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goldminingXpert (29.36)

Yongye: Red Flags

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March 23, 2011 – Comments (23) | RELATED TICKERS: YONG

 

I've now read every 10-Q and 10-K Yongye has released since it became a public company, along with talking to their CFO, and I am still baffled as to how large segments of the company operate. Hopefully the company will disclose more information (paricularly what it is required to by SEC regulations) and clear up the confusion about apparent conflicts of interest, insufficient employees, and wildly fluctuating sales.

 

Yongye's Recent Filings Raise Various Red Flags

By Ian Bezek

 

Investors in Yongye International (YONG) initially cheered the company's 4th quarter results released last week. The company beat expectations on revenues and earnings, and the stock initially traded higher. However, Yongye shares soon reversed, closing last week sharply lower despite the upbeat earnings announcement. Why the dour mood?

Behind the pleasing top-line results lurk several significant problems that raise red flags about the company's operations and profitability. The first of these issues is a seemingly impossible figure reported in Yongye's 10-k released last week:

[more here]

23 Comments – Post Your Own

#1) On March 23, 2011 at 10:50 AM, TopDogPicker (30.92) wrote:

At $5.35, YONG is looking awfully cheap (around P/E 5x)!  I can only say buy more.  I'm pretty sure the bears got this one all wrong. 

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#2) On March 23, 2011 at 11:17 AM, JaysRage (88.97) wrote:

Nice read.

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#3) On March 23, 2011 at 11:17 AM, goldminingXpert (29.36) wrote:

Why are you pretty sure that the bears (including me -- as the author of the article) got this one wrong? Am I missing something?

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#4) On March 23, 2011 at 11:33 AM, TopDogPicker (30.92) wrote:

Try talking to people on the ground in China who know a thing or two about fertilizers and the sector in general (not specialists, but maybe users or traders of fertilizers).  I can't make a judgement call purely based on numbers or filings.  Because the numbers can tell many stories, and also depends what angle you are looking at it and how you want to interpret it.  If I suspected the numbers sound fishy, I make a few calls to people not associated with the company.

I work in Asia myself.  Maybe if you saw our company's numbers you'd also suspect we're cooking the books too.  Things are a bit different out here.  Growth experienced by YONG is very common.  They do things differently and the market is so big, with so much room for growth, provided you have a good product.

 Yes some companies are less reputable than others, and fraud could take place.  But I'm not so sure YONG is one of these. 

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#5) On March 23, 2011 at 1:02 PM, Momentum21 (95.63) wrote:

I dislike Chinese invesments in general right now but I am going to give this YONG a ride. 

M21 Long @ 5.60 - Boo Yah 

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#6) On March 23, 2011 at 7:20 PM, MAURIZIO400cc (69.90) wrote:

gmx,

why don't you just give it a rest?

you are causing far more trouble than is warranted by your efforts to look smart to a bunch of dummies.

m really getting to dislike you as a caracter, why don't you bid for the part of the joker for the next batman movie, it should be vacant and it should come natural....

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#7) On March 23, 2011 at 10:41 PM, Option1307 (29.67) wrote:

No picks for MAURIZIO400cc... Ha ha ha what a surprise! ;)

Nice article per usual. I haven't looked into YONG specifically and can't comment either way, but I am sure as hell staying away from all things China in the near future (read: forever!)

Btw, the comments over on SA are pure awesome, I honestly forget just how ridiculous people can be on the internet. The majority of those comments are trash, but they are definitely worth a looksie for a good laugh!

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#8) On March 23, 2011 at 10:44 PM, goldminingXpert (29.36) wrote:

Thanks Option. You know you've written a fairly decent article when people's main response is to attack your age, looks, alleged connections, etc. rather than the meat of the fairly lengthy and detailed article.

If nothing else, SA comments are good for knowing if you've made a good logical case or not. On the articles where I may have missed the mark a bit (IBIO comes to mind) people actually attacked the substance of the article rather than me personally.

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#9) On March 24, 2011 at 9:22 AM, Valyooo (99.37) wrote:

I have been making good caps points/accuracy lately by red thumbing every small cap chinese stock

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#10) On March 24, 2011 at 9:35 AM, cthomas1017 (90.47) wrote:

MAURIZIO400cc,

Very astute investment advice.  Quality rationale, excellent facts, and much needed perspective.  Thank you for filling the board with information we can all use to make an informed decision about YONG. 

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#11) On March 24, 2011 at 9:40 AM, cthomas1017 (90.47) wrote:

TopDogPicker,

You're "not so sure that YONG is one of these"?   Care to give us any reputable facts that would tell us why you're not so sure.  Perhaps addressing the specific & detailed concerns that gmx raised would help.

Please, tell us which company employs your services and your experience in Asia so that we can compare your credentials and experience as compared to YONG.  Making unsubstantiated statements without facts to back raises concerns about the veracity of your claims. 

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#12) On March 24, 2011 at 10:30 AM, TopDogPicker (30.92) wrote:

cthomas1017

Hey, no need to get personal KID!  I I don't like your tone.  And I don't see the relevance in the second part of your blog.

Let's just keep things simple.  Why don't you just short the stock, and I'll be long.  And let's see where we are at the end of the year.

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#13) On March 24, 2011 at 12:41 PM, cthomas1017 (90.47) wrote:

topdognosepicker,

I got personal?  There wasn't anything personal.  I asked a couple of questions, legitimate questions for anyone looking for the authenticity of your claims.  If you didn't like my tone, then it must be because I hit a nerve.  It's very clear that YONG has put people on CAPS & SA to try to discredit gmx.  Hasn't worked because they have consistently posted personal attacks and unsubstantiated claims.

