S-chips make a comeback in Singapore

[Nick]

Another S Chip in trouble...

http://info.sgx.com/webcoranncatth.nsf/V...300385AB4/$file/Hongwei_auditissues.pdf?openelement

HONGWEI TECHNOLOGIES LIMITED

AUDIT ISSUES

The Board of Directors of Hongwei Technologies Limited (the “Company”) wishes to
announce that the Board has received information from its auditors, Messrs. Ernst & Young
LLP, regarding issues pertaining to the cash and bank balances confirmation in its subsidiary
company in China, namely Shuangli (Xiamen) Polyester Co., Ltd. The Company’s Audit
Committee has immediately commenced a fact-finding process to address the auditors’
concerns.

To this end, the Company has appointed the auditors to carry out an expanded scope audit.

The Company’s Audit Committee is currently working to resolve these audit issues and will be
taking necessary measures to safeguard the Company's assets. The full Board (save for the
Executive Chairman, Mr Lin Jimiao and Mdm Zhuang Xinxin) has been in discussion. The
Audit Committee is also working to obtain the full co-operation from the Executive Chairman,
Mr Lin Jimiao (who is also the Legal Representative of the Subsidiaries) in this regard. The
Company is unable to comment on the matter at present. Nonetheless, the Company will
continue to keep shareholders updated of any further development.

The Company will also apply to the Singapore Exchange Securities Trading Ltd (“SGX-ST”)
for an extension of time in relation to Rule 705(1) of the Listing Manual which relates to the
requirement of the Company to announce its full financial year results for the year ended 31
December 2010 (“FY2010”) no later than 1 March 2011.

The Company will make further announcements promptly as and when there are material
developments.

Trading of shares in the Company has been halted on 24 February 2011. Meanwhile, the
Company has requested for the trading halt to be converted into a suspension of trading of
the Company’s shares on SGX-ST.

BY ORDER OF THE BOARD
Gui Kim

[hongonn]

Ya, if you die die must participate in the China growth story, then maybe look into a Singapore company that has great exposure to China than a China originated company.

Don't take chance on any china stock, you are gambling by putting a bet on them. Forget about their reporting 30%, 40% of growth rate, 0 debt, ROE of 40%, dividend yield of 10%, blah blah blah. When the management is dubious, the valuation of the company is defaulted to 0, no need to look further.

[wj888]

Yup. For multi-baggers or multi-beggers, you can choose our S-chips. Make or Break you
If you want safer option, it's best to buy the blue-chip H-shares in HK.

[redcorolla95]

SOE Linked: Cosco Singapore (Cosco Grp), CM Pacific (CMG), China Aviation Oil (CNAF)

SWF Linked: Yangzijiang (Qatar), China Minzhong (GIC)

In terms of market capitalization, YZJ is the largest with over $7 billion.

Please add to the list. The rest I don't dare look haha

China Fishery - Carlyle invested.

[Musicwhiz]

Business Times - 28 Feb 2011

Audit woes bedevil China Hongxing, Hongwei

Companies want trading halt of their shares converted to suspensions

By LYNETTE KHOO

ACCOUNTING irregularities have surfaced at two S-chips - China Hongxing Sports and Hongwei Technologies. The auditors, Ernst & Young in both cases, could not finalise the audit for the financial year ended Dec 31, 2010 as they could not confirm the cash and bank balances in these companies.

The two Chinese firms have requested that the trading halt of their shares on the Singapore Exchange (SGX) be converted to trading suspensions.

SGX told the media yesterday that it has been informed by the companies concerned of these developments and is monitoring the situation closely as it awaits the report of the auditors and professionals.

'If a breach of listing rules is established, SGX will not hesitate to take appropriate actions, including referral to relevant authorities,' the exchange said.

Hongwei disclosed over the weekend that its auditors faced problems with confirming cash and bank balances in a subsidiary in China, Shuangli (Xiamen) Polyester Co.

It said that its audit committee had immediately commenced a fact-finding process to address the auditors' concerns and the group has appointed the auditors to carry out an expanded scope audit.

'The company's audit committee is currently working to resolve these audit issues and will be taking necessary measures to safeguard the company's assets,' Hongwei said. 'The full board (save for the executive chairman Lin Jimiao and Zhuang Xinxin) has been in discussion.'

The audit committee is also working to obtain the full cooperation of Mr Lin, who is also the legal representative of the group subsidiaries, it added. Ms Zhuang co-founded the company with Mr Lin and is a non-executive director of Hongwei.

