China.com.fraud.profit.SFC.does.f.all

Total shenanigans in the Hong Kong stock casino. Another brilliant way to screw shareholders in Hong Kong: issue deceptive notices, withhold information, watch share price drop, personally buy back shares, issue huge dividends -> profit.

A cautionary tale for investing in IPOs.

Good piece by Shirley Yam (SCMP 28 Feb 2009)..

Want Want China Holdings has just paid its controlling shareholder Tsai Eng-meng HK$24.2 million for some old office tables, chairs and cabinets that the rice-cracker producer is already using. The reason given is to "fulfil the need of the group's operation".

Or you can ask for a higher pay. Property developer Chinese Estates (SEHK: 0127) Holding recently announced that it would increase the salary of majority shareholder and chairman Joseph Lau Luen-hung from HK$3.6 million to HK$18 million on his request. No reason was given.

But this is just peanuts. To get serious money, the distribution of a special dividend is the way to go. A total of HK$4 billion has been handed out since the Lehman Brothers collapse, excluding post-asset sale payouts.

The latest to do so is China.com, an internet firm whose non-executive chairman Raymond Chien Kuo-fung fills the same role at MTR Corp. It raised HK$1.2 billion in 2000 which is largely unused.

In many ways, a special dividend payout is fairer tool for major shareholders to extract cash, compared to twisted connected transactions. At least shareholders have equal rights. Yet in the case of China.com, that may not be so.

Let's wind the clock back to mid-December. The internet firm told the market its board would meet to discuss the payment of dividends, if any. A week later, another announcement proposed to reduce its paid-up capital for each existing share from HK$4 to 10 HK cents.

That fuelled hope of a special dividend payout. The reason was simple.

Under accounting principles, a reduction of share capital would result in a surplus of HK$427 million being transferred into the company's distributable reserve account.

Having a large pool of cash sitting in the bank is not a sufficient condition for paying a dividend. One needs a matchable distributable reserve to do so. In short, the move made it legally possible for China.com to distribute a special dividend.

The company said it had no immediate plan to distribute the additional surplus but added that the reduction would "give more flexibility in distributing its assets to its shareholders".

The company's share price rose from below HK$3.50 to above HK$5.

Another announcement on Christmas Eve that the board had resolved not to declare any dividend failed to cool expectations.

An about-turn happened on February 4. After suspending its shares for two days, the company announced a profit warning. Recording a meagre profit of HK$500,000 in the third quarter of 2008, it warned of a HK$53 million impairment loss for its investments and therefore a substantial net loss in the following quarter.

Any hope of a special dividend had largely evaporated by then. The share price dived to below HK$4.20.

Those who sold would regret it the following Monday. On February 9, they realised that the majority shareholder, CDC Corp which is controlled by founder and chief executive Peter Yip, had brought 1 per cent of China.com at HK$4.247 on February 5, the day after the profit warning.

If they did suspect any good news was coming, it would be too late to buy. That evening, China.com announced a special dividend of HK$3.66 per share on the ground that it "has a strong balance sheet and it is appropriate to return some cash to shareholders that have been supportive".

A total of HK$392 million in cash was handed out - HK$309 million to CDC, HK$27.8 million to Mr Yip personally and HK$3.48 million to the management. The post-warning sale purchase brought CDC an additional dividend entitlement of HK$1.32 million, not to mention the 62 per cent paper gain in the share price.

The episode raised many questions. Was the board aware of any plan to distribute a special dividend when they made the profit warning? If yes, why didn't it tell investors at the same time?

If not, why did the board, which only 47 days ago had ruled against a special dividend payment, revise its decision after knowing the company had to make significant impairment on its investments and more may come in the future? (A quick calculation shows that the special dividend would leave the company with less than HK$50 million net cash.)

Or had a special dividend always been planned and the management was only waiting for "the right timing"? Did the major shareholder know the company would soon pay a special dividend when it raised its stake in China.com a day after the profit warning?

Perhaps, Mr Chien, a celebrity-grade director who has pledged to uphold corporate governance standards, can enlighten us on this. Or the Securities and Futures Commission could get us the answers. 

British actor swore at airline staff, court told

Curse at the HK airport or subway, go to jail.

