Powerland AG is a holding company based in Germany for leather goods manufacturing companies based in China.
After a long period of postponing of the Annual Report 2012, they issued a statement on the 02.07.2013 saying they auditor ( BDO AG WpG) denied the testate and issued a negative auditors opinion.
Today Monday 15.07.2013 at 18:01 after market-close they issued yet another statement explaining the reasons given by the auditor for not accepting the report.
One of the reasons is that the auditors were not allowed by PL to confirm the bank account statements with the headquarters of the banks involved. The auditors could only visit the local branches of the bank.
I know from a partner of EY who was posted for 3 years in China told me it is indeed normal to go into the banks and talk directly with bank representatives.
In Germany standard procedure is to simply accept an official statement coming from the bank. Not so in China, where risk of forgery is immanent. However I do not know whether it is also standard procedure to talk to the HQs of the banks. From my point of view it does make sense, esp. if PL is a important client or if there is personal interest.
PL justifies the denial with the statement that such a process is very unusual for Chinese audit procedures.Furthermore no business association exists to HQ, therefore they could not asks HQs to provide such documents.
As a last point they announce a share purchase of up to 1,5 Mio shares beginning from the 25.07.2013.
Shares outstanding is 15 Mio, accordingly 10% of all shares could be bought back.
The buyback price shall not exceed 8 EUR.
Chances:
+8 EUR provides effectively a floor to share price (given the liquidity of course)
+The buyback was approved during AGM 2012
Risks:
-Chinese bank accounts are indeed bogus resulting in insufficient capital for buyback
-German holding only had 0,48 Mio cash as of 31.12.2011 (Bundesanzeiger.de, latest HGB statement)
-No directors dealings during the period of extremely depressed share prices
/Edit: There also seems to be heavy insider trading before the announcement +26,58% on XETRA until 17:36:09. Date of announcement: 18:01.
Also higher trading volume, however not very strong.
Still: Its always leaking somewhere. EMH..
/Edit2: New CFO. Seems competent, reputation to loose, might help share price further.
/Update 16.10.2012: No news so far. Powerland release unaudited statements for Q2.13 and furthermore appointed EY / Ernst & Young as auditor. I'm surprised they took on such a high risk mandate, especially with their Sino Forest experience...
Out the buyback there is no information available at all, often companies have information on their webpage, not in this case.
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