Whether Or Not To Muddy The Water, Anta Sports Skating On Thin Ice

Just as Anta sports is fighting for Zion - NBA's "next James" and fighting with Lining...

In July 8th, Muddy Waters Research, a famous short selling company famous for its sniping stocks, detonated a heavy bomb behind it. It questioned Anta sports's financial situation seriously untrustworthy, secretly controlled a large number of distributors, and "beautified" performance through financial manipulation.

Twelve hours, two muddy water reports

Immediately after the release of the report, Anta sports plunged more than 8%, and its market value shrank by HK $10 billion. The company urgently applied to the HKEx for temporary suspension.

The first report focuses on Anta sports distributor system. At the beginning of the brand establishment, Anta, which had no reputation, had to build its own distributor and retailer network. But relying on this strategy, Anta's brand attractiveness has been greatly improved.

In muddy water, these Anta brand distributors seem to be independent third parties, but in fact they are under the control of Anta.

Mudshui believes that in about 46 primary distributors, Anta has more than 40 secret controls, which account for about 70% of the total sales. At the same time, the subsidiary will become a distributor, so that the cost of the "subsidiary" does not have to appear in the listed company system; on the other hand, it does not need to wait until the final sale of the goods to the customer, after the distributor receives the goods, it can confirm the revenue, reduce the expenses and speed up the income confirmation, which will undoubtedly make the financial reports beautified.

Muddy water also found that the average gross profit margin of these distributors was only 7% to 8%, and the average net interest rate was close to zero, far behind BELLE and Baosheng sports shoes and clothing agents.

In this regard, muddy water quoted the source of the interview: Anta management directly referred to Anta and distributors as "left hand to right hand relationship".

On the morning of 9, Anta sports issued a clarification notice, denied turbid water related allegations, pointed out that some distributors to facilitate the promotion of business, will call themselves "group" or "branch" rather than a legal definition, which only represents a Anta brand.

Driven by this, Anta sports once opened six points, but then the purchase came in, and the stock price stabilized.

On the morning of 9 am, muddy water released second short selling reports again, accusing Anta sports of being suspected of internal corruption and deceiving investors. Ten years ago, it used the agent system to transfer high-quality assets of listed companies.

Anta sports also responded quickly, and the allegations were inaccurate and misleading. Obviously, the second were not enough to kill, and the stock price of Anta sports did not change. On that day, the stock price rose by 0.2%.

Within thirteen months, three times were short.

Once muddied through the muddy waters of New Oriental, Focus Media and learning, the overseas listed companies are scared, but the logic of their short selling is not complicated. They are mainly divided into three types: commercial fraud, financial fraud and fundamental negative.

Through accurate analysis, muddy water will make short reports to investment banks and fund companies, causing the market to trample on the stocks of the problem companies, and the share price has plummeted.

Liu Chunsheng, a financial expert, said that the process of muddy water selection of target enterprises is not easy. The financial statements of listed companies are collected, and their temporary announcements, media reports and official website information are collected to form an information map. The information chain of these companies is simulated, and their logical nodes are found. Then, through field investigation, investigation of related parties, upstream and downstream enterprises, customers and competitors, industry experts, etc., the relevant information is collimating comprehensively, and the defects in evidence chain are found.

Therefore, muddy water this short selling Anta sports, according to the evidence presented in the two report, is obviously fully prepared.

This is already the third short sale of Anta sports in short thirteen months.

In June 2018, the short selling organization GMT first released the short selling report for the Hong Kong stock sporting goods company, involving Anta, XTEP, Lining and other enterprises.

GMT questioned Anta sports from five aspects, including a large number of abnormal business profit margins, cash or prepaid accounts and so on, suspected to be accompanied by a cash flow increase in cash flow, a relative low inventory to income ratio, and a high proportion of prepaid accounts relative to inventory.

In May 2019, the short selling agency Blue Orca released the short report of Anta sports. It believed that Anta's retail sales revenue of its brand Fila, compared with a number of well-known international sports brands, was "too good to be true", and Anta's valuation had a potential decline of 34%.

Having experienced the two short selling, although the stock price of Anta sports has dropped in the short term, it has quickly hit a new high with the resurrection of blood.

But this time Anta sports is faced with a much bigger muddy water. Whether the company can withstand the test of the relevant allegations is still uncertain.

　　 Why Anta sports is short selling "favor"

The reporter observed that since August 2012, the stock price of Anta sports has risen 16 times in seven years. It is a brilliant performance in the Hong Kong stock market. It is a well deserved consumer white horse blue chip.

Promoting Anta sports share price "BBK" is its outstanding performance, far exceeding Lining and XTEP and other well-known sports goods companies.

According to the financial report, Anta sports has maintained two digit growth in the past five years: from 2014 to 2018, the scale of revenue was 8 billion 900 million, 11 billion 100 million, 13 billion 300 million, 16 billion 600 million and 24 billion 100 million yuan respectively. The growth rate in 2018 was the fastest and the growth rate was as high as 45%. Net profit increased from 1 billion 700 million in 2014 to 4 billion 100 million yuan in 2018.

Among them, the FILA brand has contributed to the overall performance of the group.

Compared with A shares, the information disclosure of Hong Kong stock companies has relatively little information, which can be seen directly from the total pages of the financial reports. Although the stereotyped stereotype of mainland China, the Hong Kong stock companies' earnings reports attract more attention, especially the colorful pages attached to the consumption and cultural industry companies, and the proportion of publicity is higher. But the contents of the real value are relatively scarce. Many information companies can choose not to disclose them, which also provides "shells" for the short selling organizations. Last month, Bosideng suffered the "strangulation" of short selling organization Bonitas.

Since the acquisition of Fiji in 2009, Anta sports has not disclosed the specific income and other data of Felix. It only disclosed that as of December 31, 2018, there were 1652 stores including Anta in mainland China, Hongkong, China, Macao and Singapore.

Therefore, in view of this alone, the transparency of the company's operation needs to be improved. It is also based on this that the short selling organization can take advantage of it and seek to attack points around weak "opaque".

CLSA also issued a research report on the issue on 9 th. It is considered that muddy water is unfair to the short report of Anta sports. The real problem lies in a strong negotiable stock. If corporate governance and financial disclosure are opaque, valuations exceed the expected fundamentals in a fragile market environment. Even if there is no accusation of muddy water, stock prices may be under pressure.