Shareholders ask: "Is the cash really there? What will it be used for?"
As at end-2102, the company had RMB444.5 million cash, up from RMB439.4 million a year earlier.
Could the new auditor (Mazars LLP) and the new senior finance manager of China Fibretech explain how they verified the cash is indeed real?
A representative from Mazars said the Singapore Exchange has guidelines on how auditors should do cash audits. Mazars auditors have personally gone to the banks in China to collect the bank confirmation of the account balance in Nov 2012 and January 2013, and checked the bank statements. This is unlike audits for Singapore-based companies whereby auditors obtain the bank confirmation by post.
Giving an account of his work, Raphael Liew, who was appointed China Fibretech's senior finance manager in April 2012, said every month the company gives him the bank statement which is also circulated to the directors.
Every month, he reviews the transactions to make sure they tally with the accounts, and "so far there has not been any inconsistency."
To increase the level of transparency, Lim Yoke Hean, the independent director, revealed that the company is exploring with its bankers in China for a way for the company's key management and directors to be able to check the balance online. They would not, however, be able to make any cash transfer online.
This clearly indicates that the CEO who is also Chairman with more than 50% shareholding is always being watched about the cash balance making it difficult for the Boss to do hanky panky.
Besides,Lim Yoke Hean who is a CEO of Pheim Asset Management has a reputation to maintain as he defended the company's practice.
The cash is also deposited in a reputable and one of the largest banks in China and not in a small town bank where the employees and management can be easily bought.
2012 AGM,Commented by Leong Chan Teik from Nextinsight who attended the AGM
My closing thoughts: I assume the net cash of 17 cents indeed exists -- in part because the ex-CFO and the executive director Gao Yan should know (or at least have no strong reason to doubt) and this gross undervaluation was why they bought the shares.
The ultra-low stock price is due to the market having its doubts about the cash (since the company is a S-chip) and the business being a smallish player with weak fundamentals, so investors are by and large indifferent to it.
However, the stock price could reflate to, say, above 10 cents if the management does share buyback regularly and pays a dividend. Just a 1-cent payout will translate into a yield of about 30%, which in turn would force the stock price upwards.
Even if the stock price stays stagnant, the management would have heeded the counsel of minority shareholders -- and that would go a long way to demonstrate its sincerity in trying to enhance shareholder value.
THE CHALLENGE TO THE RETAIL INVESTORS IS TO PUSH THE MANAGEMENT WITH IMPROPORTIONATE CASH PILE AGAINST THE SHARE PRICE AND NEW CASH COMING IN TO TAKE REMEDIAL ACTIONS TO PUSH THE SHARE PRICE UP
China Fibretech: Dr Pu Weidong has appeared as the company's No. 7 largest shareholder with 5.46 million shares with a current market value of S$147,000. He did not figure in the 2012 annual report.
Dr Pu once was an investment analyst with UOB Kay Hian in Singapore, and then joined Sinomem Technology as Vice President for Corporate Planning, Strategic Investment and Investor Relations.
He currently is CEO of Sinopipe Holdings, an S-chip whose trading has been suspended since April 2012 for accounting irregularities. He became the CEO after the previous CEO was terminated for irregularities.If I am not wrong Dr Pu was born in China and did his tertiary education in Singapore. He manages Triumph Capital. Before becoming the CEO of Sinopipe, Triumph Capital has invested heavily in the counter and a substantial shareholder.I believe he would have learnt the painful lessons of investing on S-chip through after getting fingers burnt in Sinopipe and would have become extra careful .I believe he would have done his homework and due diligence before investing on China Fibretech and has the experience to probe the management how the company is being run.Being an investment analyst and asset manager he has the experience to pick the right companies for potential gains and one of them is China Fibretech.
Another new shareholder appeared in 2013 annual report of China Fibretech. is Ramesh Chandiramani, who runs Forte Capital and has taken significant stakes in various small-cap companies.
He is No.8 largest shareholder in the 2013 annual report of China Fibretech with 5.001 million shares. His name did not appear in the 2012 annual report.
In spite of all the noises made about China Fibretech which I believe these guys are aware, for them to take significant stake in CF means they see great potential in it after doing their homework and due diligence.Maybe they are the one the big boys still accumulating this counter on the cheap now.
I also believe their voices will also be heard by the management as they have the experience and the power to do it .
I strongly feel their investment in China Fibretech in spite of bad reputation of S-Chips is an endorsement of the potential of CF.
We just have to wait it out and push the management to take actions that will boost shareholder value.
We also have the CEO of Pheim Asset Management as an Independent director of CF. His reputation is at stake to ensure there is no hanky panky in the company.Perhaps, if the company wants to boost the shareholder value he can advise the management what to do with his expertise,that's what they are good for.
