For those vested, I hope the diversification is successful and that it will bring new investors wealth and old timers some respite from the pain.
Just do note that risk is not eliminated from ID words, not matter how sincere and convincing.
Just has a broader risk assessment plan.
Action speaks louder than words.
I am quite sure the actions will bring renewed interest in the counter, and the price will shoot.
As with all investment, not just a-chips, we should always ask ourselves if this counter is a spoiler and is wiped out, how will it affect from overall portfolio and my returns. How long will I recovers.
Wish you all the best! Good luck. This could be the darkest hour before dawn!!
Most of these conman S-Chips siphoned the money or mismanaged the money by expansion of existing businesses. Because of their expertise in the existing business they create loopholes in the expansion procedure to siphon the money.
Such companies include Eratat,China Paper,Hongwei,Foreland,Fuxing,Qingmei.
Unlike these companies China Fibretech is willing to venture into new business including a new management from the new business.
The business proposals are vetted by the Independent directors like Mr Lim Yoke Hean who has many years experience in deal making and investments and he is a consultant for such activities.
Besides, at all times the CEO is monitored about the cash holding through physical check and online checks by the independent directors.
I am more confident in this company once the business proposal is identified the fund will be released and the independent directors have assured us that they are monitoring every step that involves the money in the bank.
Mind you China Fibretech management has admitted that fibre tech industry is a sunset industry and they have no plan to expand current business and they are not considering downstream or upstream. Its an implication of their sincere and objective approach towards future plan instead of forcing them to stay in their comfort zone.
The company is open to investing in business overseas not just looking at prospect in China.
Under present economic condition in China, Cash is king.China Fibretech has about 83% of its asset in cash.
The only issue now is carefully chose the right kind of business. If the CEO has plan for hanky panky then he would stick to fibre tech business and siphon the money out as he understands the business better than many others.
THe CEO is willing to enter uncharted territory but not something he will not be able to understand. That's why they are taking a long time to pick the right kind of business. That's why they employ the expertise of business consultants like Mr Lim Yoke Hean to get it right instead of blindly in a rush select the wrong business.
During the EGM the independent director cautioned that the management is not entering any business without fully understanding the returns and risks. They dont want to blow the money they have accumulated over a period of time.
At IPO they only had RMB 176million n today with the sale of land it should be at least RMB 430 million n with a debt about RMB12million.
The money in the bank is safely guarded by the regular verification done by the independent directors and the senior financial manager and the auditor.
CEO is willing to utilise this money on diversification which is other than his traditional fibre tech business and to be vetted by the independent directors
Every business has its risk including existing business. Company is not only looking at business within in China but also outside china. They even looked at as far as Australia but rejected it for cultural barrier.
I believe being a business consultant Mr Lim Yoke Hean is experienced at looking at all angles before embarking on a business venture.
It was the idea of Mr Lim Yoke Hean to do random weekly checks and regular personal checks on the bank account. So far I have not heard much company have such procedures. That's where the experience comes in.
The three important points that one should take note
One of the bravest thing to do is for the CEO to admit that the fibre tech industry is a sunset industry although previously he harboured ambition to expand or look into downstream and upstream businesses within the industry.
Now, he is willing to come out of his comfort zone and entre a new industry but carefully selecting one with an established experienced management.
Second thing is although the company is primarily in the fibre tech industry the CEO did not blindly expand although he made an attempt which he gave up in the early stage with a Rmb 8million write off by abandoning construction after realising there is not much scope for fibre tech. he was willing to cut loss instead of allowing the hole to grow bigger. From this one can see that the CEO is very conservative not willing to continue something is not going right.
The third and most important point is that even the company in the sunset industry the asset is 85% cash. Scope for write off is minimal and existing facilities can still be utilised for existing business while diversifying into new industry and tapping economies of scale by sharing the management and facilities with the new new business.Thye will still have the same board of directors but having more business so the cost is shared by expanded business activities.Bring down unit cost of production with expanded business