Qingmei Group Holdings

[Underdogger]

Full of bullshitting from CFO...

Another quarter of loss, worse than the previous quarter...people in the know are already selling this morning....

Should be called PROFIT WARNING and not profit guidance!


Where is the website as promised by June 2012?
No need for website since company should be closing down soon....

Q: What happened to turnover in 3Q2012 with revenues falling by 54.6% as compared to 3Q11.
A: They had come out with a profit warning prior to the results release. Apparently shoe manufacturers had overstocked on shoe soles in previous quarters and with a slowdown in demand for shoes, that led to a drastic reduction in orders for Qingmei. Jackson estimates that 3Q12 was the low point as far as Qingmei is concerned and things can only look up from here. We can only wait and see...

Q: What is the outlook for 4Q12?
A: Should be better than 3Q12. However the slowdown in demand will will last for about six months till the overstocking situation at the shoe manufacturers end gets sorted out and we see demand turning more normal.

Q: What is the outlook for FY2013?
A: At this point of time they would not like to make any projections.

Q: Who is involved in the massive volumes on the stock that we have recently seen?
A: They have no idea.

Q: Have any clients stopped doing business completely with Qingmei leading to the massive drop in revenues?
A: Qingmei still has all their customers intact. It's just that due to reasons mentioned above the orders across the board for all companies in the shoe manufacturing business has gone down drastically.

Q: What has happened to the website development for Qingmei. I had raised this question during the AGM last year and was told that the website would be up by Dec 2011. However we have seen nothing so far. I tried to make Jackson and Wrisney appreciate the fact that for a relatively large company to have no website in today's times is quiet odd and would be a definite putdown for potential investors.
A: The website will be up and running in June 2012.


Q: Considering that the net cash hoard with the company is now around S$94 million I wanted to know about their plans for dividend payouts in 2012. Also seeing turnover down so drastically their working capital needs should also have come down quiet a bit.
A: The board will take a decision on this at the right time. Jackson assured me that he will put forward shareholder views to the board.

[potatolover]

I got this feeling that Qingmei will drop below 6 cents...Why?
becos economic conditions on the ground are really bad in china.. their reported GDP masked the real ground situation...

[Curiousparty]

Dropping to a new low soon... Can start short covering around 6 cents or below...

[Stockerman]

James Chanos had predicted huge amt of unsold goods back in Nov 2010 - Now we are seeing it - Soon the whole world will feel the ripples...

In January, 2011, the NY Times wrote an article on James Chanos, who predicted the Enron collapse, Tyco and other major financial issues. The article quoted him as telling Politico in November, 2010, “The Chinese are in danger of producing huge quantities of goods and products that they will be unable to sell.”

Now in 2012 we have the NY Times headline, China's economy besieged by buildup of unsold goods.

This is just the tip of the iceberg, says Chanos.

His fund has over 6 billion dollars bet on the Chinese economy collapsing.

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Life and career
James Chanos was born in 1957. He was born into a Greek family living in Milwaukee.[1] he graduated from Wylie E. Groves High School, and then Yale in 1980. He describes his investment strategy as being based on "intensive research into stocks"[2] looking for fundamental and large market failures in valuation, typically based on underestimated or previously unreported failings in the business or market of a stock. Followed by committing to a (usually large) short-position which he is willing to hold for long period of time—almost the mirror image of Warren Buffett's reputed "fundamentals+long stay" investment strategy[citation needed]. Because of this model, his investments function more like those of a whistle-blower than most typical investments. Examples of this include short-selling companies such as Baldwin-United, and more recently Enron Corporation.[3]
He rose to fame in the 1980s as a short seller. After working as an analyst in several firms, he founded Kynikos (Greek for "cynic") in 1985 as a firm specializing in short selling. A critical position taken at Kynikos was his shorting of Enron.[4]
In October 2000, Chanos started research into the valuation of Enron Corporation. He examined their use of mark-to-model (opposed to mark-to-market) accounting, which, in Chanos' view, results in management overstating earnings, as well as what appeared to be a worryingly low (6-7%) return on capital investment. Enron stock declined from $90 in August 2000 to a low of $1 near the end of 2001.[5] Over this period, Chanos was a short seller of Enron during 2001, increasing his short position as more information surfaced. Kynikos profited greatly and Chanos himself became something of a celebrity as a consequence of his early awareness of Enron's problems.[6]
In 2010, James Chanos warned that China’s hyperstimulated economy was headed for a crash, not a sustained boom.[7] He questioned the stability of Chinese economy, stating that historically analogous evidence points especially to a housing bubble, mentioning commercial real estate in particular.[8]

[Underdogger]

Shanghai index fell to 3.5 yr low today....Chanos must be laughing all the way home ...

