Software Circle Share Discussion Threads

[buggy] 21/7/2010 10:35

Anybody using norminee acount got the divi yet? I use SELFTRADE and nothing yet.

[zangdook] 20/7/2010 10:59

orinocor
I received some cash from them yesterday.

[orinocor] 20/7/2010 10:25

I doubt there will be a cash return.
There are laws against chinese companies returning cash to foreign investors.

[stewolf] 19/7/2010 20:39

Been away on a short break so just read the update. I now see a Company that has been actively involved in a seperate 'business activity' of currency speculation as well as that of software design. This 'other' part of the business, it seems, has involved setting up, assignment of personnel including a head guy (Mr Biao) and funding (from money the Company generates from software). . . all done with the least hint possible (if any) to outside investors that this was taking place, judging by the reactions on here and elsewhere.

If it had been a one-off 'rogue' type of affair, someone using the Company money innappropriately, a decision to hold through would have been a reasonable one to make, given the success of the software business. Still hope they sort it out, but my concerns a more acute now.

[zangdook] 19/7/2010 14:07

Just had my dividend.

[explorer88] 19/7/2010 13:45

I'm very disappointed by Sinosoft's gambling on forex.

I have today sold the last of my holding in SFT and will keep an eye on what is their eventual exposure to this disastrous activity.

I suspect there is more bad news to come / losses to be announced as all the other financial positions have now been closed.

[the_doctor] 19/7/2010 07:23

Defined enough. It suggests more than $2-3m below, which is what a $3.8m loss would suggest.

That being the case, IMO I think it's therefore likely that 'normal' business activities have also gone poorly

If cash was now $11-12m, they'd not say 'materially'

[stewjames] 19/7/2010 04:39

Is "materially below" that well defined?

[the_doctor] 18/7/2010 22:08

'hedging (I called it forward cover) is the opposite of speculation as I tried to explain' agreed


'the mere existence of stop-loss limits proves the intention to speculate without justifiable reason'

yep, which raises my concern that the board knew about it?


'any previous currency trading has been taken as a capital or financing effect (i.e. not revenue'
That should be the case, yes


However, any explanation why a £3.8m net loss on Forex speculation should cause their cash pile to be 'materially below' the end 2009 level when the business should have been cash generative otherwise?

[the_doctor] 18/7/2010 19:42

'Buggy, you are quite right that the company had absolutely no business to be speculating in FOREX'

should a company with ex-domestic operations (which I'm assuming this co. is) not have some FOREX hedging at least?

Interesting story...

- how much of the past performance was down to speculation?

- how much cash are they left with

- it would appear that the co. is still cash generative, but if it has been up to these tricks, who knows. It isnt 100% certain that they didnt know what the CIO was up to. I've not looked - do the other board members have decent credentials?

If the loss from FOREX speculation was around $4m
and the co was previously generating cash
Why would the resulting level of cash be 'materially' lower than $14m
Should it not be around $12m??

The concern would be that things are a little worse than they've let on?

Around 3.3p looks like a TA punt level?

From a very brief look, the underlying story looks positive
so, if there's nothing else lurking in the woodshed, this could be good for a move up?...

[garth] 17/7/2010 08:48

I've now moved under water in these - but its nice to see some familiar old friends commenting over the last few days.... Helps to increase confidence that the underlying story should yet come good...

[sir brainy] 16/7/2010 19:53

Graph looks pretty hot

[charlie] 16/7/2010 19:51

Completely agree they should never have been doing this.

They clearly have far too much cash. Hence the drift into things like currency speculation.

Unless there is some sign that they are going to give back the surplus cash, it's impossible now to put any value to the shares.

[stewjames] 16/7/2010 16:32

"Suspend all investment activity"...

I'd rather they didn't have any to suspend. As a software company, the only non-business related "investments" I would want to see them making are putting the big lump of cash in a bank and leaving it there.