Trading of its shares was halted on Thursday after its stock fell 9.8 per cent by the end of the day's trading.

In the case of China Hongxing, its disclosure came three days after its trading halt on Tuesday when the stock plunged 17.9 per cent earlier that day.

The group said on Friday that its audit committee was informed by the auditors on Feb 22 that they have noted irregularities in the cash and bank balances, accounts receivables, accounts payables, and other expenses during the course of their audits of its subsidiary companies in China.

These subsidiaries are Fujian Hongxing Erke Sports Goods Co Ltd and Quanzhou Hongrong Light Industry Co Ltd. As a result, the auditors will not be able to give audit clearance for the fiscal 2010 financial results without performing additional procedures and tests relating to these account balances.

The board has resolved to appoint an independent special auditor (SA) by Tuesday to carry out a thorough investigation, China Hongxing said. In the meantime, the audit committee will take steps to safeguard the assets of the company and ensure operations continue smoothly.

China Hongxing has also appointed KhattarWong as its legal adviser for matters on Singapore laws. It will appoint separate legal advisers to advise on Bermuda law and Chinese law, if necessary.

Both Hongwei and China Hongxing will be seeking an extension of time from SGX to announce their full-year financial results, originally due by March 1 under listing requirements.

Ernst & Young was appointed auditors of China Hongxing only in November last year, after the company's joint auditors Foo Kon Tan Grant Thornton LLP and RSM Nelson Wheeler gave notice to resign. It has been auditors of Hongwei since the latter's listing in 2005.

China Hongxing has a strong institutional following that includes Skagen Funds, Fidelity, JPMorgan Asset Management and State Street. Singapore-based private equity Tembusu Partners, led by chairman Andy Lim, has invested in Hongwei.

[Musicwhiz]

Mar 1, 2011
Sias concerned over S-chips' suspensions

THE investors watchdog has raised concerns over the back-to-back suspensions of two China-based firms that are listed on the Singapore Exchange (SGX).

Securities Investors Association of Singapore (Sias) president David Gerald said 'some 14,000 minority shareholders are now in dire straits over their investments' in the two firms.

Mr Gerald's statement came after China Hongxing Sports confirmed market fears yesterday morning when it asked for its shares to be suspended while auditors investigate accounting irregularities in the financials.

Trading was halted last Tuesday after the stock plunged 17.9 per cent.

On Saturday, Hongwei Technologies asked for a trading suspension after auditors raised concerns about cash and bank balances in its subsidiary Shuangli (Xiamen) Polyester.

Mr Gerald warned that allowing the two firms to go into prolonged suspensions will further erode 'whatever confidence investors have in S-chip listings'.

S-chips - China-based firms listed on the SGX - have gained a reputation for weak corporate governance.

Mr Gerald said an indefinite suspension means minority shareholders of the two firms are 'trapped in a stock without any possibility of an exit route'.

'Every effort must, therefore, be taken by SGX and the companies to expedite the investigations to allow the necessary inflow of information in the market place to enable the stocks to be traded,' he added.

FRANCIS CHAN

[freedom]

quite a lot of s chips are from Fujian, China. difficult to say they are totally no relationship from each other.

to name a few:
FibreChem
Sino-Env
Li Heng
China Sky
China Taisan
China Hongxing
Hongwei Tech
Eratat Lifestyle
China Sports
...

[sgxstockpicker]

Ya, if you die die must participate in the China growth story, then maybe look into a Singapore company that has great exposure to China than a China originated company.

Don't take chance on any china stock, you are gambling by putting a bet on them. Forget about their reporting 30%, 40% of growth rate, 0 debt, ROE of 40%, dividend yield of 10%, blah blah blah. When the management is dubious, the valuation of the company is defaulted to 0, no need to look further.

+20. totally agree with what you say here. you can pm to find out who i think spreads this BS the most.

anyway most of the manufacturing companies are based in the coastal provinces. this is because it makes it easier to export. i would think that the relative market share of the companies mentioned is incredibly small. no comparative advantage in relation to each other. i know of Singapore companies with factories there but it really ain't easy.

[Musicwhiz]

Mar 7, 2011
CAI JIN
S-chip firms: Watch those red flags
Be it directors or investors, all must take corporate governance seriously
By Goh Eng Yeow, Senior Correspondent

IT HAS been almost five years since the Singapore Exchange made sweeping changes to its rule book to make corporate boards more accountable, a welcome reform but one that has failed to eliminate the problems it set out to erase.

In the intervening five years, a number of accounting scandals have surfaced among S-chips, the problem child of the bourse.