[d.o.g.]

FY12 results are out. 4Q sales fell 80% and gross margin was negative. Looks like the superheroes have left the factory and gone back to making movies. No real surprise I suppose - minimum wage levels just aren't keeping up with the rising cost of living...

[Underdogger]

they weren't any superheros in the first instances...
Phantom workers? The facade of the factory looks nice...not sure if it is empty inside...

FY12 results are out. 4Q sales fell 80% and gross margin was negative. Looks like the superheroes have left the factory and gone back to making movies. No real surprise I suppose - minimum wage levels just aren't keeping up with the rising cost of living...

---

Why the company decided not declare any dividends for this FY? No real cash to pay out any dividends? from this point forward, we will see the cash of $581mil RMB be eroded as company's losses will widen?? thought CFO explained that Q3 will be the turning pt? Warren Buffet (??) said if the company can predict its net profit, it is likely to have manipulated its earnings....

[Greenrookie]

FY12 results are out. 4Q sales fell 80% and gross margin was negative. Looks like the superheroes have left the factory and gone back to making movies. No real surprise I suppose - minimum wage levels just aren't keeping up with the rising cost of living...

While I agree that qingmei has many many red flags flashing. The idea of superworkers isn't really that incredible. I did some research on that report before and realized that productivity by per worker per hour is only about 20. Mould injecting machines are able to inject around 100 per hour. It's comparable peers (tai ya shoes listed in shenzhen) has more super workers.. But then maybe both are haven for superheroes. 2 of them are among the largest soles producer in PRC. Not vested

[potatolover]

Should dump all s chips....

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An economist at China’s State Council sees economic crisis coming
Li Zoujun, an economist at the Development Research Centre of the State Council, recently made a report, presumably at an internal meeting, which predicted that China could face an economic crisis in 2013.
The full report in Chinese can be read here. We are not going attempt to summarise the whole report as it is quite lengthy, except that for some of his rationale for his somewhat apocalyptic predictions. Majority of what he said does not seem very surprising. The only surprising thing about such a report is just that it is made by someone from the State Council who said it, not any Westerners or Western media who were allegedly talking down China.
The causes of this economic crisis are, first of all, a burst of real estate bubble and local government debts crisis.
The second is external, namely that hot money and capital inflow over the past few years fuelled the bubble within China (then he blames “foreigners who short China”). As capital might flow the other way when the economy slows, it will cause troubles for Chinese government in dealing with it.
The third is political: as this year is pretty much the final year for the current government’s term, its job in the remaining months would be to hope that everything is stable. But let’s say the economy get pass the leadership transition without any troubles, the next leadership will face two choices: either to sustain the bubble for now and create a bigger problem in 2015 /16, or let the bubble got bust. Of which, he endorses the second choice.
Read more: China’s difficult choice between stimulating the economy and do nothing
Finally, business cycle short-wave and long-wave troughs could meet very soon (whatever that means). He believes that a crisis should have occurred in 2008/09, yet the massive stimulus delayed that, and it is about time that it can no longer be delayed.
In the coming crisis, he believes some local governments, small and medium sized business and some banks will go bankrupt.
For those who are familiar with our view, these are not new. We have spent quite a lot of time focusing on local government debts, shadow banking mess and real estate bubbles. We have also said for many times now that capital outflow will prove to be very problematic for China. Much of the endgame he is predicting here has been mentioned here, and indeed some are already happening, such as defaults and credit crunch among SME caused by mutual guarantees scheme, while some local government debts are being rolled over to delay the day of reckoning. While we do not think at the present moment that any banks will go bankrupt despite a potential financial crisis, we see Chinese banks shares to suffer an RBS-type outcome.
The only surprise, as we said, is that this is someone within the State Council who said it. This adds to the evidence to our judgment that the massive stimulus in 2009 is widely viewed as a mistake within China, and some within the government’s policymaking bodies share that view, and we believe this is one of the reasons why the government is so far reluctant to provide any massive stimulus despite arguably very grim economic outlook.
Read more: China economy 2012 series

[potatolover]

a no of S chips might bite the dust?

