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China Zenix Auto International Limited Message Board

  • bobpaulovich bobpaulovich Aug 21, 2014 1:06 PM Flag

    The subsequent proposal:

    Since the initial proposal failed, which included ZX buying the real estate company, I tend to believe that the subsequent proposal will have to show or prove value for whatever type of transaction takes place.

    They could not prove that the Real Estate company was worth anything. The board, along with an accounting firms review, would not sign off on the proposal. The only way to determine the value of the real estate company, would be to do a public offering, which would confirm that it's not worth anything.

    Hard for the Chairman to do any more damage to ZX to show that it has less than $3.00 share in value.

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    • bob, I have no doubt that the cro-oked CEO is more interested in taking over the company on the cheap rather than making every effort to make it successful and increase shareholder value. In fact, any effort to increase the shareholder value will work against his objective. Accordingly, his presentations regarding performance and outlook will be at best neutral rather than a positive and assertive approach. I think there will be a subsequent buyout/merger proposal with a new configuration but whatever is offered has to be better than equivalent of $3.00 + to even have a chance for consideration.

    • I did not hear anything about another shareholder proposal. From the conference call, I got that management will continue to work on creating aluminum wheels, and may do a second production line if there is enough demand. I also got that management has no plans for the company to buy back stock (I support this, see my third point below) and that senior managers will not personally buy more stock. The only sort of stock value proposal was that management would consider an Investor Relations campaign in the 4th quarter.

      Basically, the firm has committed to no actions in the 3rd quarter and very little action in the 4th quarter.

      Three other points. The first is that the 20% growth in inventories concerns me. The second is that the entire Chinese trucking industry declining by 10% year over year is inconsistent with a Chinese economy growing 7.5% year over year.

      The third was the statements that ZX was growing market share while holding margins. I do not believe this. I think many Chinese companies are borrowing and lending (including ZX, see the 160 million RMB is over 90 day deposits) in the shadow banking market in China. Based on my time in China, Chinese companies quickly drive margins to 0 when under financial stress. I think the inventory accounting is allowing the firm to overstate profit margins. If I am correct, this will be more visible as the year progresses.

      With all of the above, I am holding my shares at the current level.

      Sentiment: Hold

 
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