More questions for Sunbridge Group Ltd

Another warning for investors

| More on:

You鈥檙e reading a free article with opinions that may differ from The Motley Fool鈥檚 Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you’ve been following our series of articles on Sunbridge Group Ltd (ASX: SBB), then you’ll know that we have concerns for its Australian retail shareholders.

With 1 in 5 Chinese companies listed on US exchanges since 2007 being delisted for fraudulent activities and 1 in 10 on the Singapore Stock Exchange, it would be na茂ve of us to assume it could ‘never happen in Australia’. With that track record, a detailed investigation into the company’s business structure, strategy and reported financials for any company (Chinese or other) listing on the ASX is warranted.

So far we have raised several issues, which may turn out to be nothing more than poor management, undue attention to corporate governance or a lack of communication from the company. Our concern is that these issues are none聽of those.

Here are another couple of early warning signs聽that investors should be wary of when looking at Sunbridge.

Payment of a dividend is not a conclusive sign that there are no issues. Eratat Lifestyle, a men’s apparel retailer in China, paid dividends every year until it was suspended in 2013, after the company was found to have fabricated some of its bank statements. Grant Thornton, who were appointed as internal auditors, did not appear to pick this up in November 2012 when they examined Eratat’s subsidiaries’ bank balances.

Sunbridge’s statement that it intends to pay out just 25% of net profit in dividends once a year, appears at odds with having such a large cash balance, negligible capital spend and rapidly growing revenues and profits.

Receivables as a high percentage of total assets. Eratat’s accounts receivable in 2013 represented 42% of its total assets. Sunbridge’s accounts receivable stood at 32% of total assets in 2013.

Overdue accounts receivable. Sunbridge had 50% of its receivables overdue at the end of 2013, $9.3 million of the company’s payments to be received from its distributors out of a total of $18.7 million.

With so many potential issues, we again warn investors that until the facts are clearer, they may want to avoid investing聽in聽Sunbridge shares.

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter聽@TMFKinga

More on 鈴革笍 Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
鈴革笍 Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
鈴革笍 Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more

asx investor daydreaming about US shares
鈴革笍 How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more

person reading news on mobile phone
鈴革笍 Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more