Deals Potion Tunneling Fraud:

• Step 1: Record net gain on change in fair value of biological assets: FY09 RMB210.6m + FY10 RMB306m + FY11 RMB507.7m + FY12 RMB166.9m = RMB1.19bn. Note that the increase in sales from RMB668.5m in FY09 to RMB1.77bn in FY12 is RMB1.1bn.
• Step 2: Book equivalent amount goodwill from acquisition of assets at inflated valuation: Goodwill on acquisition of BPG F&B on Nov 2010 = RMB1.16bn. Note that the “asset” of BPG, excluding PPE, is RMB1.13bn, an amount which include land use rights, construction-in-progress, intangible assets, deposits, inventories, trade and other receivables, cash equivalents.
• Step 3: Write-off Net gain on change in fair value of biological assets: FY13 (RMB260.5m) + FY14 (RMB823.8m) = RMB1.08bn
• Cash outflow from acquisition of BPG to related parties = RMB666.5m + RRMB505.4m (transferred out first from Asian Citrus to BPG before acquisition?)  = RMB1.17bn
• Profit warning in Jan 2015 on fair value write-down, followed by HLB disease in April 2015

http://www.chinaknowledge.com/Newswires/News_Detail.aspx?type=1&cat=CMP&NewsID=%2040165

Hopu, Temasek among investors in Chinese juicer Asian Citrus

Eight investors, including Hopu Investment Management and Singaporean SWF Temasek Holdings, have purchased HK$1.55 billion ($200 million) worth of shares in Asian Citrus, the largest orange plantation owner and orange producer in China, to provide the company with capital needed to buffer its acquisition of BPG Food & Beverages Holdings Ltd. Asian Citrus announced last month that it would purchase BPG, a leading supplier of tropical fruit juice concentrates in the Mainland, which had been backed by Lunar Capital.

http://www.telegraph.co.uk/finance/markets/marketreport/11540490/Asian-Citrus-investors-stricken-by-infection.html Asian Citrus investors stricken by infection Shares in the orange plantation group tumble on news of citrus greening outbreak The Aim-listed company lost more than a fifth of its value on Wednesday Photo: Andrea Jones By Ben Martin 7:12PM BST 15 Apr 2015 Investors in Asian Citrus were pulped after the Chinese oranges business revealed that one of its plantations had been struck by a deadly disease. Shares in the Aim-listed company tumbled 2p, or 23.9pc, to 6.375p on the announcement that it had discovered Huanglongbing (HLB), better known as citrus greening disease, in trees at its Xinfeng plantation in Jiangxi province. Continue reading →

Glaucus Research Group California LLC initiates coverage on Delaware-Issued 2018 and 2019 Corporate Bonds of Rolta with a Strong Sell rating

Rolta India Limited (“Rolta” or the “Company”) is an information technology company with operations primarily in India and North America. In 2013 and 2014, Rolta issued an aggregate of US$ 500 million of junk bonds (the “Junk Bonds”), which are due in 2018 and 2019, and have attracted investors by offering tempting yields.

Based on the evidence and analysis presented in this report, we believe that Rolta has fabricated its reported capital expenditures in order to mask that it has materially overstated its EBITDA. The margin for error is narrowing: Rolta’s net debt has risen from US$ 319mm at FYE 2011 to US$ 740mm in Q3 2015 and the Company has almost nothing to show for its highly suspicious spending.

We believe that in reality, Rolta’s business does not generate free cash flow and that Rolta cannot repay foreign bondholders without refinancing. Indeed, we suspect Rolta approached foreign bond markets because it was unable to borrow in India. Ultimately, we believe that bondholders and ratings agencies have failed to price in evidence that Rolta has materially misstated its financial performance and the risk that Rolta will default on its Junk Bonds. We value the bonds at the recovery value of the offshore assets, which we estimate to be USD 0.16 on the dollar.

http://webb-site.com/articles/FaRCical.asp

Putting the FRC in Farcical
16th April 2015

All is not well at the Financial Reporting Council (FRC), HK’s auditor investigator, which would also like (correctly, in our view) to take disciplinary matters away from the self-regulatory HK Institute of Certified Public Accountants. Browsing through freshly released annual reports last Friday (10-Apr-2015), we came upon the 2014 annual report of China Yunnan Tin Minerals Group Co Ltd (CYTM, 0263). This is a member of what we call the “Chung Nam Network” of companies that we would never own, so it won’t surprise you to know that its main assets consist of shares in other companies in the network. In 2014, CYTM booked net gains of HK$330.5m on its portfolio, and at the year end it had the following financial assets held as current assets, shown in note 24 of the audited financial statements:

Now, read the words we highlighted carefully. It states that CYTM’s holding in Heritage International Holdings Limited (Heritage, 0412) is more than 10% of CYTM’s total assets, but represents 0.03% of the ordinary shares of Heritage. “FVTPL” is accounting-speak for “Fair Value Through Profit or Loss” and means that the listed shares are valued at market prices at the year-end.

