Saturday, May 09, 2015

Seeking a White Knight

MOS is disappointed by the recent developments at Sound Global. Our anticipated re-rating thesis has not played out. Instead auditor Deloitte has found a RMB 2 bil shortfall in the cash balance at its bank accounts at the end of last year compared to that recorded in its books.

The stock remains suspended on HKEx since 16 March. Instead of stalling or using the "usual" delay tactics, we are marginally encouraged that a professional corporate investigation firm has been tasked to review and issue a report by late May. There is further expectation that its results will be published in late June after the foregoing work is completed.

Founder Wen Yibo is cashed up to a tune of at least a billion dollars following his 30% stake sale in sister unit Beijing Sound Environmental to Tsinghua Holdings. So if the current issues at Sound Global are not of his doing, he could step in as a white knight to rescue the unit when trading resumes.



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