LON:ACHL | Asian Citrus - Sour Oranges

7th Nov '11 by CER

9 comments 10100 reads

Asian Citrus (ACHL.LSE, 0073.HK)
Asian Citrus is a citrus fruit producer with operations in various parts of China. Based upon various research approaches, including discussions with local officials, industry experts, competitors and other related parties we believe there is a strong possibility that Asian Citrus is fabricating its numbers to a considerable extent. Our research focused primarily on two key subsidiaries of the company, Litian Xinfeng in Jiangxi Province and Litian Hepu in Guangxi Province. According to the company’s annual report, the Xinfeng and Hepu plantations provided 100% of the company’s citrus output in the year ending June 2011. Key issues emerging from our investigations include:

Key Issues

1. Questionable plantation size in Xinfeng, Jiangxi Province

2. Organic Claim

3. Hepu plantation output mystery

4. Low brand recognition despite company claims and untraceable sales channels

5. Biological asset valuations by third party is unreliable

6. Significant discrepancy in SAIC filings

7. Related party recently exposed as fraudulent
8. Conclusion

*Out of respect for privacy, we are not revealing the names of our sources. However, we can provide specific contact information to investors offering credentials.

1. Questionable plantation size in Xinfeng, Jiangxi Province

According to our contacts from the Fruit & Tea Bureau, Xinfeng County has a total of approximately 290,000 mu of orange plantations with a total output of about 180,000 tons annually. Our contact's quotation is consistent with the information on the Xinfeng County Government official website (See Link). The County’s website also states that Xinfeng County in 2010 produced 150,000 tons of citrus products, generating about RMB380 million.

Figure 1: Citrus plantation size and output in whole Xinfeng County

Source: www.jxxf.gov.cn/Item/1269.aspx

According to Asian Citrus, its subsidiary Litian Xinfeng has about 55,650 mu of citrus plantations in Xinfeng with an annual output of 93,181 tons, generating total revenues of RMB331 million in 2010. If true, that would mean Litian owns at least 19% of the county’s citrus plantations and contributes 62% of total citrus output and 87% of revenues for the county (see Figure 2). It is unclear how Litian Xinfeng could contribute 62% and 87% of the whole county’s citrus output and revenue when its citrus plantations amount to no more than one-fifth of the county’s plantations by area.

Our findings do not…

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kirkie001

7th Nov '11

Sorry - is this some attempt to try and jump on an Anonymous Analytics type bandwagon?

"Out of respect for privacy, we are not revealing the names of our sources. However, we can provide specific contact information to investors offering credentials."

Can I cry foul immediately, please - either put up or shut up. Say what you've got to say or stay quiet.

And - to be utterly frank and putting my own cards on the table - I don't believe that you or anyone connected with you does not stand to make money from movement in these securities.

Put your name to something that you intend to publish and don't hide behind pseudonyms.

*no position*

zangdook

10th Nov '11

Chaoda has been steadily disposing of its shares in Asian Citrus, its percentage dropping from 49% in 2001 to 19.09% in 2010 and to 13.34% in 2011.

Nonsense. Chaoda's percentage fell mostly because of new share issues. If I were going to publish a big article full of disclaimers and crap I would do my research and not try to misrepresent the facts. This doesn't give much confidence in the parts of the article that are not so easy to check.

11th Nov '11

The partners, directors, analysts, and employees of China Economic Review and their affiliates may hold a position in the securities of the companies mentioned herein.

China Economic Review has no interest or investments in the stocks it covers, and does not allow staff to hold or trade any publically-traded shares to ensure their impartiality.

Slight contradiction there?

By the way, 'publically', if it were a word, world presumably derive from a non-existent adjective 'publical'. The word is 'publicly'.

If you want to be taken seriously you have to guard against the appearance of amateurishness.

bstuart

12th Nov '11

As a disclaimer I own about £5000 worth of Asian citrus stock. What worries me is that when I look at director dealings the only directors buying are the English ones - no Chinese director has bought stock. What reassures me somewhat is the dividend - if they can raise the yield progressively they will help the share price since cash is king.

harrycloud

29th Jan '12

I have shares in Asian Citrus and have been concerned that their value has been falling steadily for about 12 months. According to the Company's published figures, things are going well - but the above report "Sour Oranges", if correct, throws a quite different light on the issue.

As a small investor I cannot undertake any serious research, but -

Who are the Auditors? Can they be relied upon? What about the brokers? Do they have any comments?