Finally,for the Special General Meeting that maybe held in September we should demand the management to take actions to boost shareholder value and not just park the money in the bank. Otherwise we should not give our support to sell the land to send a strong message to the management.This is an opportunity not to be missed.The counter has the potential to rise above 10c as the fundementals are very strong.With strong cash position company will be in strong position to take advantage of opportunities in the bad times of the economy by getting things on the cheap.
This is a spare land and so they are getting spare money including significant gain.
So there is no excuse for them not to pay special dividends or buy back shares.
Company when they buy back shares at low price can always sell back at higher price in the open market when the price recovers. So Pheim Asset Manager,the company has no excuse to keep the money for future expansion as they can always get back the money by selling back the treasury shares in the open market
Let's all those vested in China Fibretech do not waste the opportunity of the forthcoming Special General Meeting for the sale of land to push the management to commit to boosting shareholder's value as they have this extra cash from the sale of land ,on top of the already large pile of cash they have before the sale of the land.
Even if share buyback cost them money they can always sell it back in the open market the buyback shares that becomes treasury shares at higher price when the price goes up making good profit for the company,
Suppose the buy back at an average price of 5.5c and the price goes up to 15c by share buyback where the price is supported by its fundamental of about 20c net cash after settling all debts, the company can make a gain of almost 200%.
Even at 15c the company is undervalued as if they dissolve the company and write of all assets they still have 20c per share pure cash after the sale of land. At 4c there is something wrong about the management for not taking advantage of the low price of the share to buyback to boost the NTA of the shares and cash per share.
The chairman owns 50% of the total shares and the sale of land is half the value of the total market capitalization of the company, With the cash of the sale of land itself at current price the Chairman can buy back the remaining of the shares he does not own to make it 100% for himself and the cash per share will be above 40c. It just an indication how cheap the shares now is but it does not happen like this in the real world as the shares are buyback the price rises.
So I don't buy the argument by Indpendent Director who is the head of Audit Committee and the CEO of Pheim Asset Management Lim Yoke Hean that the company is not paying dividends because they want to use the money for expansion, I think he should know better than me that paying dividends couple with share buyback will lead to higher share price and in turn the company can sell back the treasury shares in the open market at higher price and also keep retail investors happy. If he is invested in this company as an asset manager he will start arguing like us but he is an independent director singing to the tune of management instead of speaking for the retail investors.
AGM 2013
(As for what the cash might be used for (and the company has not been paying dividends), Lim Yoke Hean said the management is exploring business opportunities, such as expanding the existing business, setting up a processing plant in another city, and diversifying upstream or into a different business altogether)
AGM 2012
Jason Wee: “It’s ridiculous that a company with so much cash is being priced at less than 4 cents a share. It’s really a no-face situation – you might as well not be listed.”
(Jason Wee was formerly head of research for small-caps at CLSA. During his 13-year stint in the industry, he was consistently ranked in the top three within his specialty fields, ranging from the technology, banking & finance, media, conglomerates and consumer sectors.)
How can a top analyst Jason Wee wrong but the independent director, CEO Lim Yoke Hean of Pheim Asset Manager disagree and supporting the management?Where is the credibility of the independent director from a top performing mutual fund?
Let's use the special general meeting to demand for commitment to improve shareholders value and not just lip service and a DUMMY SHARE BUYBACK mandate which not being used.
Or else do not give the support for the sale of land as it is just going to be parked in the bank idling but no use to retail investors.
The rewards are high for those vested as the share price has the potential to multiply if the management does the right thing. LETS ALL DO OUR PART TO GET THE MANAGEMENT TO DO SOMETHING INSTEAD OF GIVING US EXCUSES FOR THE PAST 3 YEARS WHENEVER THESE QUESTIONS ARE RAISED ABOUT THE SHARE PRICE.WE DONT WANT EXCUSES WE WANT ACTIONS AS THE SHARE PRICE HAS NOT CHANGED FOR THE PASSED 3 YRS AT A RIDICULOUSLY LOW PRICE WHEN THE NET CASH IS SOON REACHING 20C FROM 17C BUT THE SHARE PRICE REMAINS UNCHANGED.
2012 AGM BY FINANCE JOURNALIST WHO ATTENDED THE AGM
My closing thoughts: I assume the net cash of 17 cents indeed exists -- in part because the ex-CFO and the executive director Gao Yan should know (or at least have no strong reason to doubt) and this gross undervaluation was why they bought the shares.
The ultra-low stock price is due to the market having its doubts about the cash (since the company is a S-chip) and the business being a smallish player with weak fundamentals, so investors are by and large indifferent to it.
However, the stock price could reflate to, say, above 10 cents if the management does share buyback regularly and pays a dividend. Just a 1-cent payout will translate into a yield of about 30%, which in turn would force the stock price upwards.
Even if the stock price stays stagnant, the management would have heeded the counsel of minority shareholders -- and that would go a long way to demonstrate its sincerity in trying to enhance shareholder value