*****
China Deterioration Raises Risk of Wen Missing Target: Economy
China’s economy is showing mounting signs of deterioration from manufacturers to banks, raising the risk that outgoing Premier Wen Jiabao will miss his growth target for the first time since taking office in 2003.
Manufacturing slowed further in August, surveys of purchasing managers showed Sept. 1 and today, with one gauge at the lowest level since March 2009. The readings added to evidence of weakness after a surfeit of unsold goods left near- record rubber stocks at China’s main hub for the commodity and financial strains saw a 27 percent jump in overdue loans at the five biggest banks in the first half.
China hasn’t failed to exceed the Communist Party’s annual growth target since the throes of the Asian financial crisis in 1998, and a miss of this year’s 7.5 percent goal may complicate a once-a-decade leadership handover. The outgoing generation of policy makers has held back on stimulus this year as it seeks to rein in a property-market boom and avoid a jump in bad debt.
“If there is no further policy response, it’s very likely that GDP growth will fall below the target and this administration will likely hand over a hard-landing economy to the next one,” said Liu Li-Gang, chief China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. The central bank should “revert to cutting banks’ reserve requirements more aggressively to revitalize the economy. If we have a cut soon we could have good fourth-quarter growth.”
Financial Strains
The risk of below-7-percent expansion could potentially trigger financial distress or even a crisis if local governments run out of money, said Liu, who has worked for the World Bank and Hong Kong Monetary Authority. Underscoring a buildup in strains, Construction Bank Corp. reported its overdue loans in the eastern manufacturing and export hub of the Yangtze River Delta doubled to 16.8 billion yuan ($2.6 billion).
Liu cut his estimate for full-year expansion to 7.8 percent from 8.2 percent after the release of the official manufacturing purchasing managers index. The gauge fell to 49.2 from 50.1 in July, below the estimates of 24 of the 25 analysts in a Bloomberg News survey. The dividing line between expansion and contraction is 50.
A separate manufacturing PMI released today by HSBC Holdings Plc and Markit Economics was at 47.6, indicating the fastest contraction in more than three years, with an employment index at a 41-month low. A government services PMI showed a faster expansion in August.
The Shanghai Composite Index (SHCOMP), China’s benchmark stock gauge, rose 0.6 percent today. It fell 2 percent last week to the lowest level since February 2009, and is heading for its first three straight years of annual declines since the Shanghai Stock Exchange opened in December 1990.
Yuan Drop
The yuan, which has weakened 0.9 percent this year, is on pace for its second annual decline since the country overhauled the exchange-rate system in 2005 and removed a peg to the U.S. dollar.
ANZ is the latest bank to lower its growth forecast. Mizuho Securities Asia Ltd. on Aug. 31 cut its projection to 7.6 percent from 8.1 percent while Bank of America Corp. reduced its estimate last month to 7.7 percent from 8 percent.
Asia’s next two largest economies are also showing signs of slowing. Japan’s industrial production unexpectedly slumped in July, data showed Aug. 31. India reported the same day that its gross domestic product increased 5.5 percent last quarter from a year ago, down from an 8 percent pace in the same period in 2011.
India today said exports in July dropped 14.8 percent from a year earlier, while imports declined 7.6 percent. Australian retail sales unexpectedly declined in July by the most in almost two years, data today showed.
Inflation Pressures
The slowdown in growth has dissipated inflation pressures, with South Korea today reporting consumer prices rose 1.2 percent in August from a year before, down from the 1.5 percent increase the previous month. Thailand’s inflation rate slowed to 2.69 percent in August from 2.73 percent in July. Indonesia’s core inflation rate fell to 4.16 percent from 4.28 percent, while total inflation held below 4.6 percent.
A gauge of euro-area manufacturing may confirm a contraction for a 13th straight month in August. The U.S. observes its Labor Day holiday today. Three days ago, Federal Reserve Chairman Ben S. Bernanke signaled he’s prepared to deploy additional asset purchases amid an American unemployment rate that’s “far above” the Fed’s mandate.
