Yesterday, FerroChina was delisted from SGX. A once leading galvanised steel producer is now history. Before it went burst, it was still growing leaps and bounds. The growth figures were beautiful and full of promises. But, it is now buried under millions of debts.
I have lost my investment in this company. It's painful. Even though I have done my homework analyzing this company, reading its financial reports and following the analysts' reports, nothing actually prepares me for this. Before it went burst, it was still reporting 194% increase in gross profit for 1H FY08 compared to 1H FY07. The net debt to equity was just 55.7%. So, how did a company with such impressive results and financials go belly up? *Sigh* I don't know.
On hindsight, I think I have believed too much in its financial reports, and I have focused too much on how well this company can grow and forgotten to look into the details of its debt. This company is practically growing and living on debts. Even without this financial crisis, the amount of debt and repayment would have buried it 6 feet under. In the pursuit of growth, financial prudence and risk management have been put aside. To me, this is a good lesson learnt.
I was searching if anyone has blogged about Ferrochina and have stumbled upon your blog. Like you, I made a sizable investment in Ferro in 2008 months before it went bust. I felt cheated as most of the public information and analyst report does not give much hint of the financial problems they were facing. I believe SGX should investigate if the company were negligent in their reporting. Wondering if I am the only one feeling that way or if other investors feel the same?
ReplyDeleteIf you look at some of the S-chips today, you will realize that quite a number of them have going concern risks. Ferro will not be the last one. I guess MAS/SGX must be quite worried about it. Once bitten, twice shy. I doubt I will ever want to look at S-chip anymore.
ReplyDeleteWho was the CFO then? Heard that he was employed by another local electronic firm? Who still dare to employ while he cannot control the finance of Ferro China. Unbelievable
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