Geong Share Discussion Threads

[swiss paul] 18/1/2013 22:43

I used to hold and pop in now and again (Hi Riv _ yep FDP lol). I came across this on the fool. I think that some of you may recognise his style of one who use to discus (argue) with the infalliable Mas (long time no hear).
Just a contrarian view for those who may have joined and think the garden is all rosy.
"If you are on any public market, you are a target for official corruption in China. You can get a phone call out of nowhere from someone connected to a relative of a central committee member asking you for an interest free $20M loan. You don't make the loan and you suddenly have regulators putting you out of business. You make the loan and now Western investors are all over you asking you about the wild excuse you made to give some explanation to the weird financial transaction. I (sadly) was invested in FUQI and the owner and chairman made an interest free loan to the bank in excess of $70M "...to improve relations with the bank." I read through that statement to mean he had a gun to his head, and the corrupt bank was simply a conduit to a corrupt government official. They received back the money after about a year, no interest paid. They hid the transaction from shareholders the whole time, and now they are going dark on US markets to avoid liability for their actions.

I don't think there is an easy solution here. Even if you are an honest person in China, the fabric of society is corrupt. There is no governance by laws in the courts. The courts are tools of the corrupt upper class."

Food for thought and best of luck to all holders

[philjeans] 18/1/2013 15:54

Thanks Riv - yes - partly!

[rivaldo] 18/1/2013 15:09

Philjeans, in an earlier post I noted that I was competing with davidosh for further stock at below 4.5p or so. Does that partly answer your question? :o))

[philjeans] 18/1/2013 14:44

Well, we know DD was sufficiently reassured to buy back in - how about the fund manager and his two private investors?

Have they bought yet?

S/p slowly ticking back up but no sign of any real volume in trades - certainly no instis clamouring for shares anyway!

[rivaldo] 18/1/2013 11:22

An excellent, clearly written post eacn, thanks. Which helps explain why the current m/cap is only £2.6m.

This year looks like being an interesting one which will provide answers one way or another, hopefully on the positive side.

[janeann] 18/1/2013 11:22

eacn

a very informed and well witten post - most helpful in light of the recent share price rise. Thank you. I am a long term holder and although i sold some on the way down, I was contemplating averaging down.
I may wait for some more indication of improved earnings before commmitting. Of course I may have a long time to wait!

thanks jane

[eacn] 18/1/2013 10:40

For the last five years GNG's profits have been tightly linked to increases in accrued income. Had accrued income remained static over this period the business would not have made a penny.

While the company claims that a significant proportion of accrued income included in the YE balance sheet is collected in the following year, the nagging doubt is that these collections are in fact payments for ongoing work rather than past work.

This suspicion is enhanced by the fact that YE accrued income balances are ever increasing both as a whole and for key customers, despite a fall in turnover.

A key question is: were GNG to cease writing business on these terms, what proportion of the outstanding accrued income would end up being collected?

I have met with GNG management both in the UK and in China, and have repeatedly asked this very question. I have yet to receive a satisfactory answer.

The management point out that the auditors have asked customers to confirm that the accrued income balances are correct. This is not, however, the same as saying that they would be paid should GNG cease to provide future services on similar terms. This being China one has to pay careful attention to such details.

While I am not a mandarin speaker, I live with one and know from experience that there are many ways in which you can seek an assurance in mandarin, few if any of which will elicit a straight answer. I also know that the provision of any assurance would be likely to require some compensating favour in return, the more so if the assurance was being provided by the 'senior partner' in the relationship.

The fact that GNG is doing business on such extended credit terms tells us a lot about their relationship with their customers: if GNG were providing an essential service, or were seen as an essential, 'senior', partner would the business culture require them to accept such terms? The answer, even in China, is no.

It is evident from discussions with management that an important part of GNG's USP is extended credit. It is clear from recent trading that in the face of weak demand they have had to extend this credit further to shore up the top line. This is a dangerous habit in any business, but doubly so in China, where disguising the truth is a national pastime.

With a decentralised sales network, and most of your employees working on customer sites, it is difficult to keep a close tab on the relations between your people and your customers. In such circumstances loyalties often drift. If your sales people have gone native, then they may decide it is in their best interest to make their targets by doing disadvantageous deals with their clients rather than making sales on robust commercial terms.

