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Long and concealed 57.7 billion debts? Li Ka Shing company was hollowed out

May 15, 2019 05:14

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[Long and concealed 57.7 billion debts? Li Ka-shing was short-selled. On May 14, Changhe issued a clarification announcement stating "strongly denied." The company stated that the audited financial statements are in strict compliance with applicable Hong Kong Financial Reporting Standards. (Daily Economic News)

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On May 14, GMT Research (hereinafter referred to as GMT), a research institution active in the Hong Kong stock market and the US stock market,Long and(00001, HK) launched an "attack." According to GMT,Long andThe recent annual report shows that the accounting adjustments related to the acquisition of Italian telecommunications company Wind Tre, coupled with the residual impact of the 2015 restructuring, boosted its FY1818 profit by approximately HK$13.2 billion, an increase of 38%. By treating some assets as assets for sale,Long andIt may have concealed the $57.7 billion in debt associated with the assets for sale.

"Daily Economic News" reporter researchLong andThe 2018 annual report found that, unlike the “hidden” that is understood everyday, in the financial report,Long andThrough the financial treatment of "single listing", part will bebankThe loan was removed from the consolidated statement. This approach does not actually conceal the debt, but it does have the effect of reducing the overall debt. andLong andThe amount of this debt excluded was HK$57.707 billion, which is in line with the data challenged by the GMT report.

May 14th,Long andThe publication of a clarification announcement indicates “strong denial”. The company stated that the audited financial statements are in strict compliance with applicable Hong Kong Financial Reporting Standards.

57.7 billion debts are listed separately

The "Daily Economic News" reporter contacted GMT to try to obtain the relevant content of the short-selling report, but was rejected. "We can only discuss our research report with the subscribers."

April 9, 2019,Long andThe 2018 annual report was released. In 2018, the company's revenue was 453.23 billion Hong Kong dollars, and the profit after tax reached 46.782 billion Hong Kong dollars. The reporter’s research company’s 2018 annual report found that the GMT short-selling report referred to “the concealment of HK$57.7 billion in debt related to assets for sale”, orLong andIt is related to streamlining infrastructure investment.

Listed company annual report disclosure, group and subsidiaryYangtze River Infrastructure GroupThe company holds a total of six infrastructure investments. On December 20, 2018, the company's board of directors passed a plan to streamline infrastructure investment. According to the plan,Long andControl of some of the infrastructure investment will be terminated.

In this situation,Long andIn the production of the consolidated financial statements, the six capital construction investments are reclassified as “sales groups for sale”, which are separately listed and consistent with the ordinary financial statements, “sales groups held for sale” The project is also divided into liabilities and assets.

According toLong andDisclosure, in this group, the “liability” project contains “bankAnd other debts, the subject amount is HK$57.707 billion, which is in line with the amount challenged by the short-selling institution.

Actually,Long andThe above changes were not deliberately concealed in the annual report. In explaining the change in net debt during the fiscal year,Long andIt is pointed out that as of the end of 2018, the company's consolidated net debt was HK$207.965 billion, an increase of 26% from the beginning of the year, mainly due to the payment of dividends, redemption of certain permanent capital securities, capital expenditures and investment expenses.Long andAt the same time, it is pointed out that the net debt in the above-mentioned infrastructure assets listed in the consolidated statement was reclassified to “selling group for sale”.

However, the reporter calculated thatLong andThe adjusted liabilities of HK$57.707 billion accounted for 27.75% of the net debt disclosed in the financial report, which accounted for a relatively large proportion.

Acquisition brings big gains

GMT short-selling report said that the acquisition of the Italian telecommunications company Wind Tre related accounting adjustments, coupled with the residual impact of the 2015 restructuring, promotedLong andProfits in FY 2018 increased by approximately HK$ 13.2 billion (38%). These non-cash adjustments explain whyLong andThe operating cash flow lags behind the cash profit and why the capital expenditure always exceeds the depreciation and amortization.

Actually,Long andThis has been disclosed in the annual report. The 2018 Annual Report pointed out that the new profits from the acquisition of the remaining 50% equity of Wind Tre in September 2018 increased earnings and cash flow.

According toLong andAnnual report, total revenue for the whole year of 2018 was HK$45.323 billion, up 9% year-on-year; net profit attributable to ordinary shareholders was HK$39 billion, up 11% year-on-year; earnings per share was HK$10.11, and a final dividend of HK$2.3 per share was proposed. Dividends per share amounted to HK$3.17.

  Long andSaid that in the revenue realized by its telecommunications sector, 3 Group's business in Europe (Long andThe annual report disclosed collectively as the European Group 3) revenue of HK$78.411 billion, an increase of 11% over last year, mainly due to the new profit from the acquisition of the remaining 50% equity of Wind Tre in September 2018.

"Daily Economic News" reporter found that Wind Tre is 2016 by VimpelCom's Wind Telecom andLong andThe company's 3 Italia merger, the company mainly operates in Italy, is the largest mobile telecommunications operator in the Italian telecommunications market. Previously,Long andHold half of its equity. July 2018,Long andIt announced that it will acquire the remaining 50% of the shares at a price of 2.45 billion euros (about 19.051 billion yuan).

Short-selling report pointed outLong andUse this radical accounting method to get cheap credit and higher market ratings.

It is worth noting that on May 14th,Long andThe publication of a clarification announcement indicates “strong denial”. The company stated that the audited financial statements are in strict compliance with applicable Hong Kong Financial Reporting Standards. All matters relating to the Group's reported earnings as mentioned in the introduction have been fully and transparently disclosed in the Group's audited financial statements in accordance with applicable accounting standards. The short-selling report refers to the fact that the debts related to the assets for sale are not consolidated. This is also in full compliance with the requirements of the applicable accounting standards and has been discussed with credit rating agencies.

  Long andIt is believed that the introduction appears selective, biased and seriously misleading. It only indicates non-cash profitable items, but there is no reference to non-cash losses reported in the relevant period in accordance with the applicable reporting standards. Its reference is notLong andThe debts consolidated in the 2018 financial statements are only the debts recorded on the balance sheet due to the acquisition activities during the period.

(Article source: Daily Economic News)

                (Editor: DF387)

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