positively contributing to the sales of MXCL, notwithstanding the non-payment is a breach of MXCL's contractual obligations.
On 27 January 2016, TSS by way of emails forwarded 53 JPEG files which purportedly show images of billboards of the relevant products being advertised by city only. There is no reference to any streets or buildings numbers or exact locations of same.
5. We had further conducted examination on the JPEG files particularly with respect to the properties and details of each of the JPEG files which suggests that the JPEG files have been created under Adobe Photoshop program.
What a mess!
For those who are counting on some form of justice to be done in China for the Malaysian shareholders of Maxwell: good luck with that.
The share price since it's IPO:
The company increased its marketing spending by a factor 39 (!) compared to the preceding year, but revenue was down 38%, while gross margin went from 24% to a pathetic 6%.
It all doesn't make any sense whatsoever.
It would be good if the auditor would demand a list of the locations (GPS coordinates) of all 390 billboards and would check a few of them randomly if they exist and if they really feature Maxwell's advertisements.
It seems that the auditor has indeed tried to do that, Maxwell announced today:
.... that the Board has been presented with the Report dated 19 July 2016 by Ferrier Hodgson MH Sdn Bhd (“FHMH”).
Some snippets:
A search on the Six Advertising Contractors (similar to the companies searches made in the Companies Commission of Malaysia) was carried out and it was revealed that two (2) out of the Six Advertising Contractors were not in existence whilst one (1) had already ceased operations.
Numerous requests were made to the MIHB Group’s management for assistance to arrange for meetings with the said Six Advertising Contractors. MIHB Group’s management had represented to FHMH that since the last 10% of the contract sum has not been paid to the Six Advertising Contractors, the relationship between the Six Advertising Contractors and the MIHB Group has gone sour. It was unlikely that the Six Advertising Contractors would be agreeable to a meeting with FHMH.
According to the contracts with the Six Advertising Contractors, 390 billboards were to be erected in cities across the PRC for a one year period from 1 March 2015 to 29 February 2016.
2. Since FHMH's appointment on 21 December 2015, we have not been able to visit any of these 390 sites as the billboards have been dismantled in October 2015 for non-payment of the remaining 10% of the consideration.
The management’s reason for not paying the remaining 10% was that the advertising activities were not positively contributing to the sales of MXCL, notwithstanding the non-payment is a breach of MXCL's contractual obligations.
On 27 January 2016, TSS by way of emails forwarded 53 JPEG files which purportedly show images of billboards of the relevant products being advertised by city only. There is no reference to any streets or buildings numbers or exact locations of same.
5. We had further conducted examination on the JPEG files particularly with respect to the properties and details of each of the JPEG files which suggests that the JPEG files have been created under Adobe Photoshop program.
What a mess!
For those who are counting on some form of justice to be done in China for the Malaysian shareholders of Maxwell: good luck with that.
The share price since it's IPO:
Thursday, 18 February 2016
Maxwells Mysterious Marketing (3)
One problem with China listed companies on Bursa is that the cash balances of many of them seem to be remarkably high. There is a suspicion (at least with me, but probably with most investors, since these companies trade at very low valuations) that the cash might simply not exist. There are precedents for this, both with China listed companies on the SGX and on the Nasdaq.
Maxwell is one of the first of these companies where the suspicion has progressed to the next stage, due to this announcement:
1. As stated in the third quarterly results ended 30 September 2015, the total amount of cash/cash equivalent were RM257 million. The third quarterly results was announced on 30 November 2015.
2. The total amount of cash placed with the asset management company, namely Jinjiang Jin Chuang Private Capital Management Co Ltd [晋江晋创民间资本管�?�有��?公�?� ] (“Jin Chuang”) as at 30 September 2015 was RM103.7 million
3. Messrs Baker Tilly Monteiro Heng’s (“BTMH”), on preliminary assessment with regards to the cash placed with Jin Chuang and pending the commencement of the annual audit, have yet to obtain any documentary evidence for such placements of funds and sufficient information on the nature of business of Jin Chuang. In addition, BTMH was concerned with the authenticity of these deposits placed with Jin Chuang and the recoverability of the deposits.
The above implies a flag that is as red as red can be.
The announcement continues:
4. On its preliminary assessment, BTMH noted that based on the announcement of court cases on the website of Fujian Quanzhou Intermediate People’s Court, a company named “Zhenxing” (A subsidiary of Maxwell) is being sued by a company, Fujian Quanzhou Li Cheng Qu Chuang Xing Micro Credit Co Ltd (��?建泉州市鲤城区创信��?��?贷款有��?公�?�) due to a dispute on the loan agreement. The Defendants in the case involve Zhenxing as the borrower, Madam Li Kwai Chun (the Executive Director of Maxwell) and two others as the guarantors.