Not so sure about your interpretation re: scapegoat, buggy. I agree it's probably a case of his sending good money after bad, but it reads to me as if he exceeded his limits, probably hoping things would reverse before his employers found out. I am, of course, in agreement the company shouldn't have been doing it in the first place, regardless of how "sensible" their limits were.

[boadicea] 16/7/2010 16:30

Buggy, you are quite right that the company had absolutely no business to be speculating in FOREX and for that major error the whole board must be held responsible.
However, you partially miss the point about the timely reporting failure. What the update says is:

"This loss arose from a number of foreign exchange contracts entered into in the
second half of May 2010 in respect of which the Company's internal stop-loss
limits were not complied with. This breach of limits and the consequent loss
were not communicated by Mr Liu Biao, the Company's Investment Officer to the
Board in a timely manner. As a consequence, he has resigned from the Company."

So there were internal stop-loss limits not activated and a failure to report that fact. But the existence of such limits in itself proves the intention to speculate without justifiable reason.
As you say, a revaluation of the past trading of the company to identify and eliminate spurious activities is necessary.

The company appears to me to be in gross breach of trust in conducting these speculative activities. There is only one reason to transact forex in most non-financial companies and that is to provide forward cover for reasonably anticipated effects such as settlements (either receipts or payments) expected to fall due within the normal forward planning period of the company. (This will vary with the time-scale of the a company's activities, e.g. perhaps 3 months to a year for a manufacturer exporting/importing in order to fix a forward price-list but longer for a major constructor under a long-term contract.)
In other words, forex cover is correctly used to avoid risk, not to create it.

So the departed employee was at fault, but no more so than other board members who should likewise be considering their positions imho.

The whole episode could have sunk the company, as with others before it. We can be just slightly thankful that the episode came to light while of a manageable proportion.

[zangdook] 15/7/2010 10:13

Dividend of 0.31p to be paid on the 19th, I make that about 5.75% at a share price of 5.38p. I topped up - the Chinese stocks usually fall too far on bad news and then creep up again. I've seen terrible collapses at GNG and JHL, and a few weeks later all the negativity had evaporated. (It reappeared at JHL, but only at a much higher level.) We're just waiting on the company to give us an explanation and assure us that the ship is being put in order. IMHO.

[muxdapanza] 15/7/2010 10:03

Is the p/e ratio above, to be believed?

The loss of some of their cash pile will not affect divi's will it ??
They have quite a lot of cash in the bank and are still generating cash ...

What is the yield?

[cgequityinvest] 11/7/2010 17:46

Daviddosh - following my attendance at the last AGM when the matter of foreign exchange risk was raised I have also sent an email to the Chairman. I have also suggested that to restore some confidence the company needs to consider some form of special/increase dividend policy or a share buy back. Personally I would rather see them focus purely on their core business rather than letting the cash balances burn a whole in their pocket and them look for enhanced returns via taking risks in areas whcih are clearly outside their sphere of competence.

CG (Chris from Motley Fool)

[buggy] 11/7/2010 13:40

managed to get a reply from the FD, nothing earth shattering but at least they seem to understand the investor concern about this issue.


Dear XXXXXX,

I apologise for having to report this bad news. As we are holding board meeting this week to look into the matter, we hope to give satisfactory update to everyone as soon as possible.
Thank-you for your patience and understanding.

Regards,
Yifa




Now I await the result of their board meeting to see who is calpable and what action is being taken to ensure that this does not happen again.

[davidosh] 09/7/2010 15:21

boadicea....Spot on there and I have already sent an email to Mark Greaves.

[charlie] 09/7/2010 13:31

Confucius wise man, but charlie wiser.

and today, poorer :(

Unfortunately reinforces the common prejudice against Chinese companies on AIM. That is, they often have lots of cash, but the external shareholders never see it. A great shame, because Sinosoft seems to have a good software business. If only they would stick to it, and return to shareholders the cash they don't need.