Sound Global (0967)

[CityFarmer]

Since no existing thread for the company in SEHK, I started a new thread.

The first post is on the latest market price of the company, immediately after the SGX's share is suspended.

HKD 5.5 with volume of 147 lots, which is equivalent of 90 Singapore cents.

[CityFarmer]

Since no existing thread for the company in SEHK, I started a new thread.

The first post is on the latest market price of the company, immediately after the SGX's share is suspended.

HKD 5.5 with volume of 147 lots, which is equivalent of 90 Singapore cents.

For the record, the company share price closed in SEHK with HKD 5.64 (or 92 Singapore cents) today. Volume 7.2 million shares. Today is the first trading day after SGX share suspended.

[CityFarmer]

I usually don't just posts price/volume on a particular stock, unless to mark a special occasion e.g. First day after EGM due to exit offer etc. This is to keep a record for the company, and is easier to trace back both for me and those interested.

It is a norm in this forum, not to focus on price/volume alone, since FA, unlike TA, focuses on fundamentals, rather on price/volume alone. It might cause uneasiness on old buddies here. If that is the case, my apologies. I will be more sensitive in the future.

May be I had overly done in this case, with the vested interest.

Thanks

Regards
Moderator

[Tiggerbee]

May I post the latest update on Sound Global. It hit an intraday high of 6.38 and closed at 6.18. Traded vol is the highest in a year.

Vested.

[CityFarmer]

LIM & Tan Securities Report on the company. It has started the coverage 1 week after the delisting approval in Singapore, or after only few remaining weeks of listing in SGX, interesting...

Anyway, congrats to those still holding on the company shares. The price continue "to power ahead" to HK$6.90 per share, today.

-------------
- Sound Global’s share price in Hong Kong has
continued to power ahead (up another 54 cents
yesterday to HK$6.18) since the company’s
announcement that shareholders have given
approval for the de-listing of its shares in Singapore
at 70 cents each 1 week ago.
- Yesterday’s equivalent price of S$1 represents a
significant 43% premium to its de-listing price in
Singapore.
- We had highlighted the significant under-valuation
(10x PE against peer’s average of 20x) of the stock
1 week ago when shareholders in Singapore had
approved the de-listing.
- Last night, Sound Global announced that it has signed
a new contract to undertake a sewage treatment
BOT project in Tacheng City, Xinjiang and also
entered into a contract for the construction of No.3
sewage treatment plant in Yining city, Xinjiang
province.
- After the 43% gain, the company’s PE has risen from
10x to 15x, putting it closer to the sector average of
20x.

Ref: http://remisiers.org/cms_images/research...115_LT.pdf

[cherks]

Anyone has a view on Sound Global which was delisted in Jan 14 from SGX and re-listed in HKEX?

Today it has fallen to HK7.73 on closing. In my opinion, its current PE is around 18+ with EPS of ~40 HK cents based on the previous FY results. If I did not remember wrongly, its current 1H results shows an ~25% increase in net profit from last corresponding period. Couple this with its migration to increase its portfolio of projects beyond EPC to cover a greater weightage of waste water treatment income, it seems to be in a sweet spot.

Thanks

[Jacmar]

kena attack by shortist. wah heng-ah, delisted from SGX. full report from their website. useful reading for those still in s-chip camp

Sound Global – a Water Specialist in Deep Water February 4, 2015 Sound Global is one of the players in the Chinese wastewater treatment industry and is engaged in the construction and operation of treatment plants, either as a contractor or as a BOT (build-operate-transfer) operator. A lumpy business segment allows it to slip in 40% of non-existent revenue and hide many cases of revenue exaggeration. 1. Bogus revenue: unknown company does Rmb1bn of undisclosed technology business a year An appraisal report on Sound Global for Chinese regulators but somehow put in the public domain unveils a “secret” segment of “engineering technology service” that Sound Global has never discussed with its shareholders despite the “fact” that it supposedly accounted for roughly 40% of the listco’s revenue during 2011-13. We certainly have not been able to find enough projects to account for the listco’s revenue. Instead, we’ve found a mysterious subsidiary that leaves no trace in the Chinese water industry, a strong indication that the revenue just didn’t exist. 2. Catch-22: the Anshan mystery All evidence suggests Sound Global completed the Anshan plants in 2012 but the company says Anshan was its biggest revenue source in 2013. We are convinced that the company had accounted for Anshan in 2012 as a BOT project on percentage completion basis, which then leaves a hole in the 2013 revenue with no big projects to account for. But if the company had not accounted for Anshan in 2012, that raises the question of which projects contributed to the 2012 revenue and additions of service concession receivables. Either way, there’s a hole somewhere in Sound Global’s accounts. 3. Confusing accounting: reporting profit before building anything
We suspect Sound Global simply makes up its stories as it feels the need to impress investors. In the 2010 Hong Kong listing document, it shows that 90% of revenue from two Jingzhou projects has been booked
Sound Global – a Water Specialist in Deep Water
2
in 2008. However, the company did not sign the construction contract until early 2009. We also examine two other cases that raise questions over the management’s trustworthiness. 4. Interest income fails the acid test All these issues above suggest that Sound Global has been doctoring its books for many years and that a substantial amount of its revenue just doesn’t exist. The exceedingly low interest income suggests that the company’s real cash/bank balances probably averaged merely one-third of the amounts disclosed. This is another strong indicator that the revenue and profit figures have been significantly inflated. 5. True 2013 profitability merely one third of announced By ignoring the mysterious Rmb1bn “engineering technology service” revenue and the Rmb380m hole left by Anshan, we estimate that Sound Global’s real profitability in 2013 was just about Rmb113m, or slightly more than a quarter of the amount that it announced. Adjusting for the non-existent cash/bank balance, true 2013 net book value would be slightly less than Rmb1bn. 6. Stock worth about HK$2.4 per share
Applying the prevailing historical 2013 P/E of 23x on Sound Global’s reported numbers to our adjusted profit estimate, we are of the opinion that the stock is worth about HK$2.4 per share.