Joyce Man
Feb 26, 2009     

A Briton who played bit roles in films starring Jackie Chan and Shu Qi was charged with using abusive language at a Cathay Pacific (SEHK: 0293) airport counter in December.

Leon Head, 59, was said to have argued for unknown reasons with a member of staff, identified only as Ms Cheung, as he was checking in at Chek Lap Kok airport.

During the row, he said "f***" several times, and Ms Cheung called police. He was charged with one count of using abusive language.

Court documents did not indicate Head's nationality, but a member of staff at casting and modelling agency Crews Model, whose website lists Head's profile, said he was British. He added that Head had left Hong Kong.

Head was scheduled to enter his plea at Tsuen Wan Court yesterday afternoon before special magistrate Chu Chung-keung but did not show up because he could not be reached to be served with a summons. His case has been adjourned to April 8 for mention at the same court.

Under the Airport Authority Bylaw, no one may use threatening, abusive, obscene or offensive language, or behave in a riotous, disorderly, indecent or offensive manner. The fine for such offences is HK$2,000. The law covers the airport area and all designated roads within it.

Swearing is also prohibited on the MTR, which is governed by two sets of Mass Transit Railway bylaws.

Greed blinds christies

“Christie’s regrets that the State Administration of Cultural Heritage has taken the unusual step of announcing reprisal measures as a consequence of Christie’s legal auction of the fountainheads in Paris this week,”

"Unusual" but surely not unexpected.  A shortsighted scramble for silver coins in a snake's cage. An unbelievable demonstration of poor judgement which can only be the consequence of greed.

“We continue to believe that sale by public auction offers the best opportunity for items to be repatriated as a result of worldwide exposure,” the Christie’s statement said.

A Chaoda (0682) drop

Rape accused cop on perversion rap

HK police rapes women in the sanctuary of the police station.

Police state

The UK authorities no doubt are running through scenarios of unrest due to the recession. Expect this to be used an as excuse to escalate restrictions on civil liberties (Patriot Law?s).

http://www.guardian.co.uk/uk/2009/feb/23/police-civil-unrest-recession

Police are preparing for a "summer of rage" as victims of the economic downturn take to the streets to demonstrate against financial institutions, the Guardian has learned.

Britain's most senior police officer with responsibility for public order raised the spectre of a return of the riots of the 1980s, with people who have lost their jobs, homes or savings becoming "footsoldiers" in a wave of potentially violent mass protests.

Hong Kong - "world city" status?

The police in Hong Kong can and do stop and search anyone they think is acting suspiciously on the streets (if they don't find anything, they can conveniently plant it during the search). It goes without saying, that our darker skinned brethan are suspicous looking - yes, Obama walking through Central will be stopped, ID'ed and have his pockets, bags and armpits thoroughly searched by some undertrained undereducated police assistant.

"any individual who act in a suspicious manner are obliged to produce proof of his identity for inspection by police officers in any street or other public place, or on board any vessel, or in any conveyance, at any hour of the day or night. The officer is the sole determinant of whether an individual is behaving in a "suspicious manner".^{[citation needed]}

A police officer only has to articulate an extremely low level of burden of proof that the behaviour of person being stopped was "reasonably suspicious". Also to note is that:

“	the only things police are authorised to do by s54 PFO is to seek production of proof of identity, detain for a reasonable period while police records enquiries are being made, and search only as appropriate. Quite limited search powers only may be exercised under S54 PFO.	”
— "Criminal Procedure in Hong Kong"[1]

However, PFO is only an internal guideline within the force, not a formal legislation. Residents are required to carry a Hong Kong Identity Card and visitors need to carry their passports at all times in the territory. Failure to do so is a criminal offence.^{[citation needed]"}

http://www.hkclic.org/en/topics/policeAndCrime/police_powers/index.shtml

Infamous Dog strikes again

Dog made his appearance yet again. This time impulsively darting in front of an oncoming car causing yet another accident.

Stay tuned for another episode of Dog and his adventures on the Hong Kong roads (until the civic minded Bowen Road poisoner catches up to him).

Driver busted after crash

Monday, February 23, 2009

Police yesterday arrested a 28-year-old man in Sai Kung for drink-driving after a breathalyzer test indicated his intoxication level was nearly three times the legal limit.

