China Gaoxian

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A good example for not chasing prices without looking at fundamentals!

Jan 28, 2011
China Gaoxian hit by poor showing in Seoul

By Jonathan Kwok

SHAREHOLDERS had bet that China Gaoxian's dual listing in Korea, which kicked off on Tuesday, would be a hit - and a boon to the company's shares listed on the Singapore Exchange (SGX) as well.

But the opposite has happened.

The counter here has tanked, after a particularly poor early showing by the textile company's Korean Depository Receipts (KDRs) in Seoul.

Since late December, investors here had chased the SGX counter to an all-time high of 45 cents on Jan10, on hopes of a good start in South Korea. However, all those gains have been erased.

SGX firms to have done well of late with dual listings abroad include Yangzijiang Shipbuilding and Super Group.

'People were looking at the likes of the successful Hong Kong and Taiwan listings, and they were extrapolating the potential rises into Gaoxian's KDR,' said Sias Research vice-president Roger Tan. 'But investors have spoken, and it has not done well.'

Since Tuesday, China Gaoxian's KDRs - the first to be launched by a Singapore-listed firm - have fallen 26per cent from their initial offering price of 7,000 won (S$7.70) to close yesterday at 5,150 won.

The SGX counter has also fallen sharply. The shares stabilised yesterday to end flat at 32 cents - still 27per cent, or 12 cents, below Monday's 44 cent close.

As one KDR represents 20 ordinary shares, the 5,150 won close translates to just over 257 won (29.6 Singapore cents) a share. KDRs and Singapore shares are fungible - they can be converted from one to the other.

'The weakness in the Korea listing has dragged the Singapore counter down,' said CIMB analyst Jonathan Ng. 'This is a fungible market. People could have sold in Singapore and bought in Korea, especially because of the price difference.'

Mr Tan said the Chinese company had forgotten to 'connect with the hearts and minds' of Korean investors.

'If they were in Taiwan and Hong Kong, maybe they would have been able to connect the investors better, since they are a Chinese company in textiles.'

This point is not lost on China Gaoxian's chief financial officer, Mr Raymond Wong.

'Despite our publicity efforts, investors may not understand us and why we're in Korea. When they didn't see our share price go up on the first day, they could have sold us off too. This would have caused some short-term selling.'

He said an error on the Korea Exchange (KRX) website, which mistakenly states the KDRs' price-earnings ratio as much higher than it is, could have contributed to selling. Price-earnings is a key indicator of share value. If it is too high, it could indicate a stock is overvalued.

'The management has notified the KRX of the mistake and the KRX has agreed to fix it quickly,' he said.

Mr Wong said the firm will conduct more investor relations activities in Singapore and Korea. It will also engage a large investor relations firm in Korea to help.

China Gaoxian's KDR offer raised gross proceeds of 210 billion won, part of which will help fund upstream expansion to produce a key raw material.

My Value Investing Blog:
"Value investors" would gladly take up arms to defend with "fundamental" analysis on why something is a value buy.

Disclaimer - I am talking about stocks in general, not Gaoxian. In case I get lambasted.

I say, look past the fundamentals and try to think of what is going on instead. Most of the time, you and I don't know the market any better to say with conviction we see value in what others can't.
Share price down 24% from $0.25 to $0.19 on high volumes of 139.9 million shares traded.

It is quite hard to imagine that this very same company ended the first trading day of the year at $0.445 !

(Not Vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
While it is probably true that many have bought into this counter driven more by a speculative (vs. fundamental) motive, the fact that so many decided to sell out and that the share price has fallen so much in a single session, do indicate something could be seriously wrong with the business or the company. Beware!
Just got halted.....
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
I remember commenting on this company before elsewhere.

Company gets listed.

Company declares dividend.

Company goes for dual listing.

Company declares dividend.

CEO owns a large stake in his company. Guess where most of the dividend went?
Business Times - 24 Mar 2011

Gaoxian trading halts: a poser


CHINA Gaoxian has joined the string of S-chips that have seen trading of their shares either halted or suspended. While investors are still anxiously awaiting news from the company, speculation is rife on what could have possibly happened. Investor fears stem from accounting irregularities at some China-based firms listed in Singapore.

In the absence of full information, a trading halt is justifiable to ensure a level playing field. But a pertinent question to ask is why the textile firm has chosen to halt trading of its Korean Depository Receipts (KDRs) one day after the start of its share trading halt in Singapore on Tuesday.

