Balance Sheet

Balance sheet tells you the value of the things that a company owns and the amount it owes.

Using China Hong Xing as a example.

The things it owns: Assets= RMB4.4B

The things it owes: Liabilities and stockholders' equity = RMB4.4B

And, in balance sheet, Assets must = Liabilities + stockholders' equity.

Assets include cash, receivables, inventories (current assets=3.7B ), equipment and property (fixed assets) and land use right (Intangible assets, total non-current assets= 0.7B) etc.

Liabilities (Which is = 542M) mean account payable, accrued liabilities (Current liabilities = 271M), deferred taxes and rent (Long term liabilities or non-current liabilities = 271M).

From balance sheet, we know:

1) ROE = net profit / equity = 0.515/3.9B = 13.2%

Stockholders' equity(=3.9B) refers to capital paid and retained earning.

2) NAV = Total assets - liabilities and preference capital / #ordinary shares
NAV per share = 4.4B - 0.54B / 2.54B = RMB 0.152

3) Trade receivable of 478M which is higher than attributable net profit of 445M. Do you want to invest in a company that has such high Debt/Profit ratio of 1.07 (478/445)? If tomorrow all these debt cannot be collected, the company will declare loss.

4) Prepayment, deposit and other receivables are 4oo% (1.16B) higher than previous year (278M). What if all these receivable not collected next year?

5) Bank and cash balance have depleted by 25% to 1.98B from previous 2.65B. Somewhere in the report said that the previous 2.6B was raised through share placement and this was done when the share price hit around S$1. Who would invest at this time when the share is less than S$0.20.