China Minzhong: Share price plunged by more than 50%!

There are so many unexpected things which happen in life. The drastic plunge of more than 50% in China Minzhong's share price at one point this morning was definitely unexpected.

A quick search online found the probable reason behind the selling:

Glaucus Research Group which is based in California accused China Minzhong of irregularities in its sales figures, involving sales to top two customers, according to "corporate registry records".

Glaucus Research Group said they and their associates have a direct or indirect short position in the company. So, they stand to make money if its share price declines. They probably made a bundle today.

Definitely, I do not know whether the accusations are true and if they should be true, how bad are such irregularities? Since the alleged irregularities involve China Minzhong's top two customers, how significant are the contributions of the top two customers' to China Minzhong's revenue?

It is not hard to then imagine whether all other numbers reported by China Minzhong have irregularities. However, if we think logically, if there should be other irregularities, Glaucus Research Group would have tipped them all out. The more negative the news the better it is for their short position.

Since I do not know what is the total revenue contribution by the top two customers, I will make the extreme assumption that all of China Minzhong's trade receivables go to zero. This would wipe out shareholders' equity by 24%. NAV would then be RMB 5.34 per share or S$ 0.89 per share.

Looking at the year on year improvement in cash flow from operations and how the company is now in a net cash position as well as how it was able to pay down some of its bank loans, I came to the conclusion that the selling this morning was overdone and bought some shares at 52c a piece.

China Minzhong has requested for a trading halt and the company is due to release full year results on Thursday (29 August). Let us see what happens next.

See: 3Q FY2013 presentation.

First-time car buyer? Get a Mercedes Benz!

I was reading the weekend edition of The Business Times and the front page story was headlined "First-time car buyers disappearing fast".

When I read that, I thought I could guess what the article was about. It would probably go along the line of how the "cooling measures" are working because 100% LTV is a thing of the past, I thought. Well, I was right but only partially.

Although the report said that most first time car buyers are young working adults and that most of them are unable to come up with the required 40% or 50% down payment, something very interesting was also reported.

While most first-time car buyers of entry level cars (which I understand from the article are those priced at around $120,000 each) have been priced out of the market, Mercedes Benz is still doing a roaring trade with first-time car buyers!

The A-Class

"We are seeing more kids bringing their parents to the showroom to book a CLA-Class or A-Class," said a senior executive at Mercedes Benz. Their A200 is priced at $156,000. "... it also looks like more parents are buying a Mercedes for their children."

The CLA at $179,888. Ouch.

Well, I suppose the cooling measures are not targeted at the rich. Rich people can well afford the luxuries in life and cars are definitely a luxury in Singapore. 

Even so, to have a brand new Mercedes Benz as a first car for a young adult given all of today's restrictions is ... er ...

Could someone help me with an adjective here?

The cooling measures have definitely worked to prevent the less rich to be more prudent because, in the past, it was possible to borrow 100% of the car's asking price with a loan repayment period of 10 years. 

A young person could then drive out of a car showroom in a brand new car paying as little as $500. He would probably have been wearing a big smile on his face and thinking to himself, "Wah! So affordable!"

Who says money cannot buy happiness?
(But buy already still have money or not?)

Related posts:
1. They were just showing off their wealth.
2. Polish your own car and save money.
3. Tea with AK71: Bought a new car.
4. Mature and sophisticated consumers lease cars, not buy.