Published October 17, 2008
Four S-share firms clarify net cash positions
JES International, Sino Techfibre, China Hongxing, Synear give updates
By LYNETTE KHOO

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RECENT market woes triggered by the insolvency of FerroChina and a full-year net loss at Bio-Treat for fiscal 2008 have pushed other Singapore Exchange (SGX) listed Chinese firms or S-shares into shedding some light on their financial conditions so as to assuage investors' fears.

Cash in hand: Recent market woes have pushed S-share companies to assuage investors' fears
These fears apparently heightened after a media report this week cited some S-share companies with negative cash flow, possibly pointing to a risk of their running into financial difficulties.
Over the past two days, four Chinese firms - JES International, Sino Techfibre, China Hongxing and Synear - issued updates or clarifications on SGX to clarify their net cash positions. Sino Techfibre, China Hongxing and Synear were among the S-shares cited in a media report to have negative cashflow.
Sino Techfibre said in an SGX filing that contrary to what was reported, it is financially strong with a net cash inflow from operating activities of 144.3 million yuan (S$31 million) in the second quarter. As at June 30, the group has cash and cash equivalents of 171.6 million yuan. It has also maintained a low gearing of 1.4 per cent.
'Going forward, the company does not foresee any liquidity problems arising from paying off the short-term obligations from current assets excluding inventories, given a healthy quick ratio of 3.49,' Sino Techfibre said.
It added that the budget of 600 million yuan that it set aside for expansion plans is sufficient to secure its growth for the next few years, and that there will not be any major capital expenditure in the foreseeable future.
It also expects to be profitable for the third quarter ended Sept 30.
In the same vein, sports apparel firm China Hongxing clarified yesterday that it is in a net cash position, with cash balances of 2.2 billion yuan and net current asset base of 3.34 billion yuan as at June 30.
On Wednesday, frozen food producer Synear clarified that it is in a net cash position of 1.34 billion yuan as at June 30.
In response to various queries received recently, JES said yesterday that its financial position remains healthy. It had net current assets of about 1.7 billion yuan as at June 30, which included some 1.1 billion yuan in cash and cash equivalents.
Its total short-term unsecured loans stood at five million yuan and it had no long-term loans as at end-June.
The Chinese shipbuilder also reiterated that it has not received any cancellations of shipbuilding orders and its order book as at end-June stood at US$1.49 billion.
Chinese stock analysts felt that fears of cashflow problems among S-shares have been exaggerated.
Prime Partners research manager Lim Keng Soon said that the financial woes reportedly faced by some Chinese firms should not be used to judge the financial health of all S-shares companies.
'It's wise to go into the details and study their financial health before we generalise them,' he said.
But those that are highly geared and have expanded massively over the past two years may run into working capital problems if they do not see sufficient demand when the new plants become operational, he noted.
In a note issued yesterday, CIMB-GK analyst Ho Choon Seng said that the concerns over Synear's cash flow and possible default risks are overplayed.
'With a significant net cash position of 1.3 billion yuan as at end-Q2, Synear is not at risk of default from any working capital strains,' he said.
'While we forecast FY08 free cash flow of 280 million yuan due to high expansion capex (capital expenditure), we still expect the company to end FY08 with a significant net cash position of 1.6 billion yuan.'
He upgraded the stock to 'outpeform' from 'underperform' given the low valuation, and kept the target price unchanged at 35 cents.