[Source: http://www.qzcourt.gov.cn/news/ktgg/showinfo.aspx?id=316]
The Management of China Subsidiary claimed that they did not received any documents relating to the litigation before.
Madam Li Kwai Chun represented to the Board that the said loan dispute was in fact involving herself as a personal guarantor and it should not involve the Zhenxing. Therefore, she will seek the necessary legal advice on the matter. Further announcement will be made upon the legal council revert with the opinion.
This sounds puzzling as well. Madam Li seems to be a serial guarantor, a previous posting regarding this matter can be found here.
In another Bursa announcement, related to the very high marketing expenses, the company announced:
1. Maxwell (Xiamen) Co. Ltd, the intermediate subsidiary of Maxwell International Holdings Berhad, has executed six contracts with six marketing agents in PRC for promoting and setting-up 390 marketing billboards/LED signboards for a period of one year. The total amount has paid RMB92.4 million in year 2015.
Why spend such a large amount so suddenly through only one marketing channel with no apparent result for the revenue? Why not try a few billboards first, and measure their impact?
It would be good if the auditor would demand a list of the locations (GPS coordinates) of all 390 billboards and would check a few of them randomly if they exist and if they really feature Maxwell's advertisements.
Maxwell is one of the first of these companies where the suspicion has progressed to the next stage, due to this announcement:
1. As stated in the third quarterly results ended 30 September 2015, the total amount of cash/cash equivalent were RM257 million. The third quarterly results was announced on 30 November 2015.
2. The total amount of cash placed with the asset management company, namely Jinjiang Jin Chuang Private Capital Management Co Ltd [晋江晋创民间资本管�?�有��?公�?� ] (“Jin Chuang”) as at 30 September 2015 was RM103.7 million
3. Messrs Baker Tilly Monteiro Heng’s (“BTMH”), on preliminary assessment with regards to the cash placed with Jin Chuang and pending the commencement of the annual audit, have yet to obtain any documentary evidence for such placements of funds and sufficient information on the nature of business of Jin Chuang. In addition, BTMH was concerned with the authenticity of these deposits placed with Jin Chuang and the recoverability of the deposits.
The above implies a flag that is as red as red can be.
The announcement continues:
4. On its preliminary assessment, BTMH noted that based on the announcement of court cases on the website of Fujian Quanzhou Intermediate People’s Court, a company named “Zhenxing” (A subsidiary of Maxwell) is being sued by a company, Fujian Quanzhou Li Cheng Qu Chuang Xing Micro Credit Co Ltd (��?建泉州市鲤城区创信��?��?贷款有��?公�?�) due to a dispute on the loan agreement. The Defendants in the case involve Zhenxing as the borrower, Madam Li Kwai Chun (the Executive Director of Maxwell) and two others as the guarantors.
[Source: http://www.qzcourt.gov.cn/news/ktgg/showinfo.aspx?id=316]
The Management of China Subsidiary claimed that they did not received any documents relating to the litigation before.
Madam Li Kwai Chun represented to the Board that the said loan dispute was in fact involving herself as a personal guarantor and it should not involve the Zhenxing. Therefore, she will seek the necessary legal advice on the matter. Further announcement will be made upon the legal council revert with the opinion.
This sounds puzzling as well. Madam Li seems to be a serial guarantor, a previous posting regarding this matter can be found here.
In another Bursa announcement, related to the very high marketing expenses, the company announced:
1. Maxwell (Xiamen) Co. Ltd, the intermediate subsidiary of Maxwell International Holdings Berhad, has executed six contracts with six marketing agents in PRC for promoting and setting-up 390 marketing billboards/LED signboards for a period of one year. The total amount has paid RMB92.4 million in year 2015.
Why spend such a large amount so suddenly through only one marketing channel with no apparent result for the revenue? Why not try a few billboards first, and measure their impact?
It would be good if the auditor would demand a list of the locations (GPS coordinates) of all 390 billboards and would check a few of them randomly if they exist and if they really feature Maxwell's advertisements.
Friday, 12 February 2016
Maxwells Mysterious Marketing (2)
I wrote before about this matter.
