Dapai International, a counter which I used to have and divested at a loss, has had an SGX annoucement here stating the 1 for 4 rights issue.
Dapai will be issuing new shares at $0.080 apiece, and the reason for it is
"the entire amount of the Net Proceeds of S$19.3 million for financing in part the potential
acquisition of a suitable target in the backpack and luggage business segment which the
Company is currently negotiating, or if the potential acquisition being unsuccessful, the entire amount of the Net Proceeds of
S$19.3 million will be used for the Group’s future expansion of sales and distribution
networks and channels as well as general working capital purposes."
I have to thank Heavens that I divested immediately after I felt something not right with this company. My reasons at that time here.
This Rights Issue is yet another reason to be wary of this company.
Dapai has a cash horde of over S$100,000,000, with negligible debt. Yet, it still begs shareholders for a mere S$19,300,000. In the words of Nick: " It is like a man who claims to have $100 in his pocket but need to beg for $19 to buy his favourite bag lol"" "
Look at the part of the SGX annoucement I bolded. Essentially, what Dapai is telling you is, should he fail to secure stock of his favorite bag, he will just keep the money in his wallet, thanks for your generosity :)
I emailed the IR in March 2011 to enquire why they did not pay a dividend. The IR replied they needed the cash for it's working capital. Yet, still need to beg shareholders for money again? Huh? Wu yiah bo?
With the recent damning China Milk report issued by KPMG, one wonders - what exactly are these Chinese companies up to? Can you trust what they say? After all, the assets are thousands of miles away. Who is going to sight and verify them?
ReplyDeleteA similar case occurs with cash - who can verify if it is indeed there? Banks collude with companies often as the whole system is corrupt - the bank executives get kickbacks for prparing nice (but fake) bank statements and signing off on bank confirmations. Other not-so-friendly ones simply refuse to meet auditors and investigators.
I believe we may start to see yet another crop of scandals very soon after the recent news of the "titillating" trio - China Hongxing, Hongwei and Sino Techfibre.
Hi MW,
ReplyDeletethanks for your comments.
Like what you mentioned in the cbox- cash is easily faked and there is alot of collusion between these dubious firms and the banks.
Like you, I'm highly suspicious of S-chips like Dapai. But, unfortunately, what can we do about them? I guess what we can do, simply, is just to stay out no matter how good the FA or how "hot" the stocks are touted.
Hi Isaac, interesting insights on this blog! This counter is indeed fishy. N dividends this year and still asking for more money?? What's funnier is, it is currently trading at (or below) net cash per share. How unbelievable! The company is either really faking its cash position or really suck at investors relations. Under such situations, Dapai should get someone independent to perform a special 'cash' audit to show the investors.
ReplyDeleteP
Hi P,
ReplyDeletethanks for your compliment :)
Mr. Market must dislike this Rights issue to have had such a strong reaction against it. I can see how this reaction is justified.
The problem with "verifying" bank balances is that, banks and corporations in PRC have a chummy relationship and will think nothing of forging bank records.
Hopefully, the retail investors have cashed out of this S-chip.
Hello Isaac!
ReplyDeleteImpressive that you took action and divest when you are uncomfortable with Dapai.
When I started out, I was always in the denial mode (my head stuck in my axx). Too proud to admit I made a mistake in buying in the first place.
Got face; money flowing out. Now I very quick to admit that I am wrong; money starting to flow in :)
Hi SMOL,
ReplyDeletethanks!
Pride is such an ass huh? We always have to remember mr. market is right!
Excellent
ReplyDelete