In fact, it had to take a query from the Singapore Exchange (SGX) to China Gaoxian on the unusual trading activities of its shares on Monday to prod the company into requesting a trading halt here for the purpose of 'investigating the matters prompting SGX's queries'. By then, the Singapore counter had already fallen by a staggering 24 per cent on that day alone to 19 cents, after some 140 million shares changed hands.

Whether the drastic stock movement suggests that some punters were trading on information not yet made public is anyone's guess. But in the meantime, China Gaoxian's KDRs in Korea, which fell only 1.1 per cent to 4,895 won on Monday, slipped a further 14.9 per cent to their lowest level at 4,165 won on Tuesday. This translates to 23 cents since one KDR represents 20 shares.

This raises the question of why the trading halts were not carried out simultaneously on both exchanges. Pending the release of potentially material information, some shareholders trading KDRs on Tuesday could be acting on incomplete or inaccurate information; or worse, some could be trading on insider information.

While no notices have surfaced yet of changes in substantial shareholdings, it would be interesting to await news of whether such transactions took place this week. Such disclosures, if any, will likely be subject to scrutiny.

Understandably, investors haunted by memories of troubled S-chips with accounting irregularities might harbour worries over China Gaoxian pending the release of information.

Earlier this month, SGX queried the group on its unaudited financial results for the year ended Dec 31, seeking clarity on the significant decrease in trade and other receivables and the rise in bank loans despite a significant jump in cash balances. In response, China Gaoxian explained that cash sales made up a larger proportion of total sales in fiscal 2010 than in fiscal 2009.

Receivable turnover days also decreased significantly as exceptionally strong demand in the fourth quarter prompted customers to pay on cash terms to secure the price and supply of products, and the group has tightened credit terms to strengthen cash position, it said.

Justifying the rise of short-term loans amid abundant cash balances, China Gaoxian said it converted bills payable balance to short-term loans to support banks in meeting their loan quota as 'it is in the interest of the group to maintain close and mutually beneficial relationship with its PRC banks'.

For shareholders not satisfied with the group's responses to the SGX queries, they had ample time to act on their shareholdings before the Tuesday trading halt. Those who have chosen not to make an exit will just have to bite the bullet and hope that investor fears will prove unfounded.

As the trading halt cannot exceed three market days unless it is converted to a trading suspension, China Gaoxian probably has to shed some light on material developments by today.

It would be surprising if the disclosure throws up any accounting issues at China Gaoxian, which was listed in September 2009 and has recently gone through another round of scrutiny by the Korean Exchange in its dual-listing undertaking. But should the news turn out to be negative, it would perhaps serve as a wake-up call for shareholders that they should not take dual-listing as a guarantee of a company's health.

After all, being able to pass muster under a different regulatory regime doesn't necessarily mean that all's well for a company, except to say that things look okay on paper.

Hopefully, the S-chips cluster will not have to cope with yet another shock, as that would mean that the uphill battle to regain confidence and trust will only get tougher.

My Value Investing Blog:
Perhaps the worst for China Gaoxian's shareholders has just happened.....$file/Announcement_24Mar11_.pdf?openelement

External auditors E&Y could not verify the company's bank balances (part of the RMB1061.7m cash & cash equivalent) as at 31Dec10. Is the CEO Cao Xiangbin (曹祥彬) a crook? Is the CFO Raymond Wong a joke? Who are the thieves who took the company's money in the bank accounts?

The funniest thing is that just in Jan11 China Gaoxian managed to raise $223.8m (net proceeds) in new capital via a KDR issue (30m KDRs; or 600m new shares) sponsored by Daewoo Securities!

How can the professional bankers, lawyers, reporting accountants, and SGX review/surveillance officers, let crooks so easily penetrate the defense system safeguarding Singapore's public equity capital market??!!

I think the Singapore authorities must act now to change/correct the system in order to uphold its integrity and market confidence. All those wrong-doers should be put to jail!
I'v just did a search and found an article by Ernest Lim, who claimed to be a shareholder (not sure if he still is ?) . I guess quite a lot of people got cheated.

After Hongwei & Gaoxian, i think people should avoid China Textile shares altogether and they do not have much time left to act.

Guess greed can turn someone insane despite so much warning. We are not talking about Risk of Business failure here.
Is about Frauds in many forms. And there is clear trend. Enough said.............


Just my Diary


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