He was said to have crashed into road railings at Fui Yiu Ha Village on Hiram's Highway at 1am yesterday.

Police said the driver, surnamed Wong, was traveling along Hiram's Highway toward Kowloon when the right side of his car hit the railings.

He told police he was trying to avoid hitting a dog.

A 25-year-old woman passenger, surnamed Leung, complained of chest pain, and was admitted to Tseung Kwan O Hospital for treatment.

A breathalyzer test suggested the driver's level of alcohol was 62 micrograms per 100 milliliters of breath. The legal limit is 22 micrograms. STAFF REPORTER 

Chaoda (0682): forked tongues and deceit

Chaoda has announced a sale of 80m new shares at $5/share and at a 10% discount to market price. Mr Kwok HO is up to his usual modus operand - first reassure investors there will be no fund raising then surprise them with just that. 

SCMP 22nd Oct 2008:

"Chaoda Modern Agriculture (Holdings), the mainland's biggest vegetable grower, said it would spend between 2.5 billion yuan (HK$2.84 billion) and 2.8 billion yuan to add farmland during this financial year, after reporting 13 per cent growth in annual profit yesterday.

Chairman Kwok Ho said Chaoda would use internal resources to fund the expansion of 100,000 mu amid the global financial crisis. It currently has 494,800 mu of vegetable land, tea gardens and fruit orchards. One mu is one-fifteenth of a hectare.

'It's impossible to raise funds right now, so our plan is mapped out in accordance with our own ability,' Mr Kwok said.

The Fujian-based company had enough cash to redeem its convertible bonds, worth 1.37 billion yuan, due in May 2009, he said. At the end of June, Chaoda had cash and equivalents of 1.28 billion yuan, down from 1.67 billion yuan a year earlier.

'I am a very conservative man,' said Mr Kwok. 'We have adequate financial resources for the bonds redemption.'

Chief financial officer Andy Chan said the company's gearing was 30 per cent, and its strong net cash inflow would help fund the expansion."

20th Feb 2009: 

The Placing Price represents a discount of approximately 11% to the closing price of HK$5.62 per Share as quoted on the Stock Exchange on 19 February 2009 and a discount of approximately 8% to the volume-weighted average closing price of approximately HK$5.42 per Share for the last 10 trading days up to and including 19 February 2009. The 80,402,000 Placing Shares represent (a) approximately 3.15% of the existing issued share capital of the Company of 2,549,019,421 Shares at the date of this announcement and (b) about 3.06% of the issued share capital of the Company as enlarged after the Top-Up Subscription.

What is worrying is this raises $390m however, there is $1.6B worth of convertible bonds which may be redeemed on 8 May 2009 . This is in addition to their annual capex runrate of $2.5B. At the end of June 2008, Chaoda had $1.28B in cash and cash equivalents, they have an operating cashflow of ~$2B anually. It appears that the convertible bonds have been converted, Chaoda has issued shares to cover the shortfall and their cash position now is low.

In the meantime, in celebration of the HKex/SFC climb down on the black out period proceed to dump their shares ahead of this announcement and after the Dec 2008 financial end:

Kuang Qiao dumped 3,200,000 shares

Ip Chi Ming dumped 700,000 shares

And these are just the employees who HAD to declare their trades to the HKex.

Moody's got it right for a change. There may be more fund rasing to come...

Hong Kong-listed Chaoda Modern Agri (HKG:0682) ratings outlook cut to “negative” - Moody's
[Date:12-08-2008]     Source: XFN-ASIA 
Moody's Investors Service said it has downgraded the outlook on Chaoda Modern Agriculture (Holdings) Ltd's (HKG:0682) "Ba2" corporate family and foreign currency debt ratings to "negative" from "stable" on the company's "limited" financial flexibility in terms of servicing upcoming debt obligations.

"The company's entire outstanding debt will be maturing as two bullet repayments totaling 2.9 bln yuan over the next 15 months," Moody's analyst Ken Chan said.

"Refinancing alternatives from the banking and international capital markets are currently limited, so it has to rely solely on accumulating operating cash flow of around 800 - 900 mln yuan per quarter for debt servicing," he said.

