Fujian Zhenyun

[CY09]

I am bit skeptical of FJZY's financial and worried when i saw the news. Thoughts of a "Foreland" struck me but fortunately the refund amount is relatively small. This company makes it to my list on "how to be the top 50 richest in Singapore".*

On the balance sheet it has 437m RMB or s$91.3M of cash with about 29.5m RMB or s$6.2M of ST-debts; and FJZY market cap is s$15.5M. Even the company's level of cash & equivalent is higher than current mkt cap.

*For those interested in joining Singapore's top 50 richest, let me elaborate; please bear with my repeat boring remarks if you have read my Qingmei thread:
1) Convince a bank to loan you 20M, use it to buy over FJZY (current mkt cap 15M) and you will have s$91.3M cash

2) Now use 10M to buy over Qingmei (current mkt cap 8m);

3) Now use another 22M to launch a hostile takeover of China fibretech (current mkt cap 19m). So now you have spent 52M but have obtained a total of s$236.1M in cash from these 3 takeovers. Now pay back the 20M you initially borrowed from the bank. At this juncture, you are in a net cash position of $184.1M

4) Offer $40M to buy over China Sports Intl (current mkt cap 33.7m); then use its RMB849M of cash pay off its RMB202M trade payable and RMB108.5M debt; to be left with RMB 538.5M or s$112.5M. So you gain $72.5M from this takeover

5) Now offer $34M to takeover Universal Resources (current mkt cap 30.1M) to get the $63.6M present in its B/S.

6) Lastly, use 34M to takeover Changtian plastics (current mkt cap 29.7m) who has reported s$202 M cash at its group level

In 6 simple steps, you are now $454.2M “richer in cash” with an additional few hundred Mil worth of PPE and receivables. The 50th Richest men in Singapore only has a net worth of $450M!

[CityFarmer]

What a business plan! Thank for the proposal.

(not vested)

I am bit skeptical of FJZY's financial and worried when i saw the news. Thoughts of a "Foreland" struck me but fortunately the refund amount is relatively small. This company makes it to my list on "how to be the top 50 richest in Singapore".*

On the balance sheet it has 437m RMB or s$91.3M of cash with about 29.5m RMB or s$6.2M of ST-debts; and FJZY market cap is s$15.5M. Even the company's level of cash & equivalent is higher than current mkt cap.

*For those interested in joining Singapore's top 50 richest, let me elaborate; please bear with my repeat boring remarks if you have read my Qingmei thread:
1) Convince a bank to loan you 20M, use it to buy over FJZY (current mkt cap 15M) and you will have s$91.3M cash

2) Now use 10M to buy over Qingmei (current mkt cap 8m);

3) Now use another 22M to launch a hostile takeover of China fibretech (current mkt cap 19m). So now you have spent 52M but have obtained a total of s$236.1M in cash from these 3 takeovers. Now pay back the 20M you initially borrowed from the bank. At this juncture, you are in a net cash position of $184.1M

4) Offer $40M to buy over China Sports Intl (current mkt cap 33.7m); then use its RMB849M of cash pay off its RMB202M trade payable and RMB108.5M debt; to be left with RMB 538.5M or s$112.5M. So you gain $72.5M from this takeover

5) Now offer $34M to takeover Universal Resources (current mkt cap 30.1M) to get the $63.6M present in its B/S.

6) Lastly, use 34M to takeover Changtian plastics (current mkt cap 29.7m) who has reported s$202 M cash at its group level

In 6 simple steps, you are now $454.2M “richer in cash” with an additional few hundred Mil worth of PPE and receivables. The 50th Richest men in Singapore only has a net worth of $450M!

[brattzz]

haha! CY09! i enjoyed reading ur post!

Can we make a sticker, named as "CY09's LIST"?

[touzi]

I am bit skeptical of FJZY's financial and worried when i saw the news. ...

On the balance sheet it has 437m RMB or s$91.3M of cash with about 29.5m RMB or s$6.2M of ST-debts; and FJZY market cap is s$15.5M. Even the company's level of cash & equivalent is higher than current mkt cap.

High level of cash by itself does not indicate that there is fraud. Is there any signs that hint of fraud?

-Was there any rights issue? (no)
-Is there high level of debt? (the loan amount is small which makes the usual explanation that it is to maintain relationship with bank more believable)
-Is the interest earned from the cash particularly low? (not sure. need to verify)
-Has the company been giving dividend? (yes)

Anybody can add to the checklist ?

