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Allegations Of Fraud Rattle Chinese ADRs
By DONALD H. GOLD, INVESTOR'S BUSINESS DAILY Posted 06:45 PM ET
Featured Stocks
*
CAGC
China Agritech Inc (Added 12/02/2009)
CCME
China Mediaexpress Hldgs
VISN
Visionchina Media Ads
* Top-Rated Company
The market offered a cautionary tale Thursday for China's ADRs ? and for
those who invest in them.
China MediaExpress (CCME), a former member of Your Weekly Review, plunged 33
% in monster trade as the stock continued a five-day, 54% collapse.
A research company has accused the company, a provider of digital
advertising in buses in China, of grossly overstating its earnings.
View Enlarged Image
Citron Research, in a scathing Jan. 30 online note, said the company's claim
to be China's biggest TV advertiser on intercity and airport-express buses
defies certain facts.
Citron compared China MediaExpress with its rival, VisionChina Media (VISN).
"How can CCME generate 3 1/2 times the revenue per screen of its competitors
?" the report asked. "CCME has roughly (55,000 to 60,000) displays; VISN has
(about) 120,000 screens. In Q2, 2010, VISN's total revenue was $31 million
and CCME generated $53 million from less than half the screens. Remember
that VISN operates bus advertising in major metropolitan areas, compared to
CCME, which claims intercity buses between second- and third-tier markets."
China MediaExpress, on its company website, said "CME strongly disagrees
with the views expressed (in the research note) and believes that investors
should rely on the Company's public reports filed with the Securities and
Exchange Commission."
The stock's implosion should remind investors that transparency issues tend
to appear more often in foreign companies than with U.S. names.
China Agritech (CAGC), a fertilizer maker, fell 9% in monster trade Thursday
and is near its July 1 low. Like China MediaExpress, it's been the subject
of media reports of misstating its results.
China MediaExpress might have looked like a bullish opportunity lately. The
stock broke out of a base on Jan. 27. Yet, there were signals in its chart
that should have made investors cautious.
The base was somewhat deep and had some loose price action ? flaws that were
noted in IBD's chart analyses.
The day after the breakout, shares made a bearish reversal, closing with a 9
% loss and below the possible buy point. Selling continued en masse. Shares
fell below the 50-day and then the 200-day moving average.
Remember, a key rule of investing in stocks is to cut losses short, no more
than 8% from your purchase price.
The stock was 8% below its buy point on Jan. 31. Investors selling at that
time would have spared themselves the larger losses.
By DONALD H. GOLD, INVESTOR'S BUSINESS DAILY Posted 06:45 PM ET
Featured Stocks
*
CAGC
China Agritech Inc (Added 12/02/2009)
CCME
China Mediaexpress Hldgs
VISN
Visionchina Media Ads
* Top-Rated Company
The market offered a cautionary tale Thursday for China's ADRs ? and for
those who invest in them.
China MediaExpress (CCME), a former member of Your Weekly Review, plunged 33
% in monster trade as the stock continued a five-day, 54% collapse.
A research company has accused the company, a provider of digital
advertising in buses in China, of grossly overstating its earnings.
View Enlarged Image
Citron Research, in a scathing Jan. 30 online note, said the company's claim
to be China's biggest TV advertiser on intercity and airport-express buses
defies certain facts.
Citron compared China MediaExpress with its rival, VisionChina Media (VISN).
"How can CCME generate 3 1/2 times the revenue per screen of its competitors
?" the report asked. "CCME has roughly (55,000 to 60,000) displays; VISN has
(about) 120,000 screens. In Q2, 2010, VISN's total revenue was $31 million
and CCME generated $53 million from less than half the screens. Remember
that VISN operates bus advertising in major metropolitan areas, compared to
CCME, which claims intercity buses between second- and third-tier markets."
China MediaExpress, on its company website, said "CME strongly disagrees
with the views expressed (in the research note) and believes that investors
should rely on the Company's public reports filed with the Securities and
Exchange Commission."
The stock's implosion should remind investors that transparency issues tend
to appear more often in foreign companies than with U.S. names.
China Agritech (CAGC), a fertilizer maker, fell 9% in monster trade Thursday
and is near its July 1 low. Like China MediaExpress, it's been the subject
of media reports of misstating its results.
China MediaExpress might have looked like a bullish opportunity lately. The
stock broke out of a base on Jan. 27. Yet, there were signals in its chart
that should have made investors cautious.
The base was somewhat deep and had some loose price action ? flaws that were
noted in IBD's chart analyses.
The day after the breakout, shares made a bearish reversal, closing with a 9
% loss and below the possible buy point. Selling continued en masse. Shares
fell below the 50-day and then the 200-day moving average.
Remember, a key rule of investing in stocks is to cut losses short, no more
than 8% from your purchase price.
The stock was 8% below its buy point on Jan. 31. Investors selling at that
time would have spared themselves the larger losses.
