China Huishan Dairy Holdings Company Ltd (6863.HK)

Huishan Dairy Plummets 91%, Erasing $4.2 Billion in Market Value

by
Richard Frost
24March,2017, 2:05 pm AEST 24March,2017, 2:31 pm AEST
Shares of China Huishan Dairy Holdings Co. plummeted more than 90 percent in Hong Kong.
The sudden crash wiped out about $4.2 billion in market value in the stock, which is a member of the MSCI China Index. A record 779 million shares in the company changed hands, the most on Hong Kong’s exchange. The shares were down 85 percent at the midday trading break in the city.

Short seller Carson Block’s Muddy Waters Capital LLC said in December the company is “worth close to zero” and questioned its profitability in a report. Muddy Waters alleged that Huishan had been overstating its spending on its cow farms by as much as 1.6 billion yuan to “support the company’s income statement." Huishan said the allegations in the report were groundless and contain misrepresentations.

The key points in MW's report are

- Inflated profit margin due to depressed feeding cost. Its EBITDA margin in FY2015 was 44%, while SGX-listed Japfa's EBITDA in FY2015 was around 23%

- Stolen asset via undisclosed IPT

- Excessive Leverage and shares are pledged to lender(s)

- Massively overstated assets and CAPEX

The killing parts are the inflated profit and asset, together with an excessive leverage, IMHO. The total debt to equity is 1.4x with interest coverage of <2. The superficial doubts on profit and assets will lead to a panic among the creditors, and fear among investors.

the funny part is the share price didnt drop when the report issued, only this week suddenly crash, must be some big players doing something behind the scenes.

Huge Plunge in Shares of China Huishan Dairy May Have Been Triggered by Leak of Meeting
http://www.caixinglobal.com/2017-03-25/101070458.html

(26-03-2017, 07:30 PM)Behappyalways Wrote: Huge Plunge in Shares of China Huishan Dairy May Have Been Triggered by Leak of Meeting
http://www.caixinglobal.com/2017-03-25/101070458.html

Good info. Thanks.

The creditors are "nervous" now. Investors have good reason to panic.

"The reason the company gave for failing to meet obligations was odd: It said the firm’s vice president, Ge Kun, who is Yang’s wife, suffered an acute attack of an unspecified illness, resulting in the firm’s inability to transfer funds necessary to make the payments.'

lol

Fantastic. Reminds me of another China company (I can't remember the name) which claimed that their financial documents were destroyed when the building housing the documents got burned down in a fire, making it impossible to complete an external, independent audit.


My blog:
https://timetocompound.wordpress.com

You mean Malaysia Police HQ fire a day after the AG was fired (pun intended)

Oh you mean China...

I'm sure it's just coincidences

^^

http://www.sarawakreport.org/2015/07/arr...exclusive/

(28-03-2017, 12:40 PM)specuvestor Wrote: You mean Malaysia Police HQ fire a day after the AG was fired (pun intended)

Oh you mean China...

I'm sure it's just coincidences

(28-03-2017, 08:26 AM)serendibz Wrote: Fantastic. Reminds me of another China company (I can't remember the name) which claimed that their financial documents were destroyed when the building housing the documents got burned down in a fire, making it impossible to complete an external, independent audit.


My blog:
https://timetocompound.wordpress.com

China Stationery Ltd (listed in KLSE):
China Stationery Ltd (CSL), who has asked Bursa for an extension of time to submit its audited annual statements for the financial year ended Dec 31, 2013 due to a fire incident at one of its plants in Fujian Province, China.

The unfortunate fire incident destroyed approximately 10,000 sq m of the 15,422 sq m production plant in Fujian Province on April 4. Its auditors Messrs RT LLP said it was unable to proceed with “walk-in bank confirmations”, sight of fixed assets, as well as complete the audit fieldwork on CSL’s subsidiaries in China.


China Bio-chem (listed in SGX):
KPMG was called in to do a forensic audit, but could not complete its job after a truck that was supposed to deliver a set of financial records from China Sun's Shenyang head office to an office in Tongliao was stolen when the driver was having a dinner break.


I am looking forward to the day when these China companies give the following reason when they are unable to meet obligations:
The Chairman's pet has passed on and we are unable to contact him/her.