At the moment I am more concerned with mismanagement of the business than fraud. Quality issues indicate serious operational weakness and to lose a customer that is big enough to carry out a project in Iraq must be very damaging to its reputation.

[level13]

I am bit skeptical of FJZY's financial and worried when i saw the news. ...

On the balance sheet it has 437m RMB or s$91.3M of cash with about 29.5m RMB or s$6.2M of ST-debts; and FJZY market cap is s$15.5M. Even the company's level of cash & equivalent is higher than current mkt cap.

High level of cash by itself does not indicate that there is fraud. Is there any signs that hint of fraud?

-Was there any rights issue? (no)
-Is there high level of debt? (the loan amount is small which makes the usual explanation that it is to maintain relationship with bank more believable)
-Is the interest earned from the cash particularly low? (not sure. need to verify)
-Has the company been giving dividend? (yes)

Anybody can add to the checklist ?

At the moment I am more concerned with mismanagement of the business than fraud. Quality issues indicate serious operational weakness and to lose a customer that is big enough to carry out a project in Iraq must be very damaging to its reputation.

Are you saying the market has seriously mis-priced this stock?

I agree that having high level of cash by itself does not indicate that there is fraud. But however, almost all the S-chip that imploded earlier on exhibited the same characteristics - having lots of cash and the share px is languishing at a level lower than the cash backing per share.

This is not a phenomenon only found in Singapore. Go check out the S-chips listed in Malaysia.

Since they have so much cash and if you are a shareholder, can you get them to do either of the following?

- Give a yearly bonus dividend payout
- Start a share buyback program
- Get the management themselves to start buying shares
- Take the company private since the px is so low now

[roxhockey]

The level of receivables (8 months of sales) is suspiciously high. The interest rate on the cash also seems incredibly low, which raises some questions. A positive sign is the lack of equity raisings (what's the point in maintaining a fraud unless you're raising more capital from victims?) but even if the financials are real, management has shown no intention of unlocking the intrinsic value for you as a shareholder which makes me stay away from this.

[touzi]

The level of receivables (8 months of sales) is suspiciously high.

Yes I find the receivable too high too.

The interest rate on the cash also seems incredibly low, which raises some questions.

How can I determine from the annual report? Do I just base on the cash deposited with the bank at the end of FY (427 Mil) and the interest earned (1.48 Mil)? How do I find out the tenure of the deposit they have? What is considered an acceptable rate in China?

[CY09]

Hi Touzi,

You have to scan the annual report, 1 of the sections will have to declare the interest rates its cash is earning as well as the interest charged for its loans.

For FJZY, its found in section 5 & 29. In section 5, it shows their interest expense is higher than the interest earn by their cash parked in banks. For section 29, the group's cash is earning an interest of 0.37% and loans interest rates by the bank ranges from 5.3-10.9% p.a. Just going to say, the figure looks ridiculous.

For comparison with other Sgx listed companies in the interest they earn, the dukang thread has it.
http://www.valuebuddies.com/thread-2151-page-6.html

[touzi]

Hi Touzi,

You have to scan the annual report, 1 of the sections will have to declare the interest rates its cash is earning as well as the interest charged for its loans.

For FJZY, its found in section 5 & 29. In section 5, it shows their interest expense is higher than the interest earn by their cash parked in banks. For section 29, the group's cash is earning an interest of 0.37% and loans interest rates by the bank ranges from 5.3-10.9% p.a. Just going to say, the figure looks ridiculous.

For comparison with other Sgx listed companies in the interest they earn, the dukang thread has it.
http://www.valuebuddies.com/thread-2151-page-6.html

Thank You!

The info on section 29 is for Financial Instruments, so I guess it could include others besides bank deposits. In 2012 their effective interest is 0.75%, higher than Minzhong but lower than Sunsine ( 2 companies that are not under any suspicion?). In page 8 of the AR, the explanation provided is that they terminated a wealth management agreement with ICBC in 2013.

[butcher]

Half year result is out. Profit dropped by almost half. Despite that, the Receivable actually increased slightly from RMB 171 Mil to 179 Mil. The company reported the Receivable turnover increased from 191 to 244 days ! That sounds very long to me . Company does not think that collection will be an issue though they are monitoring.

The announcement was also accompanied by a review report by the accountant. http://infopub.sgx.com/FileOpen/Appendix...eID=310181. Is this normal?

The company can choose to have its interim financial statements reviewed by their auditors. A review is different from an audit with mostly analytical procedures I think. But having a review is better than not having a review.