Despite such major debt-servicing requirements, Chaoda maintains an aggressive capex plan of 2.5 - 2.8 bln yuan per annum and this is further pressuring its cash flow, Chan added.

(1 usd = 7.8 hkd, 6.85 yuan)

Using openCV 1.0 with python 2.5 in Windows XP

http://www.instructables.com/id/S3P1LVLF03WEX8C/

China business model: get bank loan, buy stock

Stocks rally linked to record bank loans
(1 hr ago)
Mainland companies may be using record bank lending to invest in stocks, fueling a rally that has made the benchmark Shanghai Composite Index the world's best performer this year, according to Shenyin & Wanguo Securities.

As much as 660 billion yuan (HK$747.91 billion) may have been converted by companies into term deposits or used to buy equities, Li Huiyong, Shanghai-based analyst at Shenyin Wanguo, said, citing money supply figures.

Mainland banks lent a record 1.62 trillion yuan last month as part of a government drive to stimulate the world's third-largest economy, while M2, the broadest measure of money supply, climbed 18.8 percent from a year earlier. The Shanghai Composite has surged 29 percent since the start of the year, compared with a 10 percent decline in the MSCI World Index.

Part of the liquidity flowing into the stock market could be from companies using borrowed funds to invest in the stock market instead of working requirements, said Li. The brokerage was voted the best in the country for research by the national pension fund, China's largest investor.

The jump in new loans was twice the record set a year earlier. The biggest proportion of new lending, 39 percent, was through discounted bills, which supply working capital. Medium and long-term corporate loans accounted for 32 percent.

Companies are reluctant to increase production amid a slowdown in demand and some may have diverted funds meant for expansion into the stock market to chase higher returns, said Li.

BLOOMBERG    

HK Exchange of wealth

from the majority to the minority. Where each and every proposal for fairer regulation get voted down by the pigs of special interests. One notable ironic and hubristic event was David Li the baston of insider trading in Dow Jones calling the proposed regulation for a longer insider trading blackout period "stupid".  A better use of stupid would be a group of 200 companies appointing a person who cannot STFU while sitting in an aircraft as a spokesman for their group.

Now the closing auction period opened for manipulation.. (via David Webb).

"If the rule is approved, HKEx will become the only market we know which has no price caps in the continuous trading session but has price caps in its closing auction. Why is it, do you think, that no other market has chosen this? Perhaps because no other market has a Government which is so beholden to special interests, such as the small brokers who hold 13 seats in the Chief Executive's election committee, including 1 seat in the Legislative Council. The Government in turn appoints 7 of the 13 directors of HKEx, currently including 3 members of Hong Kong's cabinet, the Executive Council."

Turbaconucken

A chicken inside a duck inside a turkey, all wrapped in bacon.

thisiswhyyourefat.com

Meat ship.. Made from bacon, sausages, pastry, franks and pork mince.

Coming to a bourse near you: HKT the sequel

- No doubt about who controls HK. Organized crime isn't just with the triads.

 MONEY MATTERS
Shirley Yam
Feb 07, 2009     


So, what's going to happen with PCCW (SEHK: 0008)? What if I tell you Richard Li Tzar-kai will split it into two entities - a telecommunications company and a non-telecommunications one - and list the former in the future? You will say I must be joking. Isn't the privatisation in doubt now with regulators investigating allegations of share-rigging?

How can regulators allow a relisting given his corporate governance record? Who will entrust his or her savings with a guy who has wiped out over 90 per cent of the value of a once blue-chip stock and pocketed billions himself?

These are all fair questions. But having talked to various bankers, lawyers and private equity guys in the past few weeks, I can tell you I am not kidding.

Yes, there is an investigation, and I do believe the authorities shall conduct it in an earnest effort to protect not just PCCW's shareholders but also the integrity of Hong Kong's regulatory regime.

Yet, that will mean no more than a few months' delay in the court decision on the privatisation plan as the regulator asks for time to investigate.

I just don't see how the court will overturn a decision that was endorsed by the shareholders with a 1,400-to-800 majority - unless the investigation proves that without the hundreds of alleged planted voting rights, the polling result would be significantly different.

Yes, the law does empower the Financial Secretary, in the name of public interest, to investigate whether there is any "fraud on minority" by Mr Li and his board in the privatisation deal.