Of course all of these concerns may be misplaced. However, over the past two years GNG has done little or nothing to dispel these concerns and show no signs of taking decisive action to move the business model onto a more transparent and accountable footing. Without such action the market has good reason to remain sceptical.

[sir rational] 18/1/2013 09:21

Would be good to see the new FD making an impact with the Finals.

I can see positives on cash collection starting to come through along with steady as she goes on transition to better SaaS/ IaaS mix.

20p a medium term target though not a fanciful one IMV.

[davidosh] 17/1/2013 13:42

I think it is very healthy for investors whether shareholders or not to be asking questions and reading about the business and strategy at Geong. I totally agree that directors have to appreciate that communication is 100% important and it has to be clear and not inconsistant with past notifications.

Do make contact with the advisers and let them know what you would like to see before making an investment. The message will be getting through.

[rmillaree] 17/1/2013 13:34

What about the old debtor £2.1 million they faithfully advised shareholders they were likely to receive by 31/12/2012 - either way this is a materially large figure that i would like to think shareholders would have been updated on as they were the ones setting the timeframes - i haven't seen any recent mention of this although i may have missed it.
£2 million extra in the bank with the "prospects" of cashflow turning positive (ignoring the £2 mill) is all we need (backed up by it happening)
If the business is not then loss making why not start paying a divi/
If the numbers arent made up there is over £5 - £10 mill of positive cashflow to come in once the "accruals cycle" stabilises.
Note non shareholder here so when i say we i don't mean me - and as a non shareholder feel free to ignore my comments.

I would like managament to promise categorically in clear speak cashflow will be positive and that funds will be used for benefit of shareholders before i purchase owt.

PS good luck with the sizeable investment davidosh - on all published info this share is a super super bargain buy and i can fully understand the logic of taking a punt from a risk reward perspective - albeit of one of the risky variety.

[davidosh] 17/1/2013 13:06

I like to buy stocks at the point of maximum negativity and then try and break down the reasons behind the negativity. Sometimes management need help in understanding what investors need to see from their investments. I think 2013 will be the last year for management to prove up the business model and show us some cash being generated...If any positives come through then there will be a significant uplift here. So it is almost option money at these levels with reasonable odds at 5p. I do like the group visit idea.

[rivaldo] 17/1/2013 12:14

I wonder who the two "serious private investors" with davidosh were? :o))

[persevere2] 17/1/2013 11:53

Post from Carmensfella on MF last night. He met with management to work out where he had gone wrong with his investment.There were also other experienced investors at the meeting. He had bought about the 30 p mark. As did many. Down to 5p.
He ended up buying substantialy more.

(Almost) everyone has this share down as a con.Sentiment along with the figures are awful.Thats why its so cheap. The CV of people who have a major stake in the company looks at odds with this being their cunning plan. Good position with IBM etc.

Is there money to be made supplying software services to companies in China ? Local knowledge and language should be barriers to entry.Statement from management indicates this year should see turnaround so time will tell if it is be hero or zero.
Rivaldo beat me to it!

[rivaldo] 17/1/2013 11:42

You might be interested in this post last night from davidosh (aka Carmensfella) on T.M.F.

He confirms that he has been buying more, quadrupling his holding following a meeting with GNG, and now has just less than 3% of the company. This probably equates to around 1m shares:

[mudbath] 17/1/2013 10:42

Couple of serious trades(for Geong)this morning.
About to resume that upward trend ,I hope.

[philjeans] 07/1/2013 12:50

I think this has some mileage in 2013 as late payers should have settled up in Q4 2012 and profit starts to build again.

Cashflow should be stronger as the old legacy contracts run out and the newer, sharper deals come on stream.

Topped up again.

[rivaldo] 07/1/2013 09:23

Sssshhhhhh.

[mudbath] 05/1/2013 22:23

It wont be "easy" SR ,yet if anyone was ever bullish over GNG prospects,now would be the time to buy.

[sir rational] 04/1/2013 13:28

I see 20p as easy but it will take a few weeks/months.

[mudbath] 04/1/2013 12:58

Having the ill performing GNG in my share competition portfolios resulted in two second places in 2011/2012.
Could this years Geong performance help cement a win for once I wonder.
The chance to invest at 5pence or below seems to have passed for the time being.

[sir rational] 27/12/2012 23:14

Due for a leg up, chaps.