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Orient Paper, Inc. Message Board

  • peristentone peristentone Jul 1, 2010 8:52 PM Flag

    Number of Trucks Going to ONP Facility

    I started to read the Muddy Waters report today. Most of what they say would require careful due diligence to prove or disprove, but one line of reasoning they pursue seems extremely important to check up on, and can be checked easily.

    To their credit, Muddy Waters does a calculation based on tonnage for the number of trucks that must be coming in and going out of the ONP facility, in order to support the manufacture of 582 tons of paper per day. Assuming 1500 pound (1.5 ton) rolls, and 20 to 30 rolls per truck, there should be on average around 33 trucks leaving per day, averaging 25 rolls per truck.

    This anyone can verify by standing outside of the ONP facility and simply watching the truck flow. You don't have to really verify any of the paper trails to make simple observations about whether the product flow comes even close to agreeing with the reported results.

    So is anyone coming out to say that they have done this observation for an extended period of time, and that the number of incoming and outgoing trucks agrees with the mathematical requirements of the reported revenue? Because if the company fails this basic test, Houston we have a big problem, and we can leave the details to the attorneys and accountants.

    If on the other hand the basic flow of inputs and outputs mathematically agrees with the reported revenues, we owe the company a hearing and probably facts are going to get explained.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • seasaw, can you contact me by email persistentone AT spamarrest.com

    • Try getting the company's approval to do that. Good luck!

    • Why don't you go there and take a count yourself? Complaining about it, 4000 miles away, is not going to help.

    • I would not consider buying shares in this company. Even if the numbers are correct there are lots of Chinese microcaps that look cheaper. I think the important point is how many trucks leave the plant every day. People sell and buy shares for tens of millions of dollars while it seems impossible to establish the very simple number of how many trucks leave the factory every day.

    • 582 tonnage is for 2012 and at this moment, their tonnage is only 200 ton+.

      • 1 Reply to rcch12342003
      • No, wrong again. 200K (please note the K for THOUSAND) is their total approximate output capacity PER YEAR. The chairman of ONP said to thestreet.com and to Muddy Waters that the capacity was now at 250K and they were running at 85% utilization. Let's do this very complicated 7th grade math together:

        250,000 tons/year * .85 * 1 year / 365 days = 582 tons/day

        582 tons per day: that is the amount they need to be shipping out of their facility - on average - every day for 365 days in order to make the statement of ONP's chairman true.

        Please, don't comment on threads if you aren't willing to at least read the executive summary of the thing you are summarizing.

    • Your post is a tangled mess. I don't even know where to begin untangling it.

      Does the facility ship anything close to 582 tons of paper per day or not? It's not rocket science. Answer that one very simple question and this thread is closed.

      We don't need to go through a tangled mess of he said / she said, or prove whose versions of financial records are correct to answer that question.

    • I believe in receiving a wrong tax statement includes the idea that they also got the numbers wrong. It's like me saying you're looking at a supply statement from 20 years ago that's why you're coming up with bad numbers. Needless to say, it means that they [ONP in analogy] are NOT fraudulent if you look at today's numbers. In such a short amount of time you cannot expect every question to be answered. If in fact Muddy Waters was mixing and/or confusing the different paper company with ONP there may be a bit of a problem for anyone shorting this stock. He Bei Oriental is not Hebei Baoding Orient. If Muddy Waters mixed that up, then the 27x's argument is moot.
      They don't have to specifically mention their truckloads when they basically said that all of their accounting is true and accurate as opposed to what Muddy Waters reported.
      Keep in mind as well that from the looks of it Muddy Waters basically tried to extort money out of the company by first offering a positive report. Remember that one of the 2 amateur analysts from Muddy Waters is also an attorney. Loop holes can exist in their negative campaign.
      The fact that they attempted extortion while the co. refused is very very telling. A pump and dump co. would enjoy a positive spin from anyone offering a pump article. They denied it. What happens next? Muddy Waters starts a smear campaign right after they offered a positive campaign (in exchange for money).
      Right off the bat Muddy Waters already lost all credibility. They attempted an illegal move while the company refused.
      I'm sure you would like to dwell on the truck numbers and not want to look at the bigger picture. The bigger picture is what started all of this. You allowed Muddy Waters to instill doubt in your mind and that is causing you to remain in a small box in mind looking for facts that are not necessary (as they may be true) as the reason for Muddy Waters' report. They disclosed their short position and as a result will desire a speedy drop in price.

      If you are short you are definitely in a difficult position because the company can very easily report first thing on Tuesday their numbers refuting everything Muddy Waters has said. If so, a continuation squeeze will be in effect and anyone short may suffer large losses because of the low float in this stock. The stock has dropped all week and just Friday shot upwards. The chances of it dropping again like a stone are much lower than this gapping up. Anything can happen of course but the one thing we can be sure of is that Muddy Waters has lost credibility by attempting to extort the company in addition to getting their subsidiary name wrong.

    • Exactly right jaboyle. Management could quash this rapidly by showing clear evidence of volumes leaving the factory, in a rigorous audited count. That would establish immediate credibility related to their reported revenue, and the details of the other claims people would give them time to respond to more slowly.

      Instead what we see is lots of redirection; that was a good word choice by you.

    • In China, most fraud is conducted through related party transactions, not equity sales. That's just a cultural habit. So, for example, they might pay $27M for a company with no real value - as China Marine Food appears to have done. A scathing a rather good description of that transaction is here:

      http://seekingalpha.com/article/209881-china-marine-food-group-where-did-your-money-go

      Or, as another example, you might pay a company set up by your relative $1M for items that have a market value of $575K from every other supplier.

      Those kinds of related party transactions can be very hard to find, particularly when your accounting is done in a non transparent way.

    • If you read Sean Regan's Bio

      "he has owned three factories; and, has performed due diligence on literally thousands of factories across Asia. During this time, he has has become an expert in identifying production problems in the making, and has learned well how to find buried bodies (proverbial of course)."

      Whether he has performed that much DD does not matter as he has owned three factories. Anyone that owns a factory understands TOC and this thread has hit that right on the head.

      I don't see management refuting that they got the capacity wrong. I see them telling us they got the wrong tax report from a similar named company. This is a deflect and needs to be addressed.

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ONP
1.2499+0.0599(+5.03%)Oct 23 4:00 PMEDT

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