‘It still has real value’

Thankyou, Bloomberg reporter, for picking up the phone to bring us this:

China Forestry Holdings Co. (930), the logging company that last week said its only able to account for 1 percent of its historical sales, still has value in its assets, according to its third-largest holder, Carlyle Group.

“We believe the company has stabilized and is recovering,” Brian Zhou, a Beijing-based spokesman of private equity firm Carlyle, said today by phone. “It still has real value. We’ll continue to be one of its shareholders.”

Bloomberg says Carlyle holds 10.5 per cent of China Forestry Holdings — a company that has been suspended from trading on the HK Stock Exchange since January 2011; and also a company that makes Sino-Forest look boring. From further down the story:

Financial statements for the years from 2006 through 2009 aren’t verifiable because the independent board committee conducting the probe found that some of the underlying supporting information isn’t available, the company said on April 27, detailing findings from the investigation.

Police Detention

Most former managers who were involved in irregularities refused to cooperate, the computer hard drives of key former managers were reformatted and major customers declined to provide information, according to the statement.

Okay, not quite up there with the allegations of chops-stealing and physical violence at ChinaCast Education.

But what about the missing 99 per cent of revenues?

This is from a report published last week by the company’s committee of independent directors, formed in January last year when KPMG (since resigned as auditor) first raised the alert about irregularities.

According to the Independent Investigation, the major differences between the financial information as disclosed in the Prospectus and the amounts that were verifiable in the course of the Independent Investigation based on available information retrieved by the Company are as follows:

China Forestry Holdings - revenues verified 2008 & 2009

That’s zero verifiable revenues from 2008, and about 0.4 per cent from 2009.

It didn’t get much better for 2010:

China Forestry Holdings revenues 2010

You get the idea.

Getting closer to the here and now, from Bloomberg again:

China Forestry’s net loss for last year was 4.19 billion yuan, compared with a net loss of 2.71 billion yuan in 2010. Sales fell 63 percent to 392.3 million yuan

The company has $180 million of bonds outstanding with 10.25 percent interest rate, it said in its annual report. It had 749.6 million yuan ($119.3 million) in cash and bank balances as at Dec. 31, it said.

According to the company’s 2011 results, it has 6.7bn yuan in net assets, so who knows — maybe the Carlyle spokesman is right…

Related links:
The joys of auditing a China short target – FT Alphaville
Sino-Forest’s diminishing returns – FT Alphaville
Carlyle Group Lost $105 Million On A Fictional Chinese Forestry Company, And It Will Make The Same Mistake Again – John Hempton at BI

Copyright The Financial Times Limited 2019. All rights reserved. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

Read next:

Read next:

FT Alpha Tweets