On February 5, 2016 the company announced the resignation of an independent non-executive director, with the following comment (emphasis mine):
Whether there are any matters that need to be brought to the attention of shareholders:
There is concern on the advertisement expenditure which was disclosed in the Third Quarter 2015 results which management has yet to provide satisfactory justification.
Kudos to Mr. Lee, he could have simply resigned without any comment, but did chose to take a stand, something not often seen in Malaysia. The resignation itself and the above comment are both very clear red flags.
On February 11, 2016 the company announced (emphasis mine):
Further to the Company’s announcement to Bursa dated 30 November 2015 which reported significant net losses for the amount of RM46.253 million for the third quarter ended 30 September 2015 as compared to the net profit reported in the preceding year corresponding quarter of RM12.180 million was mainly due to the advertisement expenses incurred in the retail business, the disclosure made in the announcement in relation to the resignation by Mr Lee Chong Hoe which stated that there was concern over the advertisement expenditure that was disclosed in the third quarter 2015 results which management has yet to provide satisfactory justification on 10 February 2016, the Board wishes to announce that the Company, upon the recommendation of the Audit Committee had on 18 December 2015 engaged Messrs. Ferrier Hodgson MH Sdn Bhd (“FHMH”) to commission an extended scope of audit on the advertisement expenditure in addition to the normal audit.
FHMH is finalising their report with respect to this particular issue and the Company shall make further announcements on the findings in due course.
Further to this, Messrs. Baker Tilly Monteiro Heng, the Statutory Auditors had on 5 February 2016 also highlighted additional issues relating to the annual audit for the year ended 2015 which require further clarification. They have also recommended that an investigative audit to be carried out on these issues. The Independent Directors had on 5 February 2016 and 11 February 2016 also recommended to the management of the Company that an investigative audit to be carried out on the issues raised by Messrs. Baker Tilly Monteiro Heng and are now seeking further clarification and response from the Executive Director of the Company in China.
On February 5, 2016 the company announced the resignation of an independent non-executive director, with the following comment (emphasis mine):
Whether there are any matters that need to be brought to the attention of shareholders:
There is concern on the advertisement expenditure which was disclosed in the Third Quarter 2015 results which management has yet to provide satisfactory justification.
Kudos to Mr. Lee, he could have simply resigned without any comment, but did chose to take a stand, something not often seen in Malaysia. The resignation itself and the above comment are both very clear red flags.
On February 11, 2016 the company announced (emphasis mine):
Further to the Company’s announcement to Bursa dated 30 November 2015 which reported significant net losses for the amount of RM46.253 million for the third quarter ended 30 September 2015 as compared to the net profit reported in the preceding year corresponding quarter of RM12.180 million was mainly due to the advertisement expenses incurred in the retail business, the disclosure made in the announcement in relation to the resignation by Mr Lee Chong Hoe which stated that there was concern over the advertisement expenditure that was disclosed in the third quarter 2015 results which management has yet to provide satisfactory justification on 10 February 2016, the Board wishes to announce that the Company, upon the recommendation of the Audit Committee had on 18 December 2015 engaged Messrs. Ferrier Hodgson MH Sdn Bhd (“FHMH”) to commission an extended scope of audit on the advertisement expenditure in addition to the normal audit.
FHMH is finalising their report with respect to this particular issue and the Company shall make further announcements on the findings in due course.
Further to this, Messrs. Baker Tilly Monteiro Heng, the Statutory Auditors had on 5 February 2016 also highlighted additional issues relating to the annual audit for the year ended 2015 which require further clarification. They have also recommended that an investigative audit to be carried out on these issues. The Independent Directors had on 5 February 2016 and 11 February 2016 also recommended to the management of the Company that an investigative audit to be carried out on the issues raised by Messrs. Baker Tilly Monteiro Heng and are now seeking further clarification and response from the Executive Director of the Company in China.
Monday, 30 November 2015
Maxwells Mysterious Marketing
Maxwell International announced their quarterly results, they were simply horrible, a loss of RM 46 Million.
In the notes we can find the following:
When a company increases its advertisement spending by such a large margin, we expect positive results in sales.
But diving in the numbers, it appears that is not exactly what happened:
The company increased its marketing spending by a factor 39 (!) compared to the preceding year, but revenue was down 38%, while gross margin went from 24% to a pathetic 6%.
It all doesn't make any sense whatsoever.
I wrote before about Maxwell, about its puzzling transaction in which it bought a company which it gave back to the original owners two years later for free.
The share price:
In the notes we can find the following:
When a company increases its advertisement spending by such a large margin, we expect positive results in sales.
