ChinaDaily Briefs

China: Pinduoduo, Evergrande, Cloud Village, Zhejiang Expressway Co H and more

In today’s briefing:

  • Forensics 101 – Quality of Earnings Shenanigans and Key Detection Metrics
  • China Evergrande Group – Thanks S&P
  • Cloud Village (NetEase Music) IPO: Not yet a Sound Investment
  • Zhejiang Expressway (576 HK): Is There Any Room for Higher Dividend Payout?

Forensics 101 – Quality of Earnings Shenanigans and Key Detection Metrics

By Jason Yap, CFA

  • A company’s earnings is arguably the most important line item on the income statement
  • Given its relative significance as a barometer of a company’s financial and operating performance, the earnings line item is highly susceptible to fraudulent misstatements 
  • In the 2nd of this 3 part series, we discuss Quality of Earnings Shenanigans Key Metrics. We discuss Balance Sheet Health metrics in the next edition of this Insights series. 

China Evergrande Group – Thanks S&P

By Thomas J. Monaco

  • C’mon Guys, Where Have You Been?: S&P issued a scathing report suggesting that China Evergrande Group (3333.HK) [Evergrande] “will likely default because the company has lost its main business”;
  • Other Pearls:S&P also believes that “Evergrande’s massive debt will catch up with it”; and    
  • Ratings Agencies Are More Than Culpable: Wouldn’t you know it, the sleepy, fee hungry ratings agencies are finally starting work on Evergrande after the market embarrasses them once again.

Cloud Village (NetEase Music) IPO: Not yet a Sound Investment

By Arun George


Zhejiang Expressway (576 HK): Is There Any Room for Higher Dividend Payout?

By Osbert Tang, CFA

  • We believe there is room for Zhejiang Expressway Co H (576 HK) to raise dividend payout ratio moderately, following that of Anhui Expressway (995 HK) and Shenzhen Expressway (548 HK)
  • It has a comparable gearing with SZEX, positive earnings outlook, improved operating cash flow and manageable capex which all are supportive to raise payout ratio.
  • If it increases to 55% payout, versus an average of 45.6% previously, we estimate the stock is trading on attractive dividend yield of 11.3% and 12.4%, respectively for FY21-22.

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