Financial News
Written by: Wen Zongzong
2019-11-22 10:02
Last updated date: 2019-11-22 10:02Mainland milk powder producer China Feihe (6186) was listed on Wednesday (13th) and was not expected to be listed for as short as 7 trading days, which attracted short-selling institutions. According to research firm GMT Research, China Feihe has a strong revenue growth and a large amount of cash. It has never paid dividends in the past five years, which is in line with the characteristics of fraud. It is recommended that investors avoid it.
China Feihe announced the suspension of trading before the market opened, pending the publication of a clarification announcement. The stock closed at 6.28 yuan yesterday (21st), 16.2% diving compared with the offer price of 7.5 yuan.
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GMT Research published a report yesterday, pointing out that China Feihe is the industry leader, with strong revenue growth and profitability, which is the highest in the world. Free cash inflow has accumulated about 6 billion yuan, equivalent to about half of operating income, but in the past 5 The fact that no dividends have been paid in the year is a typical fraud feature. It is suspected that the company’s cash is trapped and it is also possible to falsely report part of the cash.
However, the report also said that the situation does not necessarily mean that the company has false income, but after the privatization of Feihe in 2013, the company suddenly transformed into a high-end milk powder leader, its revenue doubled from 2016 to 2018, and the profit before tax increased by 5 times. Most of the growth came from its product "Astrobaby", which increased by 7 times during the period. The report believes that there is no convincing reason to explain the company's rapid transformation.
GMT also mentioned that China Feihe was listed in Hong Kong for the second time. The company said that the use of funds was mainly used for debt repayment. The situation was suspicious and investors were urged to evade.
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