But diving in the numbers, it appears that is not exactly what happened:
The company increased its marketing spending by a factor 39 (!) compared to the preceding year, but revenue was down 38%, while gross margin went from 24% to a pathetic 6%.
It all doesn't make any sense whatsoever.
I wrote before about Maxwell, about its puzzling transaction in which it bought a company which it gave back to the original owners two years later for free.
The share price:
Tuesday, 28 April 2015
Maxwell's puzzling acquisition (2)
I wrote before about Maxwell's puzzling acquisition of Lim Ying Ying Ltd.
The story received a new twist today, the company announced that the SPA has been terminated.
And now the good news (at least, for the vendors), they not only get their company back, they can retain the sum of HKD11,700,000.00 previously paid by Maxwell (HK). A case of having your cake and eating it.
No reason is given which is strange, to say the least.
The company states that it "is not expected to have any material effect on the net assets and earnings per share and gearing of the Group for the financial year ending 31 December 2015."
That is possible, several inter-company balances are written off, so may be they all cancel each other out. But I am sure that Maxwell's shareholders would like to see some more detail there.
The share price has performed very badly since its listing.
The story received a new twist today, the company announced that the SPA has been terminated.
And now the good news (at least, for the vendors), they not only get their company back, they can retain the sum of HKD11,700,000.00 previously paid by Maxwell (HK). A case of having your cake and eating it.
No reason is given which is strange, to say the least.
The company states that it "is not expected to have any material effect on the net assets and earnings per share and gearing of the Group for the financial year ending 31 December 2015."
That is possible, several inter-company balances are written off, so may be they all cancel each other out. But I am sure that Maxwell's shareholders would like to see some more detail there.
The share price has performed very badly since its listing.
Saturday, 19 January 2013
China listed companies on Bursa, does it make sense?
In The Edge of January 14, 2013 an article by Kathy Fong about China listed companies on the Bursa Malaysia. Their fundamentals all look good, but despite that, they are trading at unbelievable cheap valuations.
Net Cash(m) Net Cash p/s Share price
China Ouhua 125 19 12
China Stationery 864 70 77
XiDeLang(in RMB) 304 42 21
XingQuan 326 106 79
HB Global 131 28 32
K-Star 79 30 16
Maxwell Intl 221 55 31
Multi Sports 223 43 31
The above based on the numbers from The Edge:
Would it make sense to buy a basket of these stocks? To me it doesn't, if for every company that goes to near zero another company is taken private at say 30% premium, the returns just don't add up.
Investing is for a large part based on trust, trust that the balance sheet and profit & loss accounts are correct, the trust is obviously not here.
Bursa and SC have clearly improved the quality of recent Malaysian IPO's. I also have to admit that not yet one China listed company in Malaysia has actually gone bust or had any financial scandal. I am pretty sure that will happen, but things can take a lot of time to pan out.
To me, things must make sense, founders list their companies because:
Given that, which founder would list its company, knowing the share price will most likely go south after the IPO?
And for SC and BM, enforcement in Malaysia has already been proven to be so difficult, why make it even more difficult by listing Chinese companies?
Eight very depressing share charts of the Chinese listed companies in Malaysia:
Net Cash(m) Net Cash p/s Share price
China Ouhua 125 19 12
China Stationery 864 70 77
XiDeLang(in RMB) 304 42 21
XingQuan 326 106 79
HB Global 131 28 32
K-Star 79 30 16
Maxwell Intl 221 55 31
Multi Sports 223 43 31
The above based on the numbers from The Edge:
- Net Cash: in millions RM, Cash minus Borrowings
- Net Cash p/s: net cash per share in Sen
- Share price: in Sen
Would it make sense to buy a basket of these stocks? To me it doesn't, if for every company that goes to near zero another company is taken private at say 30% premium, the returns just don't add up.
Investing is for a large part based on trust, trust that the balance sheet and profit & loss accounts are correct, the trust is obviously not here.
Bursa and SC have clearly improved the quality of recent Malaysian IPO's. I also have to admit that not yet one China listed company in Malaysia has actually gone bust or had any financial scandal. I am pretty sure that will happen, but things can take a lot of time to pan out.
To me, things must make sense, founders list their companies because:
- They are good, reliable companies
- The companies can use the new money injected to grow further
- The founders want to take some money of the table (understandable, since often a huge percentage of their wealth is tied to this one company)
- It offers a liquid market to their employees who might own shares or options in the company
- Investors pick up the IPO shares since there is some value at the IPO price, taking into consideration the risk involved (companies that have just IPO-ed are notoriously more risky than companies that have listed 2 or more years ago).
