Wednesday 18 December 2013

Asian Bamboo steps into the Chinese property hysteria

A Chinese property and forest company

Yesterday there was an ad-hoc report from Asian Bamboo which leaves a very foul taste in my mouth and simply makes me furious. If I would have been a dog there would have been rabid foam around my mouth. The ad-hoc can be read here. The share price directly dropped around 40% and the question is then why did this happen?

It is indeed very easy. The management say that they completely failed with their restructuring that they have been attempting to make since a long time now and as a funny little extra joke on top of all this they tell us that they will step into the Chinese property hysteria that in media very frequently has been called a bubble with increases of 35% only during the first three quarters this year. For more information please read for instance this article about the bubble.

They also say that they will have to add some more money and this will be done buy selling I think it was 3 year convertible bonds at 1/3 of your holding. The management guaranteed to step in and buy anything the shareholders did not pick up. Oooohhh, nice! They are squeezing out the small shareholders and increasing their own shares with crazy announcements that kills the share price and makes no one wanting to buy the convertible bonds that will be traded at a low price.

Another fantastic side note was that the part that the CEO and founder had taken extra care of since the last 6 months (pulp and fibre extraction of bamboo) they now decide there is no future with and they will try to sell it off.

Oh, I will keep my shares, I will keep them as a reminder to myself how wrong things can go when I decide to step into a company without a long track record of success and what happens when you water the weeds!

Right now I want to write some really bad words so please add your own...

So **** *** Asian Bamboo and your ******* management that are a bunch of thieving ******** rot in the **** that you came from and may you never see the sun shine again unless you are looking out of my *******!

Sorry I just had to get that out of my system. So right now I am looking forward to owning, and this we should not forget, IN COOPERATION with other inland Chinese companies wink, wink, say no more, say no more, ay, ay, know what I mean wink, wink... that will then of course all share profits equal to what was put in and of course we will have full control and knowledge concerning these companies and the real owners of them. Great!


Anonymous said...

My opinion about Chinese companies operating and or being listed outside of china is that you should be very careful when comes to owning shares in them, supporting them in other ways and probably also being their customers. Just an advise both to individuals and to politicians.

Fredrik von Oberhausen said...

Yeah, I was reading about the stories in Canada with Sino-Forest so I new that there were a lot of problems with China. If we look on Chinese companies registered here in Germany there are even recently legal problems due to severe accounting issues with Kinghero AG.
I know several Chinese people and I find all of them to be honest, hardworking and straightforward so I wonder why things are going so wrong on the company level...

Anonymous said...

Hi Fredrik

I like you analysis and blog!

At the same time I am amazed that you managed to invest in this bamboo business at the same time that you are quoting Graham, it just doesn't add up - sorry for the harsh words.

BR Juan

Fredrik von Oberhausen said...

Hi Juan,

Thank you!

This goes out to everyone! Towards me you can not say any harsh words, there are none. Say anything you want towards me, my thoughts, my analysis and my investments (try to avoid cursing words if possible).

As a person I have a tendency to perform better the angrier and the darker my situation is looking so if you guys are pushing me I will just improve faster! :)

However towards other commentators I would be happy if everyone remains polite and kind.

The thing with Asian Bamboo is that you have probably only seen the analysis that I published on the blog this year based on the full year 2012. When I made my investment in AB back in spring 2012 it was looking like a perfect Graham gem based on the full year report from 2011.

Excellent P/E, P/B, book to debt, paid a small dividend but it had been increasing each year. 2011 was a tough year for AB and the earnings dropped.
I saw that as a nice little turnaround company and thought I was getting a great company cheap.

I was wrong and that will happen every now and then. My big mistake here though was that I stepped in with more money... and a lot! Instead of having an unrealised loss of around 1400 € based on my first foolish but yet fully reasonable investment based on the analysis from 2011 I now have an unrealised loss of almost 5900 €. That was my mistake. Watering the weed.

There was a Swedish investor (Wallenberg) that once said that he had never made a loss on a stock. Impossible one could say but no, no. He bought stocks in good companies and never sold any shares and as long as they do not go bankruptcy then you will also not have a realised loss.

So I look forward to owning some property in China now! Exciting time! Maybe the management will find out next that even more tourists will be attracted if they have an amusement park with an annexing Zoo with a couple of pandas in it.

So in 10 years time I look forward to being the owner of the first Chinoworld park! Exciting times! Exciting times!

Sorry for the long reply the disappointment has still not left my system. But Juan back in 2011/2012 the company looked really good on the paper also according to Graham so the investment as such, back then, was not wrong.