Though I don't own any of these stocks , I wonder why S-Chips need to hoard so much cash, especially shoes/clothing sales and distribution companies like C Hongxing, C Sports etc ? I also note that similar H-Shares listed in HK hoard even more cash ( Li Ning, China Lilang, Xtep etc ) Is it really so difficult to secure OD lines or term loans in China ? Keeping so much cash is nuts as they should be put to good use to enhance shareholder value. If they really don't need the cash, give them back to shareholders.
On another note, surely the external auditors must have deligently verified their cash hoards before signing off their annual accounts. As there seem to be little or no problems with H-Shares, why only us? Mind Boggling!
Hoarding cash is one thing, the other thing is raising capital for expansion of capacity. To me, it's ridiculous how every mfrg business in China seems to want to expand capacity. There is over=capcity looming already and the general truth is that Chinese biz people don't heck care, they build and build and look for business later. And the profit margins are getting thinner
@Belgeran - Good to have some cash & use credit line as emergency. But not excessive cash, unless mgt explain clearly what they are for? eg Li Ning has Rmb1,470m cash, Rmb9,478 sales - 15% of sales OK , as they are now expanding overseas. Look at C Sports, abt Rmb900m cash, Rmb1,200 sales - 75% or 9 mths sales. Hongxing is worse. Fair enough, smaller co. need more cash to quickly expand distribution to entrench their brand ( 1st mover advantage )as China's consumer market is at it's infancy, but mgt or IR should articulate specific plans to justify cash hoard.
@yeh - agree, esp those with low skills or capex entry level. They always ask for $$$ for factory expansion which will take some time to build. Eventually industry overcapacity will hit ( worse if new factories just completed ) and if they have not established their own brands to end users, they will be at the mercy of their few intermediary customers. Most top brands ( Nike, Li Ning etc ) dont own factories as they focus on brand building/mgt , hence not burdened by over capacity or factory overheads during downturn. Investors often overlook the intangible value of top brands & distribution network, which take decades to build. Eg Re Forbes 2010 report, the Nike brand alone is worth USD10.7 billion.
