Ping Luo, what flavor was your Kool-Aid? (CCME, SDTH, HRBN, CNYD, WATG, etc)

[UPDATE – Ping Luo buy rated stock Wonder Auto (WATG) also failed to filed its 10K on time]

Ping Luo, perhaps the high priestess of Chinese reverse-merger garbage, must really need a hug after the past week.

It turns out that Global Hunter‘s former ace China analyst is pretty much a moron. On the 15th of March she “suspended coverage” on China Media Express (CCME). Sadly for her, and any investors unwise enough to hear her siren song, the shares were halted the morning of March 11th.

The halt came a mere three weeks after Ping issued perhaps the silliest analyst report to ever be issued, even by a shop as neck deep in reverse-mergers as Global Hunter. Her February 17th defense of CCME is destined to be a classic. Read it here. A small taste of the Charlie Sheen-esque “truth torpedoes” within:

Met with management and Starr. We felt management was eager to prove the legitimacy and validity of its business. The company has been open and cooperative with our due diligence work. We believe the company is currently assisting Deloitte in completing its annual audit, and has been actively collecting third-party verifications. In addition, we visited Starr‘s Shanghai office again. We believe Starr has done comprehensive DD and been closely monitoring the company. Our  impression was that Starr continues to believe in CCME and is likely to remain as a long-term investor.

Of course, Deloitte did not seem to agree that management was so forthcoming. According to CCME‘s own press release announcing the resignation of Deloitte:

The DTT resignation letter stated that DTT was no longer able to rely on the representations of management, and recommended that certain issues encountered during the audit be addressed by an independent investigation. DTT’s letter also stated that these issues may have adverse implications for the prior periods’ financial reports and that, in their view, further investigatory procedures would be required to determine whether the prior periods’ financial reports are reliable.

And Starr, the great hope of every misguided stuckholder’s fallacious arguments from authority? Perhaps not such a long-term investor anymore, either. On the 16th of March, Ying “Dorothy” Dong, of CV Starr Asia, resigned from the CCME board and sent a withering letter of her own to China Media.

Another Ping Luo stock, ShengdaTech (SDTH) was also halted on the 15th of March, and remains halted. SDTH is not able to file its 10K. ShengdaTech announced:

it had appointed a special committee of the Board of Directors to investigate potentially serious discrepancies and unexplained issues relating to the Company and its subsidiaries’ financial records identified by the Company’s auditors in the course of their audit of the consolidated financial statements for the fiscal year ended December 31, 2010.

Ping did not suspend coverage of that name, according to Bloomberg, she says buy.

A third Ping name, Harbin Electric (HRBN) did manage to file its 10K complete with a Frazer Frost audit. Still, even Frazer had to admit that there were serious internal control issues at HRBN including:

1- Control activities related to bank reconciliation.
2- Control activities related to the reconciliation and classification of notes receivable.
3- Control activities related to the calculation of provision of income tax.
4- Control activities related to valuation of inventory allowance.
5- Control activities related to inventory recording.

And yet, the Pinger still rated Harbin a buy. Let’s take a look at the the complete Ping Luo Coverage Universe, who knows, there might be some low hanging fruit still left to pick. With Ping guiding us, how can we lose?

SIHI   SinoHub Inc             buy    03/15/11
CHLN   China Housing & Land    buy    03/15/11
CCME   China MediaExpress H    suspended coverage    03/15/11
AMCN   AirMedia Group Inc      accumulate    03/15/11
CMFO   China Marine Food Gro   buy    03/14/11
ZOOM   Zoom Technologies In    buy    03/07/11
WATG   Wonder Auto Technolo    buy    03/07/11
VALV   Shengkai Innovations    buy    03/07/11
CAST   ChinaCast Education C   buy    02/17/11
CADC   China Advanced Const    buy    02/16/11
SOKF   SOKO Fitness & Spa G    buy    02/14/11
CELM   China Electric Motor I  buy    01/31/11
QKLS   QKL Stores Inc          buy    01/24/11
CVVT   China Valves Technology buy    01/24/11
SDTH   ShengdaTech Inc         buy    01/24/11
HRBN   Harbin Electric Inc     buy    01/18/11
CRTP   China Ritar Power Cor   buy    11/22/10
CNYD   China Yida Holding Co   buy    11/22/10     
CHC    China Hydroelectric C   accumulate    11/12/10     
CAAS   China Automotive Sys    accumulate    11/10/10
CSKI   China Sky One Medica    dropped coverage    09/02/10                    
JRJC   China Finance Online    dropped coverage    09/02/10                    
SGTI   Shengtai Pharmaceuti    dropped coverage    09/02/10                    
CDII   China Direct Industrie  dropped coverage    04/01/09                    
JNGW   Jingwei International   dropped coverage    03/31/09                    
BEST   Shiner International I  dropped coverage    03/24/09                    
FEED   AgFeed Industries Inc   dropped coverage    12/30/08                    
CHGS   China GengSheng Mine    dropped coverage    11/19/08

Not a quality company in the bunch. And not a single sell rating either. Ping, what exactly qualifies as “analysis”, “research” and “due dilligence” in your world? On second thought, don’t bother answering, your February 17, 2011 CCME report speaks volumes.

A quick check of the Global Hunter Securities website shows her name is no longer to be found under the “Equity Research Professionals” section. Is GHS doing some damage control and dropping her? And your author thought Kevin Theiss had a bad week!

The content contained in this blog represents only the opinions of the author. The author may hold either long or short positions in securities of various companies discussed in the blog. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. This blog is not a solicitation of business: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.
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2 comments

  1. UPDATE – WATG filed an NT-10K stating:

    “financial statements as of and for the years ended December 31, 2008 and 2009, included in its Annual Report on Form 10-K for the year ended December 31, 2009, as well as the financial statements included in its Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and September 30 during each of the years 2008 and 2009 should no longer be relied upon due to a cutoff error regarding timing of revenue in such periods. Additionally, the Company is still evaluating the impact of the cutoff-errors on its financial results for the year ended December 31, 2010 and on its internal control over financial reporting as of December 31, 2010.”

    Poor Ping!

  2. Would’ve loved to have been a fly on the wall during the meeting when she got fired.

    Also, started reading the Asensio book. Good stuff! One of the stocks he mentions in passing during the boner pill chapter made me perk up: VVUS? Vivus. That sounded familiar. Turned out I had a tiny position in my IRA, which I promptly dumped since once a garbage company, always a garbage company it seems.

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