China-listed firms Fibrechem Technologies and China Sun Bio-chem were just two. They were suspended from trading in 2009 as auditors uncovered irregularities over their purportedly huge cash balances and trade receivables - the money customers owe for goods delivered but not paid for.

And now two more S-chips - China Hongxing Sports and Hongwei Technologies - have disclosed problems reminiscent of the accounting scandals two years ago.

The continuing problems with S-chips raise questions about those reforms back in 2006.

One big change was to get a company's board to issue a 'negative confirmation' at the release of each set of interim results. This would tell investors that, to the best of the board's knowledge, there was nothing to make the results false or misleading.

The reforms occurred more than a year after China Aviation Oil (CAO) nearly collapsed after losing US$550 million (S$697 million) in oil trading.

It was later learnt that CAO's directors were unaware of the mounting derivatives losses racked up by then- chief executive Chen Jiulin.

The new rule was designed to force directors to delve more deeply into the accounts of their companies.

It was hailed as Singapore's version of the Sarbanes-Oxley Act, which was rushed into law in the United States a few years earlier after the high-profile collapses of Enron and WorldCom.

But there is a key difference between the approach taken by the US and Singapore.

Sarbanes-Oxley is backed by the full force of legislation and carries harsh penalties for those who fall foul of it.

But breaching SGX rules will only attract punishments such as a reprimand or, at most, a delisting of a company's shares.

So it is not surprising to find questions surfacing over the effectiveness of measures like demanding directors to make 'negative assurances' on interim results, as the global financial crisis triggered a fresh string of corporate scandals two years ago.

These scandals revolving around firms such as Fibrechem Technologies prompted the SGX to again address the issue of ensuring that boards are not merely behaving like a rubber-stamp when they approve material announcements like corporate results.

In December 2009, it set out to tighten the rules still further, with a proposal to get Singapore-based independent directors to sit on the boards of the major overseas units of the locally listed firms.

Fifteen months later, as it continues to deliberate on whether to press ahead with fresh reforms or not, accounting irregularities came to light at China Hongxing Sports and Hongwei Technologies last week.

But the latest cases of accounting misfeasance show that if everyone - directors, analysts and investors - had displayed more vigilance, the existing safeguards should have been enough to trigger alarm bells.

Take China Hongxing. For a few years now, pointed questions had been raised over its reluctance to pay a handsome dividend, despite apparently sitting on a huge cash hoard.

In September 2009, eyebrows were raised when the company took a sloppy five months to report a series of share sales by a then-big investor, JF Asset Management.

Last October, another red flag was raised when its auditors for the past five years, RSM Nelson Wheeler and Foo Kon Tan Grant Thornton LLP, suddenly resigned, two months before the year-end audit was about to commence.

In hindsight, it seems surprising that the shareholders did not bother to question the management more deeply about the resignation when they met on Nov 29 to approve the appointment of the new auditors.

NRA Capital executive chairman Kevin Scully also asked if China Hongxing's board itself could have done more to investigate the resignation before issuing a negative assurance in November on the third-quarter results.

As Straits Times reader S.C. Yeo notes, 'the tell-tale signs were there, but investors wanted irrefutable proof that the problem existed. By then, it was too late'.

Last week, lawyer Peter Madhavan became the first independent director in Singapore to be given a jail sentence over a misleading statement.

He was on the board of Airocean, whose then-chief executive Thomas Tay was the subject of a criminal probe.

Madhavan is appealing against his conviction and sentence.

Observers say that his four-month sentence sends a strong signal to independent directors to take their watchdog role seriously.

And when it comes to a weighty matter like issuing a 'negative confirmation' for a company's results, they should break ranks and refuse to go along with the rest of the board if they are not comfortable - or face possibly painful consequences.

Listed firms and their boards should know better than to 'play play' when it comes to important corporate governance issues, as television character Phua Chu Kang would put it.

engyeow@sph.com.sg

[momoeagle]

Based on the financial statements, Eratat is undervalued and share price has significant potential upside.

What I do not understand is why the management has to issue large amount of new shares at almost 10% discount to market price.

Perhaps this is why the market sees this negatively and is sending clear signals to express that view!

I looked at the balance sheet recently.

I can't see why it is undervalued. 70% of its NAV is in trade receivables.
This is my chart of NAV less trade receivables.
https://lh5.googleusercontent.com/-8sEgn...inusTR.JPG

We can see that it has been rather consistent and flat over the past 8 quarters (or 2 years or 730 days). It sorts of tell me that most of the earnings reported went into trade receivables.