Art Textile 0565.hk

This company is listed on the HKEX and primary produces textiles. It attempts to be less affected by the vagarities of commodification by moving to highend textiles. Most of it's products are sold in China. Constant mention is made in it's annual reports about attending textile fairs in Paris but no results of these attendances are forthcoming.

This company showed up in my earlier screens with high cash and a low price/book ratio. The key points were: was the cash really there and how shareholder friendly would the management be in utilizing this cash.

Auditor: Deloitte Touche Tohmatsu

2007 Annual Report:

Cash: HKD$487m

All Debt: $10m

Inventories: $25m

Receivables: $62m (Rev: $645m)

2008: Announces deal to purchase factory/land from "third" parties for HKD$174m. The vendor was conveniently established in 14 August 2006.

2010 Annual Report:

Cash: $480m

Debt: $393m

Inventories: $104m

Rev: $801

Receivables: $230m

In the 3 years of this period, management has purchased properties/equipment from a third party. Revenue has doubled, however inventories and receivables have quadrupled resulting in negative cashflow for the last 2 years.

I am leery of the timing and fit of the purchases made in 2007 as well as the ballooning receivables which I believe are destined to go bad ($20m > 90days overdue).

On the scale of stinkiness this Chinese company rates a putrid.