But it would take a lot of political interest and backbone for the government to ignite this powerful weapon. Legislator petitions and shareholder outrage have never carried much weight in government decisions. Neither has the administration showed much political courage in protecting the underprivileged in the past. So I won't count on the government.

In short, within months, Mr Li and China Unicom (SEHK: 0762, announcements, news) (the other major shareholder with a 19.84 per cent stake in PCCW) will have their way.

According to the scheme, which insiders call "an open secret", PCCW is likely to be divided into two separate entities via a series of asset swaps.

All of PCCW's telecommunications service, media and IT solutions business will come under a company named Hong Kong Telecommunications (HKT). (Yes, it has the same name as the old telephone empire that Mr Li gulped down in 2000). The remaining business, mainly the property and perhaps some international assets, will stay with the new PCCW.

HKT will no longer be controlled by Mr Li. Instead, its major shareholders will be China Unicom and some funds "friendly" to Beijing, who will appear as passive investors, leaving the job largely to career managers. The new PCCW goes to Mr Li. The new HKT will seek listing as the market recovers.

While regulators may still have a bad aftertaste about Mr Li, they would have little reason to reject the new HKT's listing as long as it complies with every rule and regulation.

With Mr Li's army of well-paid lieutenants and lawyers, I have little doubt that the listing application would have zero fault, as we have seen with most of his controversial deals. (In fact, he did mention the possibility of listing the telecommunications-related business in the privatisation circular.) Also, let's not forget who will be the real controlling shareholder of HKT by then.

Sure, it will take the investors some years to forget Mr Li's poor record. But he will have nothing to do with the new HKT. More importantly, it will return to its old cash-cow state (though shrunk a bit) that promises a decent dividend. It will not be short of followers.

Every party gets their bit, except the minority shareholders of PCCW. Mr Li will get his exit from the telephone business, which he has shown little patience with. Most importantly, the exit will come with billions of profit. Don't forget he has recouped every penny he spent on the merger with the old telephone firm via earlier share sales. As for the privatisation, it's fully financed by PCCW's cash flow. Anything thereafter is profit, the size of which perhaps will depend on the valuation the new HKT gets in its future listing.

How about reputation? Well, it depends on how you define it. If Mr Li sees himself as being among the private equity elite, he may even see this as a plus. There aren't many private equity funds that can manage to reap a handsome return with the standard buy-low-privatise-and-relist formula, without spending much real effort in adding value to the business.

As for China Unicom, or should I say Beijing (to be more precise), the scheme will give it control over the telephone company that it considers crucial to state security - something that it has longed for since 1997 but didn't dare grasp publicly. Sure, it will have to pay some money to buy Mr Li out, but the heavy reputation cost is saved. Just imagine if PCCW remained listed and the deal had to be done before the public eye.

The bankers, who have lent US$23.8 billion to PCCW last September, will be happy to see their loan partially repaid with listing proceeds, though the company's cash-flow will shrink a bit for the moment.

So, in a year or two, we are likely to see things back to square one: a listed telephone firm called HKT and a private Richard Li empire - except that billions of dollars have been transferred from the shareholders to Mr Li; a blue chip that has turned into one of the worst performers in the region; thousands of jobs cut; and the corporate governance as well as regulatory regime of Hong Kong becoming a laughing stock.

shirley.yam@scmp.com

Large fat bastard assaults eyes

Flaunting wanton obesity around the world sponsored by Visa. Wouldn't be too bad if these commercials weren't played every 2 minutes. Would be mucho enjoyable if the FB was dancing on some marketing drone's head instead.

PCCW privatisation vote passes

The vote goes ahead even with vote rigging allegations. 

In the meantime, the SFC/SEC on their knees pours another cup of coffee for the tycoons. Prince Richard still aint happy because he wants the other services.

David Webb gets another anonymous letter patched together with cutouts from The Standard and it reads mysteriously like one of Mary Ma's editorials.

Headless body of girl found

In the SCMP today...

"The naked headless body of a girl of about two was found in the sea near Tai O on Lantau. Police officer said there were no suspicious wounds on the body and there had been no reports of a missing girl of that age. The body could have drifted to Hong Kong from elsewhere."

Case closed?