Gormless George

6th May '12

harry, as a small investor you can undertake enough research to see that the article above is deeply flawed and riddled with inaccuracies - just read the comments above - and then you can form a judgement as to the likely accuracy of the rest of the article - the parts that are harder to check.

If you look through the shorters' website at cerresearch.com you'll see they carefully avoid listing ACHL among the companies which they have 'researched' - this article is not something to brag about.

15th May '12

From the Annual Report of Amati VCT2:
A month later another anonymous article appeared, this time published by the China Economic Review. It reads well, but is almost complete nonsense, which is the most dangerous kind of document. The only claim of substance relates to Chaoda, not to Asian Citrus, and it turns out that the author had contacted the company whilst writing the report, but had shown no interest in actually seeing the evidence which could refute his claims.

http://www.amatiglobal.com/documents/AVCT2/Amati_VCT_2_-_Annual_Report_-_31_January_2012.pdf

Publishing this rubbish damages Stockopedia's reputation in my opinion.

steve30

19th Jan '13

An interesting spoiler. In the interests of thorough research before investing:
1. The article appears to come from an organisation called China Economic Review Research – but the website comes back with the message cerresearch is currently under maintenance. We should be back shortly. Thank you for your patience. Not too impressive for a professional investigative outfit. Although the China Economic Review does exist – it’s a magazine publisher apparently.
2. Reference is made to Yang Fresh Fruit. I can only find one reference to Yang in relation to citrus fruit – in Guangdong Province. I find it puzzling that Yangs Fresh Fruit does not have a website. It is the largest producer in Xinfeng, Jiangxi Province apparently?
3. There is no mention in the 2007 annual report of aborted expenditure on a cold storage facility. Rather, the company states in the 2007 AR “Phase 1 of the Xinfeng Development has been substantially completed, creating 238 units available for sale. Since the end of the financial year, the formal procedures for the sale of 184 units have been completed with total consideration of RMB55 million. Up to date, the Group has received the proceeds of approximately RMB20 million and the balance will be received by completion. We expect that the sale of Phase 1 will be completed within the next three months. We are keen to commence the next phases of the Xinfeng Development in the near future and we expect that the average unit price would increase in view of the strong demand in the local area and the increase in activity in the overall PRC property market. Not quite an aborted project methinks. Indeed far from a lack of lack of capital the company raised £18,000,000 (RMB 180m) in a share issue in March 2007. Another load of old cobblers.
4. The links in the article do not work – conclusion, they are spurious
5. The author apparently didn’t do the most basic thing to check on the citrus plantation size – VISIT IT! What an amateur.
6. Referring to Macquarie verifying the ACH land area it looks like the author has got it all mixed up. The only reference I can find connecting Macquarie to ACH is in connection with Chaoda Modern Agriculture, a Chinese vegetable producer which owned about 23% of Asian Citrus Holdings. Chaoda was challenged by the weekly Next Magazine that it had over-stated its land holdings; however analysts from the Macquarie banking group investigated the matter using global satellite positioning and other technology, to confirm the plantations' size. More unproven innuendo.
7. WRT Hepu plantation, the author makes a big fuss over non-disclosure of output stating “Our local contact from Fruit Bureau in Beihai City Agricultural Bureau also told us that they run statistics on total citrus output in Beihai City every year and for the whole Hepu County, he said the total output to be around 15,000 metric tons in 2010, but this number did not include Litian Hepu output. He said the company [ACH] refused to cooperate with the Agricultural Bureau for “business confidential” reasons”. Now what’s the word I’m looking for – oh yes bollocks, the output is detailed in the annual reports which are incredibly informative.
8. I’ve run out of patience and time to pull apart the rest of this report. However my conclusion is this report was written by a short seller hoping to make money out of a fall in the share price of ACH. It cannot be relied upon as accurate or genuine.
9. Challenge – if the author would like to refute my comments in public, I would be glad to engage in a little on line sparring match, because this sort of misinformation REALLY ANNOYS ME!

Will Marsh

4th Sep '14

I have shares in asian citrus and have been following the share for some time. I have also farmed and have some knowledge of farming which has good years and bad years thhrough forcemajure .

I see the problem with this share is that it is not perceived squeaky clean and until it is the share price will languish regardles of the truth of this. however, a point above is that the share is not being agressively shorted, which it would be if their was confidence in the truth of the article above.

As a long term investor in Aim and other stocks I would like to have confidence in the auditors though which i no longer do

Asian Citrus - Sour Oranges

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CER

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