[ET Net News Agency, 8 July 2020] Short selling research house Blue Orca Capital just
published a new report said that China Feihe's (06186) story has more in common with
Wirecard and Luckin Coffee than Apple or Tencent (00700).
It said that Feihe claims to be a hyper-profitable and fast-growing infant milk formula
(IMF) producer in China. A failed US-listed reverse merger, Feihe went private in 2013
following a series of auditor dismissals and accusations of misconduct. Its stock price
collapsed, and its business foundered. Yet away from the scrutiny of auditors and the
market, Feihe remerged in a 2019 Hong Kong IPO claiming a near-miraculous change of
fortunes.
In 2019, Feihe reported EBITDA and net income margins higher than Apple, Tencent and
Alibaba, Blue Orca noted. All while supposedly growing at a 54% CAGR from 2017-2019. It
supposedly achieved such remarkable performance selling the same products to the same
customers in the same market as when the company was a failed reverse merger.
Blue Orca values Feihe at HK$5.67 per share, at a 5x EV/adjusted sales multiple. (KL)