Thinsoft's thin ice
11 December 2009
There's a remarkable bubble in shares of software firm Thinsoft (Holdings) Inc (Thinsoft, 8096), so lets remark on it. Thinsoft was suspended at $0.64 at 11:44 yesterday (after rising 25.49% on the day), pending an announcement of an MoU for a possible acquisition. Even before that, it was a bubble stock. Thinsoft's stock may be temporarily frozen, but it is skating on thin ice.
The latest report for the quarter ended 30-Sep-09 shows net assets of just HK$33.64m (about $0.0134 per share, split-adjusted). It booked a loss of $1.4m on turnover of $2.3m. Despite this, at the suspended price of $0.64, it has a market value of $1,604m (US$205m), or about 48 times net assets. Is a back-door listing opportunity really worth that much?
Thinsoft was listed on 27-Feb-02 after a placing of 25% of the company at a split-adjusted $0.08 per share. The joint lead manager was Luen Fat Securities Co Ltd (Luen Fat).
On 7-Mar-07, the software company invested US$1m of its cash into shares of Vietnam Emerging Market Fund Ltd (Cayman) managed by Vietnam Asset Management Ltd, because that's what HK-listed companies with too much cash on their hands do, rather than return it to investors and let them make their own investment decisions.
On 20-May-08, Inno Smart Group Ltd (Inno Smart) agreed to buy 74.81% of Thinsoft for HK$86.25m or $0.046 per share (split-adjusted) from IPC Corporation Ltd, listed in Singapore. Inno Smart is owned as to 50% by Dennis Yu Won Kong (Mr Yu) and 50% by Yue Wai Keung (Mr Yue). Mr Yue is Chairman of Luen Fat.
Inno Smart's purchase triggered a general offer via Kingson Securities Ltd (Kingston), which closed on 11-Aug-08 with no acceptances. Before the offer, Mr Yu owned 2.88% and Mr Yue's mother and sister owned 3.61% between them, taking the total concert party to 81.30%, so in a placing on 19-Nov-08 at $0.10 (split-adjusted), Mr Yu sold 2.75% and Mr Yue's mother and sister sold all their shares via Luen Fat to restore the public float to 25.06%. Our CCASS Analysis shows that on settlement day, about 1.2% moved to Kingston, but the rest remained in custody of Luen Fat.
On 21-Aug-08, Mr Yu was appointed as Chairman and Mr Yue as Executive Director of Thinsoft.
On 1-Dec-08, Thinsoft lent HK$5.5m to toymaker-turned-coal-play Kiu Hung Energy Holdings Ltd (Kiu Hung, 0381) for a year at 11%. Mr Yu owned 11.96% of Kiu Hung and had an interest in convertible bonds of Kiu Hung. He became an ED of Kiu Hung on 22-Oct-09. Mr Yue also owned 4.49% of Kiu Hung. Mr Lam Kit Sun, an NED of Thinsoft since 11-Aug-08, was appointed as ED of Kiu Hung on 27-Oct-09.
Mr Yu has appeared in our stories before - he was a director and Chief Operations Officer of NASDAQ-traded China Energy Savings Technology Inc., which we wrote about in our article Golden Resorts and CESV on 8-May-05. He resigned on 1-Jul-05. On 4-Dec-06 the US SEC filed fraud charges against CESV and others (but not Mr Yu), alleging that they orchestrated an elaborate stock manipulation scheme.
There are no other shareholders over 5%, but CCASS records show that 95.22% of the company is in the custody of just two brokers: Kingston (76.20%) and Luen Fat (19.02%). The SFC should investigate the concentration of ownership in this stock.
Note that a 5:1 stock split took effect on 5-Nov-09 and there was parallel trading (under two different stock codes) from 5-Nov-09 to 19-Nov-09, which explains the gap in our history. Which reminds us of an outstanding problem at HKEx:
© Webb-site.com, 2009
Organisations in this story
- China Energy Savings Technology, Inc.
- IPC Corporation Ltd
- KINGSTON SECURITIES LIMITED
- LUEN FAT SECURITIES COMPANY LIMITED
- Ruifeng Petroleum Chemical Holdings Limited
- Vietnam Asset Management Limited