Geong – Another Crap Chinese Company on AIM provides pure comedy

AIM listed Chinese joke company Geong (LSE:GNG) is always a bundle of laughs. This is a company that works on projects for 18 months, does not invoice yet books the amounts as income. I have pointed out before that its balance sheet backing is illusory, that its “profits” ho ho ho never translate into cash and that it would probably be out of cash within a year. That was in September. But today the company has served up a stormer of a statement and I have just got even more bearish. This is a classic China bubble story.

 You can read my dissection of its hilarious accounting problems and my prediction of gloom here

Today’s statement reads:

The Company announces that payment of the interest amount due on 31 December 2012 under the CULS was late as a result of unexpected delays in the granting of approval by the State Administration of Foreign Exchange of China (“SAFE”) for the transfer of funds. Payment, which was still being processed on the due date, was made on 15 January 2013.

As a result of the late payment which represents a default under the terms of the CULS, the holders, Hanafin Investments Limited (“Hanafin”), have requested immediate repayment of the CULS. Whilst the Company has adequate resources to make the repayment it will not be able to secure the necessary approvals from SAFE to do so in the short term. Accordingly, the Company is seeking to reach an understanding with Hanafin as to an acceptable and achievable timetable for the repayment.

The Company retained £3.9 million in cash at 31 December 2012.

Ends.

Comedy and now incompetence. Whatever the cash was at 31^st December since then it has forked out interest on the CULS and now has to stump up £2.5 million. Since the company is bound to have material trade liabilities and I do not believe it will ever turn all its booked income into cash and never seems to generate cash the prognosis is uber-grim.

A rubbish company + curious accounting policies + clear management incompetence. Just the sort of stock that brings credit to AIM. A sell with a target price of 1 Chinese walnut

Its Geong, Geong… what comes next?

Tom Winnifrith writes for 10 UK and US websites as well as running the quirkiest Celtic Italian restaurant in Clerkenwell ( Real Man). You can get alerts on all of his articles by following him on twitter @tomwinnifrith and links to all pieces appear on his blog www.TomWinnifrith.com

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Comments

1. Peter says:

   January 25, 2013 at 11:02 am

   Looking forward to your update on another cash strapped company that you tipped as a buy on more than one occassion…ANGM!

2. Ian Mackey says:

   January 25, 2013 at 12:07 pm

   Hi Peter,

   Quite ! You/Tom may wish to have a look at these comments re another co TW’s keen on, from someone who seems to know his stuff.

   http://lordshipstrading.blogspot.co.uk/2012/11/avanti-avn-sales-and-receivables.html

   Motes and beams, pot and kettle ? I hope not ! Interims due out shortly, I guess we’ll find out soon enough….

   Good luck.

3. Tom Winnifrith says:

   January 26, 2013 at 9:39 am

   Peter

   ANGM was a bad tip from me. I hope that you took my advice to cut losses some months ago at 1.1p.

   I am the first to admit that not all my tips fly.Over 12 years at tips the average gain on 241 tips was 42.7%. that’s my record. You know that,. But you ignore that. You ignore winners. And you bang on about losers.

   You will never be convinced by facts so why don’t you just stop reading my articles so you have more time for kiddy porn or whatever really interests you.

   Ian

   I addressed these points a while back here.

   http://tradingresearchpoint.co.uk/2012/10/19/avanti-communications-bull-vs-bear/

   Best wishes to you both.

   Tom

4. Ian says:

   January 26, 2013 at 12:18 pm

   Hi Tom,

   Thanks for replying – AVN itself doesn’t ! ;-<

   The link you provide unfortunately doesn't address Earl's comments re apparently high level of provisions to, arguably, trade receivables classified as such but maybe not so current; the related question-mark re possible vendor financing; and the remarkably high level of ESA contribution to total reported turnover.

   Hopefully the next update will go some way towards clarifying these issues. For a company supposedly gearing itself up to the "greater disciplines" of the main market, AVN isn't very shareholder friendly in the info it's willing to supply…..

   "Commercial confidentiality ?" Puhhhhhlease…..

   ATB

5. Tim Nasty-and-dim says:

   February 9, 2013 at 5:58 pm

   “the average gain on 241 tips was 42.7%.”

   Is that all the tips, including those still held, or is it only those you recommended selling? Monkey!

6. Tim Nasty-and-dim says:

   February 9, 2013 at 5:59 pm

   How’s that CEY short working out for you? Wingi-nut?

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