Economic growth has slowed for six quarters to 7.6 percent in the three months through June from 9.8 percent in the fourth quarter of 2010 as Europe’s debt crisis crimped exports and a prolonged crackdown on property speculation damped domestic demand.
Further Measures
The slowing will continue this quarter to 7.4 percent, according to Lu Ting, at Bank of America in Hong Kong, the No. 1 forecaster on China in Bloomberg Markets’ annual ranking of global economists for the two years through September 2011. He said there’s a risk the full-year rate will be below 7.5 percent, and growth may miss his forecast if the government “fails to roll out further policy measures in the next few months.”
Growth averaged 10.9 percent from 2005 to 2011 when the target was 8 percent and was as high as 14.2 percent in 2007. The government set a goal of an average 7 percent expansion for the five-year plan that runs through 2015.
Industrial companies’ earnings fell in July by the most this year, according to government data. The nation’s steelmakers posted a 96 percent drop in first-half profit as demand weakened and prices fell, the China Iron and Steel Association said July 31.
Plant Shutdown
Hitachi Construction Machinery Co., the world’s third- biggest maker of building equipment, is shutting its Chinese plant for two weeks a month until October due to a sales slump, President Yuichi Tsujimoto said in an Aug. 29 interview.
Inventories of rubber at Qingdao port, the country’s main hub for the car-tire material, were forecast to match a January record last month on a weaker auto market, Li Xiangou, chairman of the city’s rubber exchange, said in an Aug. 17 interview.
Retailers are also suffering. Parkson Retail Group Ltd., which operates more than 50 department stores in China, said first-half same-store sales rose at less than a quarter the pace of a year earlier and sportswear seller Li Ning Co. (2331) shut 1,200 shops in the six months ending June 30.
China’s government has refrained from a stimulus on the scale of the 4 trillion yuan package unveiled during the global financial crisis that helped keep growth above 9 percent in 2008 and 2009 while the rest of the world slumped.
Wen said in October the government would “fine tune” economic policies. Since then, banks’ reserve requirement ratios have been cut three times, approvals for investment projects have been accelerated and social security and health spending have risen. The central bank lowered interest rates in June for the first time in three years and cut them again in July.
Stimulus Reticence
“The lack of really decisive bold action over the last few months signifies at least in some part the government is content with a growth figure closer to the actual target than perhaps they would have previously liked,” said Alistair Thornton, an IHS Global Insight economist in Beijing. “They’ve got sufficient clout to turn things around if they really want to and they’ll only really want to when the labor market feels the impact.”
A growth rate of 7.5 percent to 8 percent would still compare well with the world’s biggest economies. The International Monetary Fund’s latest forecasts, published in July, put U.S. expansion this year at 2 percent and Japan’s at 2.4 percent with the euro area contracting 0.3 percent.
Korean Experience
Even so, China is at risk of repeating the experience of South Korea in the 1990s, where a slower pace of growth resulted in a “significant deterioration” in profits as companies were burdened with higher fixed costs from capital spending booms aimed at supporting the economy, according to Duncan Wooldridge, chief Asia economist at UBS AG in Hong Kong.
“China’s reluctance so far this year to replicate the investment surge in 2009 is a good thing even if it delays a cyclical improvement by a few quarters,” Wooldridge wrote in the Aug. 30 note.
With less than seven months left in office, Wen may need to leave the task of reviving growth to new crop of government officials due to take over in March 2013 after the annual session of the National People’s Congress.
“There have been rising concerns within policy circles in Beijing that the government’s growth target of 7.5 percent for the year may be at risk,” said Ramin Toloui, Singapore-based global co-head of emerging-markets portfolio management at Pacific Investment Management Co., which manages the world’s largest bond fund.
“More policy easing helps shield against a major contraction, but is unlikely to catalyze a strong recovery because the economy and financial sector is still digesting the large investments made in recent years,” said Toloui, who visits Beijing several times a year.