Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

A buy-side analyst with over 15 years of experience investing in Asian markets and specializing in the mid-small cap space, emphasizing value investing in companies with good free cash flows/dividends and long-term holding horizons. 
Exempt Financial Adviser (EFA) under CrossASEAN Research Pte Ltd. It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity, Bottom-up Analyst

Yadea - Play on EV , 83% of Market Cap in Cash, Will Shareholders See the Cash?

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Forensic Accounting

Yadea Group Holdings / Forensic Accounting

Since my last insight, <a href="https://www.smartkarma.com/insights/yadea-play-on-ev-83-of-market-cap-in-cash-will-shareholders-see-the-cash" target="_blank" data-smartkarma-citation="insights:34062" rel="noopener">Yadea - Play on EV, 83% of Market Cap in Cash, Will Shareholders See the Cash?</a> things just got crazier in <a href="https://www.smartkarma.com/entities/yadea-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:22706:1" rel="noopener">Yadea Group Holdings (1585 HK)</a> after they reported their results for 2019.  Cash is now over 100% of market capitalization, payable days are higher than they have ever been resulting in their highest OCF's and FCF's historically but they decided to cut the dividend ( from 4 cents a share) to zero !!! 
I understand these are uncertain times with the COVID scare and a lot of companies are not paying out dividends or suspending payments into the future.  Yadea has set a new benchmark though on the margin of safety it requires to increase dividends. As of 2019,  here is a look at their cash balance :
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/290/original/image_91760770321585886604581.png?1585886609" class="editor-image img-responsive" data-smartkarma-image-id="126290"></figure>
source: Annual Reports ( figures in mn RMB )
If we analyze this in terms of cash/net profit we get a sense of the runway on how long they can afford to pay a 100% dividend payout ( the company was paying out 25% in 2018 ) without any accretion to the cash balance.
The numbers are staggering! The ratio of Net cash to PAT increased from 9.3x to 12x in 2019. If the company had an accretion so massive to their cash balance surely they could have increased dividends to the shareholders? Why did they choose to pay 0? 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/292/original/image_75396001641585887199169.png?1585887203" class="editor-image img-responsive" data-smartkarma-image-id="126292"></figure>
source: Internal calculation based on annual reports
Here is a look at their dividend payment history from FY17 to FY19. With a runway of net cash/PAT of 12(x), why would the company suspend/defer a dividend payment?   
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/295/original/image_50010184471585887694004.png?1585887698" class="editor-image img-responsive" data-smartkarma-image-id="126295"></figure>

source: annual reports
All the company has to show in terms of shareholder-friendly actions is a buyback of 5 mn shares in July 2019, in which they approximately used~ 7 mn RMB of their 6.3 bn RMB cash balance 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/296/original/image_1374506181585888231621.png?1585888236" class="editor-image img-responsive" data-smartkarma-image-id="126296"></figure>
source: annual report 2019
In this insight, I try to ask more questions.

Since my last insight, Yadea - Play on EV, 83% of Market Cap in Cash, Will Shareholders See the Cash? things just got crazier in Yadea Group Holdings (1585 HK) after they reported their results for 2019.  Cash is now over 100% of market capitalization, payable days are higher than they have ever been resulting in their highest OCF's and FCF's historically but they decided to cut the dividend ( from 4 cents a share) to zero !!! 
I understand these are uncertain times with the COVID scare and a lot of companies are not paying out dividends or suspending payments into the future.  Yadea has set a new benchmark though on the margin of safety it requires to increase dividends. As of 2019,  here is a look at their cash balance :

source: Annual Reports ( figures in mn RMB )
If we analyze this in terms of cash/net profit we get a sense of the runway on how long they can afford to pay a 100% dividend payout ( the company was paying out 25% in 2018 ) without any accretion to the cash balance.
The numbers are staggering! The ratio of Net cash to PAT increased from 9.3x to 12x in 2019. If the company had an accretion so massive to their cash balance surely they could have increased dividends to the shareholders? Why did they choose to pay 0? 

source: Internal calculation based on annual reports
Here is a look at their dividend payment history from FY17 to FY19. With a runway of net cash/PAT of 12(x), why would the company suspend/defer a dividend payment?   


source: annual reports
All the company has to show in terms of shareholder-friendly actions is a buyback of 5 mn shares in July 2019, in which they approximately used~ 7 mn RMB of their 6.3 bn RMB cash balance 

source: annual report 2019
In this insight, I try to ask more questions.

Yadea Negative EV, Cash Pile Growth>50% No Dividends ??