So wanna get personal?  Wanna take this outside?  No thanks.  I'm out here to point out the pump-n-dumpers who are a part of what's looking more and more like fraud & scam at YONG.  And brother, you're sounding like an immature, superficial, blowhard who doesn't want to watch whatever miniscule investment you have made in YONG go down the drain.  (And it wouldn't surprise me one bit if you aren't simply one of YONG's hired guns writing under an alias.)  You seem awfully sensitive for someone seeking the truth about what's really going on at YONG.

So take THAT, little DUDE. 

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#14) On March 24, 2011 at 12:49 PM, TopDogPicker (30.92) wrote:

Cut the chit chat and just short the stock. Put ur money where ur mouth is. I'm laughing my way to the bank already. Hahaha

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#15) On March 24, 2011 at 1:13 PM, TopDogPicker (30.92) wrote:

cthomas1017

Come on short the stock! I need to buy it again at $5.35! Help me out here! Hahahaha 

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#16) On March 24, 2011 at 1:26 PM, Momentum21 (95.63) wrote:

I am going to have to score this round for the YONG

http://finance.yahoo.com/news/Yongye-International-Responds-prnews-2944223270.html?x=0&.v=1

 

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#17) On March 24, 2011 at 1:37 PM, MAURIZIO400 (74.95) wrote:

topdogpicker

booyaaa!!!

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#18) On March 24, 2011 at 2:58 PM, TopDogPicker (30.92) wrote:

Boo-yah!

I have to thank Ian for my 13% gain in a day!  Although I might not agree with his findings, I still respect his efforts.  Fraud or not, only time will tell.  But without people like Ian, maybe their could be more fraud.  And on a positive note, it forces companies to be more transparent.

There's enough bad China stocks out there creating bad taste for everyone.  So I can understand where his suspicions came from.  But it might be a mistake to put them all in the same basket.  

In the meantime I'll give him the benefit of the doubt that he has no vested in interest, and only trying to put the heads up for fellow investors.  But I think some people might be a bit upset if they sold yesterday.  But, then again, I guess they can only blame themselves.  Fear is the your worst enemy in the markets.

On transparency, I have to agree with the management, that there is no need to tell the whole world who their key customers names are.  But transparency should make people think twice before going public.  During my investment banking days, I was pitching to clients to go public, ironically now with my own company, it's not even an option.  If the cake is that good why share it and still have to strip naked while eating eat together?

This is the first time I have ever blogged...  and it was quite fun.  Especially when I was suspected to be hired gun from Yong (they couldn't afford me kid).

Imagine, for 3 capital letters (KID) and I got a new name, labelled a suspected hired gun, trying to discredit Ian, afraid to lose my miniscule investment and sensitive.  Anyone got a mirror?  I guessed write huh KID? Your writing gave you away.

Peace!

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#19) On March 27, 2011 at 7:52 PM, pebbles444 (< 20) wrote:

TopDogPicker....Like you, I trust the Motley Fool teams high recommendation on YONG.  I had been watching the stock for quite awhile and finally bought shares on its recent dip.  Do you have any knowledge of when the stock might start to turn upward and continue to make gains?  Another YONG investor mentioned he believed the stock would reach $14-$20 share price and thought that even that range could be conservative.  I'm interested in your thoughts about this.

Thank you

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#20) On March 27, 2011 at 8:10 PM, buffalonate (94.17) wrote:

There are a lot of people out there that suspect that YONG is a fraud.  Otherwise it wouldn't trade for such an extraordinarily low p/e ratio.  YONG sure is secretive about their distributors and customers.  What do they have to hide?  If it sounds too good to be true it probably is. 

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#21) On March 27, 2011 at 9:37 PM, pebbles444 (< 20) wrote:

buffalonate....I can't imagine Motley Fool would recommend this stock so highly if their were genuine fraud concerns.  Motley Fool not only recommends this on Global Gains but the "Fool" also owns shares themselves in YONG.  Just my opinion.

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#22) On March 28, 2011 at 1:27 AM, TopDogPicker (30.92) wrote:

 pebbles444

1) I agree that MF is reputable, but I also remind myself they are not always correct, and they could be duped like other analysts, auditors and institutoinal investors.

2) YONG may or maynot be a fraud, I don't know, and only time will tell.  But Ian Bezek's (GoldMiningXpert) articles didn't convince me it is a fraud.  Had he done some ground work and channel checks and based is reports on that, maybe I would be more convinced.

3) With current negative sentiment towards Chinese RTOs, YONG like the other Chinese stocks is being a target for shorts. Make sure you have the appetite first before going in.

4) On where and when the stock is going, I wish I knew. Really depends where the market wants to price it.  Personally I think $7 or $8 in the near term could be possible (unless more negative articles come up).  If the shorts keep on hammering it, some longs may get fed up and quit (even if they believe YONG is good).  As to $14 - $15, why not?  That's only around 13x historical PE and around 9x forward, but it may take a few months.  I think the smoke may clear up in a month.  But if someone drops another smoke bomb on it, it could stay low again.

5) I'm just an opportunist picking up YONG on the cheap.  Until someone can show me some facts that YONG is a fraud, I'm a buyer if it goes down below $5.40 again. But I could be wrong.

Good luck!

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#23) On March 28, 2011 at 12:47 PM, pebbles444 (< 20) wrote:

Thank you TopDogPicker.  I understand everything you tried to convey....and, good luck to too!

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