[CityFarmer]

I merged the post to HK directory, since no longer listed in SGX

kena attack by shortist. wah heng-ah, delisted from SGX. full report from their website. useful reading for those still in s-chip camp

Sound Global – a Water Specialist in Deep Water February 4, 2015 Sound Global is one of the players in the Chinese wastewater treatment industry and is engaged in the construction and operation of treatment plants, either as a contractor or as a BOT (build-operate-transfer) operator. A lumpy business segment allows it to slip in 40% of non-existent revenue and hide many cases of revenue exaggeration. 1. Bogus revenue: unknown company does Rmb1bn of undisclosed technology business a year An appraisal report on Sound Global for Chinese regulators but somehow put in the public domain unveils a “secret” segment of “engineering technology service” that Sound Global has never discussed with its shareholders despite the “fact” that it supposedly accounted for roughly 40% of the listco’s revenue during 2011-13. We certainly have not been able to find enough projects to account for the listco’s revenue. Instead, we’ve found a mysterious subsidiary that leaves no trace in the Chinese water industry, a strong indication that the revenue just didn’t exist. 2. Catch-22: the Anshan mystery All evidence suggests Sound Global completed the Anshan plants in 2012 but the company says Anshan was its biggest revenue source in 2013. We are convinced that the company had accounted for Anshan in 2012 as a BOT project on percentage completion basis, which then leaves a hole in the 2013 revenue with no big projects to account for. But if the company had not accounted for Anshan in 2012, that raises the question of which projects contributed to the 2012 revenue and additions of service concession receivables. Either way, there’s a hole somewhere in Sound Global’s accounts. 3. Confusing accounting: reporting profit before building anything
We suspect Sound Global simply makes up its stories as it feels the need to impress investors. In the 2010 Hong Kong listing document, it shows that 90% of revenue from two Jingzhou projects has been booked
Sound Global – a Water Specialist in Deep Water
2
in 2008. However, the company did not sign the construction contract until early 2009. We also examine two other cases that raise questions over the management’s trustworthiness. 4. Interest income fails the acid test All these issues above suggest that Sound Global has been doctoring its books for many years and that a substantial amount of its revenue just doesn’t exist. The exceedingly low interest income suggests that the company’s real cash/bank balances probably averaged merely one-third of the amounts disclosed. This is another strong indicator that the revenue and profit figures have been significantly inflated. 5. True 2013 profitability merely one third of announced By ignoring the mysterious Rmb1bn “engineering technology service” revenue and the Rmb380m hole left by Anshan, we estimate that Sound Global’s real profitability in 2013 was just about Rmb113m, or slightly more than a quarter of the amount that it announced. Adjusting for the non-existent cash/bank balance, true 2013 net book value would be slightly less than Rmb1bn. 6. Stock worth about HK$2.4 per share
Applying the prevailing historical 2013 P/E of 23x on Sound Global’s reported numbers to our adjusted profit estimate, we are of the opinion that the stock is worth about HK$2.4 per share.

[grubb]

Delay in release of 2014 results..

http://www.hkexnews.hk/listedco/listcone...311597.PDF

===============

And then the resignation of a member of the audit committee, for family reasons. I'm a bit sceptical..

http://www.hkexnews.hk/listedco/listcone...311603.pdf

===============

And lastly today's news from SCMP.

http://www.scmp.com/business/china-busin...it-ratings
=================

I think all along I have been quite sceptical of Chinese water treatment companies. Their investment is front loaded, but they get their profits back on a long term. At the same time, they sell themselves as a Growth stock, so they need to raise lots of financing to invest in new projects. And I was also concerned about the ability of municipal governments to pay the concessionaire so many years down the road given all their debt problems reported in the news.

Of course all this sounds like I'm saying it on hindsight. And in general all utilities invest up front first and get their money back later. The stock price performance of water treatment companies has also been amazing. But I think where China businesses are concerned, those which have a cashflow mismatch problem ought to deserve more due diligence...

Just my 2 cents. Feel free to correct me.

[specuvestor]

Amazing SGX managed to dodge a bullet... IIRC Sound Global had a toxic derivative deal with CS when it was listed in SGX, which suppressed the share. Funny why they reported to Singapore MoF.


Sound Global Says Auditors Discover About $323 Million Shortfall
2015-04-29 22:27:20.816 GMT


By Joshua Fellman
(Bloomberg) -- Sound Global Ltd., the water-treatment
company accused of accounting irregularities by a group calling
itself Emerson Analytics Co., said auditors had identified a
shortfall of about 2 billion yuan ($323 million).
Auditors found the discrepancy between Sound Global’s bank
and book cash balances as of Dec. 31 while working on the
company’s 2014 earnings, according to a Hong Kong stock exchange
filing on Wednesday. The auditors reported their findings to
Singapore’s Ministry of Finance, Sound Global said.
Sound Global’s shares plunged a record 29 percent on Feb.
16, the first day of trading after Emerson released a report
questioning the company’s revenue. It issued two subsequent
notes. Sound Global denied the accusations, saying Emerson’s
reports were “misleading, groundless and full of hyperboles and
logic flaws.”
The company’s independent review committee will early next
week hire a professional corporate-investigation firm to look
into the matter, probably returning a final report by late May,
according to the Wednesday statement.
Assuming the auditors will resume work after the final
report is issued, Sound Global expects to publish 2014 earnings
in late June, according to the filing. The company’s shares will
remain suspended until further notice.