CYTM had total assets of HK$1488.6m, so 10% of that is HK$148.86m, so that implies that the stake in Heritage is at least HK$148.86m. However, if it is only 0.03% of Heritage, then that implies that Heritage had a year-end market value of at least HK$496.2 billion, making it bigger than say, Hutchison Whampoa Ltd. In fact, although we regard Heritage as a bubble stock, its market value at 31-Dec-2014 was HK$6.48bn, nowhere near the implied figure. So CYTM’s stake can’t have been 0.03%, and must have been more like 3% of Heritage, a stake that would be substantially harder to liquidate in a hurry, so the error is material to readers of the accounts, particularly investors. Continue reading →

http://blogs.barrons.com/asiastocks/2015/04/14/zoomlion-slumps-on-profit-warning-barclays-downs-to-sell/?mod=BOL_hp_blog_astw

Meanwhile, will Zoomlion be able to collect cash from its sales? Will we see write-downs? The Barclays analysts wrote: Overdue finance lease receivables increased 5ppt to 30% at end-2014. Management commented that the average payback period for its machinery is six years. As such, we believe the financials of a significant portion of its customers is now beyond repair and that Zoomlion’s provisions for its financial leases (3.8% in 2014, down from 4.0% in 2013) is inadequate.

15 April 15

(1157) Zoomlion Heavy Industry Science and Technology Company(H): Zoomlion Heavy Industry Science and Technology issued profit warning and expects to record a net loss attributable to the equity shareholders of RMB300 m to RMB390 m for the first three months of 2015 due to the continuous slowdown in the growth of fixed assets investment of the State, especially the slowdown in the growth of real estate investment, the demand in the construction machinery market continued to be weak, which represented a relatively substantial persistent impact on the overall sales revenue and net profit.

(1157) Zoomlion Heavy Industry Science and Technology Company(H): Zoomlion said the joint research group which was formed by five departments, including the SASAC and MIIT investigated the operation of Zoomlion recently. Zoomlion’s chairman Zhan Chunxin said that the company will strive to achieve a 15% growth or higher in annual revenue in 2015.

20 January 15  

(1157) Zoomlion Heavy Industry Science and Technology Company(H): Zoomlion Heavy Industry Science and Technology Co., Ltd issued profit warning and expects net profit attributable to the equity shareholders for the year of 2014 to drop 70-80% YoY due to the continuous slowdown in the growth of fixed-assets investment of the State, especially the slowdown in the growth of real estate investment, the demand in the construction machinery market was weak.

http://blogs.barrons.com/asiastocks/2015/04/14/zoomlion-slumps-on-profit-warning-barclays-downs-to-sell/?mod=BOL_hp_blog_astw

April 14, 2015, 9:56 P.M. ET

Zoomlion Slumps On Profit Warning; Barclays Downs To Sell

By Shuli Ren

Shares of Zoomlion (1157.Hong Kong) fell by over 5% this morning after the construction machinery manufacturer issued a profit warning. Continue reading →

14 April 15

(970) Sparkle Roll: Sparkle Roll Group Limited issued profit warning for the year ended 31 March 2015 due to the (i) decrease in revenue and gross profit from sales of automobiles, watches and jewelries due to the PRC government’s anti-extravagance policies; (ii) approximately HK$10,000,000 losses onforward foreign exchange contracts as a result of the depreciation of the Euro and Swiss Franc against Hong Kong dollars; and (iii) approximately 30% increase in finance costs arising from purchase of automobiles in the fourth quarter of the current financial year.

02 July 14

(970) Sparkle Roll: Sparkle Roll said Mok Henry Wing Kai has tendered his resignation as the chief financial officer, the company secretary and an authorized representative due to personal reasons but retained as a consultant to the company starting from 1 October 2014 to 31  December 2014 or such later date as mutually agreed