Given that, which founder would list its company, knowing the share price will most likely go south after the IPO?
And for SC and BM, enforcement in Malaysia has already been proven to be so difficult, why make it even more difficult by listing Chinese companies?
Eight very depressing share charts of the Chinese listed companies in Malaysia:
Saturday, 8 December 2012
Maxwell's puzzling acquisition
Maxwell International Holdings Bhd. is one of the China-listed companies on the Bursa Malaysia. Although it's financial results are very good, potential investors are apparently not impressed, the share price is hugely down since its IPO:
The company is on track to make about 19ct per share net profit, in other words the share is trading at a PE of 1.7 only. Its balance sheet is rather asset light and it has RM 212 million cash.
If these numbers are indeed to be believed, then it would be very easy to unlock the value to a more realistic price:
All the above are actually happening, but in tiny amounts. Puzzling, and not exactly giving (much needed) credibility.
"Where is Ze Moola" wrote about Maxwell and noticed the very low interest it received on its cash. This is one of the known red flags with Chinese companies listed on the Nasdaq.
On December 4, 2012 Maxwell announced to acquire 92.5% of the shares of Lim Ying Ying Ltd (LYY) for HKD 15.6 million.
The main activities of LYY are rather ..... virtual:
The current shareholding structure of LYY:
Maxwell plans to buy the shares of the small shareholders, but that might be a tall order (from a legal point of view) with three of the six shareholders being deceased:
Bursa Malaysia asked for some much needed clarification, and the company provided the following data:
These numbers do not look very impressive, to say the least, the company is making losses in each of its last three years.
Also, the data of December 31, 2011 is almost exactly one year old, Maxwell should have provided some numbers over 2012.
And lastly, LYY owns half of the beneficial interest of the "Hang Fung Property", that property will be excluded from the deal, but most likely this property does generate income, are those numbers excluded from the profit numbers? I doubt it, since it is only explicitly excluded from the Net Assets.
To end with, the following, rather puzzling, statement:
"Madam Li Kwai Chun’s role in the Proposed Acquisition is to guarantee the full completion and observance of all the terms and conditions of the Sale and Purchase of Shares Agreement by the Purchaser. Accordingly, she is not deemed to be interested in the Proposed Acquisition."
If she guarantees this all (for any financial consideration?), then it sounds to me she is interested in the acquisition.
The company is on track to make about 19ct per share net profit, in other words the share is trading at a PE of 1.7 only. Its balance sheet is rather asset light and it has RM 212 million cash.
If these numbers are indeed to be believed, then it would be very easy to unlock the value to a more realistic price:
- By issuing a decent dividend, if it would pay 10ct per share that would translate to a whopping 31% dividend yield
- By embarking on an aggressive share-buyback program
- By the major shareholders buying large amounts of shares
All the above are actually happening, but in tiny amounts. Puzzling, and not exactly giving (much needed) credibility.
"Where is Ze Moola" wrote about Maxwell and noticed the very low interest it received on its cash. This is one of the known red flags with Chinese companies listed on the Nasdaq.
On December 4, 2012 Maxwell announced to acquire 92.5% of the shares of Lim Ying Ying Ltd (LYY) for HKD 15.6 million.
The main activities of LYY are rather ..... virtual:
The current shareholding structure of LYY:
Maxwell plans to buy the shares of the small shareholders, but that might be a tall order (from a legal point of view) with three of the six shareholders being deceased:
Bursa Malaysia asked for some much needed clarification, and the company provided the following data:
These numbers do not look very impressive, to say the least, the company is making losses in each of its last three years.
Also, the data of December 31, 2011 is almost exactly one year old, Maxwell should have provided some numbers over 2012.
And lastly, LYY owns half of the beneficial interest of the "Hang Fung Property", that property will be excluded from the deal, but most likely this property does generate income, are those numbers excluded from the profit numbers? I doubt it, since it is only explicitly excluded from the Net Assets.
To end with, the following, rather puzzling, statement:
"Madam Li Kwai Chun’s role in the Proposed Acquisition is to guarantee the full completion and observance of all the terms and conditions of the Sale and Purchase of Shares Agreement by the Purchaser. Accordingly, she is not deemed to be interested in the Proposed Acquisition."
If she guarantees this all (for any financial consideration?), then it sounds to me she is interested in the acquisition.
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