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  • Was the loan from Citic funded? You bet!
    According to the most recent 8k, Mr. Ming Zhao denied that the loan from CITIC amounting to 3.5 billion RMB had been funded and hence the 49% transfer and 51% pledge would be ineffective. Link HERE
    However, according to 《财经国家周刊》Economy & Nation weekly (a subsidiary of the states media Xinhua agency), dated 3rd May 2011, by the end of Jan, 2011, 3 billion of the loan had been used to buy several mines and to upgrade the machineries. This contradicts Mr. Zhao's words, but I know which side I would choose, if the loan hadn't been funded, there wouldn't be a need to increase it from 2.5 billion to 3.5 billion in Nov. 2010. The weekly also listed the specific mines that were bought using Citic's loans, so looks like it's not a baseless fabrication. What's also interesting is that the weekly also pointed out that Puda's core assets had been pledged to Mingshen banks etc to the tune of several billions RMB long before it was pledged to Citic, so we may have a seniority issue here.
    Nobody knows what's gonna happen next, but if Mr. Zhao is lying to the audit committee even now, how much can we expect from the 12 dollar offer? Maybe I am the only fool still thinking about that offer, given the stock is trading at sub 2.
    Disclosure: None
    Tags: PUDA
    Sep 06 11:12 AM | Link | Comment!
  • I have found the hogs

    When it comes to investing in China RTOs, there is simply no substitute for on the ground DD. Some of the OTGDDs are fairy easy to carry out, HOGS is one such case. Assuming company is telling the truth, all you need to do is to follow the company list and locate the shop and take a photo, that’s exactly what I asked my investigator to do.

    I’ve chosen Anyang city because it has been scouted by CER street by street, in taxis, and on motor bikes, and CER found 8 branded stores in Anyang city, so we have a benchmark to compare to. Furthermore, it’s a third tier small city which is easy to investigate, one probably needs to spend a week in Shanghai to figure it all out, for Anyang, it’s a one day job. Anyang is also one of the home bases of Zhongpin, so one should expect rather good coverage there. I have chosen 20 CONSECUTIVE stores on Zhongpin’s list to show that I won’t mark the bullseye after the shot. They are list item 151 – 171 on Zhongpin’s list , excluding nr. 153, which is in a county, not in the city.

    I have found 17 out of 20 stores! The pictures are here , at the address that the company said where you could find them. In addition, I have also found store that didn’t show up on the list, and stores that are not within the 20 names, just like CER did, in Anyang city. China is changing fast, so I guess a fluctuation of 10-20% can be expected in one and a half months, also it’s possible that I have missed some stores, some addresses are a little confusing. The key point however, is that 17 out of a short list of 20 is a pretty good score, which completely overturned the story that CER painted, aren’t it?

    Given I have found 17 out of 20, it would be natural to wonder why CER only found 8 out of the entire city? Maybe some of them are too hard to find? Not at all, Nr. 161 is very hard to miss according to my investigator, it’ the biggest farm market and everyone knows that there is a chain of Zhongpin stores,  Maybe CER’s investigator didn’t ask anyone local when they did their investigation, after all, they are the authority in OTGDD, why ask local? One can argue that Nr.161 is in a farm market, though among the most popular place to buy meat in China, but nevertheless, you don’t see it in a taxi. How about this one facing the street in the city center? It’s not in my 20 names but nr. 189 on Zhongpin’s list, if you ask any locals where you can find Zhongpin shop, they most likely would point that one out too, how could CER miss one facing the street in the city center of a small city such as Anyang? How could they make the claim: “(We are confident as to thoroughness of our research in this respect. – CER)”? But let’s not forget, they have missed most of what Zhongpin has in Anyang, so I am not so confident, nor is the market if I look at the price reaction.

    Maybe they are hiding something? When doing a crime investigation, you need to find out the motive, would CER have a motive to lie? YES, although CER takes no position itself, however, one call I placed to CER’s Graham Earnshaw recently, I asked him how he made his publication profitable, he mentioned that he provided services to hedge funds that wanted to do OTGDD, in this case, it is probably a short fund and with clear instruction. I see HOGS is suing CER, easy to guess where I gonna place my money.

    GEO investing, a OTGDD team with better track records and reputation, has shown that HOGS SAIC revenue matches SEC’s, other things aside, CER’s story contradicts diagonally with GEO’s finding, once again, my money isn’t with CER.


    Jul 26 7:46 AM | Link | 8 Comments
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