Chaoda reaping the suckers

Same old story. Waits till there is a pop in the share price then raises more capital ($200m bonds).

If successful, the agricultural giant, which has been criticised by analysts for paying too much money for farmland that remains idle, will have raised US$771 million in share and bond sales during the past two years.


Chaoda, which did not respond to emailed questions, said in mail to potential investors it would spend the proceeds from its planned bond sale on expanding its production base and infrastructure.

The company's shares closed at HK$4.89 - a bargain-basement price of 4.5 times forecast earnings.

On March 31, before Chaoda announced its latest fund-raising, analysts at Macquarie accused the company of spending the money it made from its agricultural operations on an "enormous and growing land bank that does not produce revenues".

Macquarie analysts Jake Lynch and Jamie Zhou said the cash Chaoda had raised from regular stock and bond sales "continues to sit on the balance sheet".

In its last set of annual accounts, Chaoda said it had more than 2 billion yuan (HK$2.38 billion) in net cash.

Macquarie estimated Chaoda used only 24 per cent of its land for growing fruit, vegetables or grains, adding the company had never explained in its annual reports what it did with the rest.

There was "no transparency on 76 per cent of the land on the balance sheet", it said.

"The raw fact is that this land generates no revenues now and management cannot tell us when they expect the revenues to commence."

Chaoda, which was founded in 1997 by Kwok Ho, has regularly been mired in controversy since its Hong Kong flotation in 2000.

The company says it is China's largest vegetable grower. But some investors and analysts say this is impossible to prove because the mainland has no formal registry for agricultural land.

In 2002, big four auditor PricewaterhouseCoopers said it could not endorse Chaoda's annual results, and resigned.

The farming firm replaced PwC with the much-smaller CCIF and Baker Tilly, which both stepped down in 2007. It is now audited by mid-sized BDO.

Since 2002, Kwok has gradually reduced his ownership of the company by arranging regular issues of new shares.

The company's chief financial officer, Andy Chan Chi-po, has now sold all his stock, according to Macquarie.

46 companies permanently suspended on HKEX

The HK SFC as incompetent as ever....

"As of March 31, there were 46 companies whose stock has been halted for more than three months.

These include many that have not traded for over a year, with some cases stretching back longer.

Hong Kong has a long code of conduct for listed companies, known as the listing rules. But no Hong Kong government body or regulator has the power to levy criminal penalties or fines on company bosses who choose not to release accounts. In Britain, the Financial Services Authority can impose unlimited fines, while in Australia, the Director of Public Prosecutions has the authority to recommend jail terms for very serious breaches of disclosure requirements.

But when Hong Kong businessmen or mainland entrepreneurs fail to disclose important information, they can relax in the knowledge that a halt in share trading is probably the worst thing that will happen to them.

The result is that shares in companies that keep secrets stay suspended for a very long time. Unsurprisingly, getting stuck in zombie stocks for months, if not years, makes investors furious, as well as very scared.

"You know something is going horribly wrong, otherwise why would companies not publish accounts?" said Claude Tiramani, an emerging markets fund manager at Paris-based hedge fund Lutetia Capital. "But you cannot do anything about it. You cannot get your money out."

As Fraser Howie, a Singapore-based stockbroker and the author of Red Capitalism, put it: "These long-term suspensions are direct evidence the listing rules are a fig leaf, designed to make Hong Kong look well regulated when, in fact, it is not. You would not have all these immobile shares if the regulators or the government could compel companies to release information."

Stock suspensions can be costly for investors unlucky enough to hold a frozen share. If the wider stockmarket is rising, you are losing money. You cannot liquidate your position in a suspended share and put the cash in a stock that is likely to go up. The Hang Seng Index rose 58 per cent last year, so investors in Zhejiang Glass paid a big opportunity cost.

But as a spokesman for HKEx said, there is nothing the exchange operator can do.

"Shares that are subject to trading suspensions are allowed to resume trading only after the company provides sufficient information for investors to make sound investment decisions," he said. In other words, until a company agrees to publish information, shareholders' money stays stuck in a stock that cannot trade.

A spokesman for the Securities and Futures Exchange, which oversees the listing rules, did not respond to an email containing detailed questions."

Zhejiang Glass (00739) Nationalized

The first private company to listed as a H Share, no less is crashing with fraud and burning shareholders. The China state governments are stepping in and taking it's assets. In this case burning it's biggest shareholder the IFC a member of the World Bank Group.

Lasted traded at $2.48 with market cap of HKD$955m. Suspended trading on 20100503.

Last report 2009 (interim):

Net Assets of $2.79b

Interest bearing debt : $5.3b

Cash: $63m

What is Hong Kong's Securities and Futures Commission doing? ... Nothing, this is most useless and incompetent organization on the planet. Their focus it seems is on smaller, easier, local individual targets, like traders manipulating illiquid derivatives.

H Shares - China companies listed on the HK market are riddled with fraud paired with no non-existent enforcement by the SFC/HKEX, a pit covered with SFC's facade of governance, trap laid with shards of sharp bamboo spikes.

Chinese reverse mergers

Article from thestreet.com.. cash isn't cash in China.

"The alleged chicanery has followed a pattern, Qin says. In many instances, "bank employees are colluding with clients. The bank employee would provide us with falsified bank statements."

Hui Xian

SCMP's Tom Holland on Li Ka Shing's yuan based IPO. Now Hui Xian could be translated as "return first", in this case it will be making returns to the old fox Li Ka Shing first...

Lots of noise about it based in yuan, but as Tom's points out, it doesn't matter what currency the IPO is in as the assets are in China and priced in the Chinese environment. Each share represents a 'share' of the assets and what currency is used to price it is moot.

According to Hui Xian's offering documents, if the shares are priced at the top of their indicative range, they will pay a dividend yield of 4 per cent.

That sounds like an attractive proposition at first. But for a real estate investment trust that plans to pay out nearly all its net earnings in dividends, it equates to a price to earnings ratio of almost 25 times.

Now, you can argue that Hui Xian's sole asset, its stake in Beijing's Oriental Plaza retail, office and hotel complex, is a mature investment with a steady, low-risk income stream, and so the offering's valuation is justified.

But the pricing still looks steep, especially when you consider that the value of Hui Xian's underlying property assets will deteriorate to zero by 2049, when its joint venture partnership in Oriental Plaza is due to expire worthless.

In contrast, Hong Kong dollar shares in the GZI real estate investment trust, which manages properties in Guangzhou, are currently priced at around 15 times earnings for an indicative yield of almost 6 per cent.