One problem with China listed companies on Bursa is that the cash balances of many of them seem to be remarkably high. There is a suspicion (at least with me, but probably with most investors, since these companies trade at very low valuations) that the cash might simply not exist. There are precedents for this, both with China listed companies on the SGX and on the Nasdaq.

Maxwell is one of the first of these companies where the suspicion has progressed to the next stage, due to this announcement:


1.         As stated in the third quarterly results ended 30 September 2015, the total amount of cash/cash equivalent were RM257 million. The third quarterly results was announced on 30 November 2015.

2.         The total amount of cash placed with the asset management company, namely Jinjiang Jin Chuang Private Capital Management Co Ltd [晋江晋创民间资本管�?�有��?公�?� ] (“Jin Chuang”) as at 30 September 2015 was RM103.7 million

3.         Messrs Baker Tilly Monteiro Heng’s (“BTMH”), on preliminary assessment with regards to the cash placed with Jin Chuang and pending the commencement of the annual audit, have yet to obtain any documentary evidence for such placements of funds and sufficient information on the nature of business of Jin Chuang.   In addition, BTMH was concerned with the authenticity of these deposits placed with Jin Chuang and the recoverability of the deposits.


The above implies a flag that is as red as red can be.

The announcement continues:


4.         On its preliminary assessment, BTMH noted that based on the announcement of court cases on the website of Fujian Quanzhou Intermediate People’s Court, a company named “Zhenxing” (A subsidiary of Maxwell) is being sued by a company, Fujian Quanzhou Li Cheng Qu Chuang Xing Micro Credit Co Ltd (��?建泉州市鲤城区创信��?��?贷款有��?公�?�) due to a dispute on the loan agreement. The Defendants in the case involve Zhenxing as the borrower, Madam Li Kwai Chun (the Executive Director of Maxwell) and two others as the guarantors.

[Source: http://www.qzcourt.gov.cn/news/ktgg/showinfo.aspx?id=316]

The Management of China Subsidiary claimed that they did not received any documents relating to the litigation before.

Madam Li Kwai Chun represented to the Board that the said loan dispute was in fact involving herself as a personal guarantor and it should not involve the Zhenxing.  Therefore, she will seek the necessary legal advice on the matter.  Further announcement will be made upon the legal council revert with the opinion.


This sounds puzzling as well. Madam Li seems to be a serial guarantor, a previous posting regarding this matter can be found here.

In another Bursa announcement, related to the very high marketing expenses, the company announced:


1. Maxwell (Xiamen) Co. Ltd, the intermediate subsidiary of Maxwell International Holdings Berhad, has executed six contracts with six marketing agents in PRC for promoting and setting-up 390 marketing billboards/LED signboards for a period of one year. The total amount has paid RMB92.4 million in year 2015.


Why spend such a large amount so suddenly through only one marketing channel with no apparent result for the revenue? Why not try a few billboards first, and measure their impact?

It would be good if the auditor would demand a list of the locations (GPS coordinates) of all 390 billboards and would check a few of them randomly if they exist and if they really feature Maxwell's advertisements.