(26-09-2012, 04:23 PM)Serendipity123 Wrote: [ -> ] (26-09-2012, 09:42 AM)dzwm87 Wrote: [ -> ]Serendipity123:
What you are doing here is something like Ben Graham's net-net, except you discount away fake cash but took into non-current assets such as PP&E. But what makes Ben Graham's net-net work is the concept of diversification. He buys a portfolio of net-net which diversifies away company-specific risks.
If you think Foreland is a conviction, then I suggest it will be better to find other similar cases and use it as a comparison. You will be surprised how many there is in Asia markets. China Fibretech is another one - btw, their auditor just resigned.
Disclaimer: just a suggestion, not a call or anything
Fibretech already has warning signs all over it. I looked at it before but decided to give it a pass because of several red flags.
1) The company has no history of paying dividends.
2) The business itself is lousy(Large declines in profit year after year; it's running losses now)
3) The independent directors have resigned one after another (check previous years' annual reports)
So now that more bad news has happened, it's not surprising. But anyway, since you mentioned Fibretech, take a look at the price action subsequent to the announcement. You notice that even with this bad news, the stock hardly reacted. Reason being it's already been PRICED inside the stock.
Foreland, at this price, is in the same situation in that it already has a lot of bad news priced inside, but without any of the accompanying giant red flags. That's why I think it's a good buy.
(26-09-2012, 09:55 AM)propertyinvestor Wrote: [ -> ]Can the company still function AND OPERATE AS A GOING CONCERN if ALL THE CASH IN NON EXISTENT?
Precisely my point. At this price, even if it were to liquidate IMMEDIATELY, I expect the amount retrieved to be more than the current 0.045 per share.
(26-09-2012, 10:28 AM)CityFarmer Wrote: [ -> ]IMO, Cash and Cash Equivalent is the ONLY asset that closer to book value, especially to company like Foreland Fabrictech
But too bad it is the ONE been doubtful.
Ask yourself, in that case, what new information are you looking for that would convince you that Foreland is an honest company and the accounts are good? If there's nothing, it means because of the S-Chip scandals, you trust NO S-chips now. ALL S-chips are doubtful, ALL of their accounts are fake.
Nothing I say or do, and nothing Foreland's management say or do, will ever convince you otherwise.
That's okay though. Everyone is entitled to their own opinion
win big or lose all might not be for everyone, but nonetheless might be a good strategy for some who wish to stomach the risk. Foreland used to be my favourite s-chip as it happens to have the least red flags flashing before the chairman cashed out at ridiculous price.
My personal speculation/imagination is:
chairman might have used quite a bit of money to "buy" the permit for building the andong facility(Was delayed for several years), and thus it looking for ways to recoup the cash. btw, half the assets under the non-current assets is the new andong facility, which is worth hundreds of million of rmb, hence it is not impossible that to use this investment, the chairman used some "creative" methods of payment.
Even so, given his is the major shareholder, why not declare a intern or special dividend?
Given many companies that are hit by the scandals are from the textile sector, Gaoxian, HongXing, Sinotech fibre, 1 more which i can't recalled now, and that chinafibretech has so much problems, i suspect there might be some "common practices" in china that we don't take too kindly to here.
I am willingly to hold on or add to my holding as the price goes down until the chairman did such a stunt, which remind me of qingmei (from the bottom of 5cents to 7 cents now) boss which placed out shares at 16 plus cents and then there is no end of red flags.
I agree that if there is no fraud or coporate governance issue here, you would get a multi-bagger in a few years time. But I gave up and move on, it seems too much like a gamble than a investment to me, IMHO. I have been to china for work several time, their business culture is very different from here, it might not be fraud but their coporate governace is... even schools openly accept "donations" for enrollment places...
I wish you all the best. 1 red flag is no big deal if you invest in s-chip, let's just hope it stops here