In another blow to the confidence investors have in Chinese firms, Wonder Auto Technology (NASDAQ: WATG) announced that it would be restating its 2008 and 2009 annual reports. From their 8-k:
Historically, the Company has disclosed in its Annual Report that "revenue from sales of its products is recognized when the significant risks and rewards of ownership have been transferred to the buyer at the time when the products are put into use by its customers, the sales price is fixed or determinable and collection is reasonably assured." During 2008 and 2009, two of the company's significant subsidiaries recorded period sales and cost of sales based on when usage reports were provided by the customers. The periods covered by the usage reports, however, did not always exactly correspond to the financial reporting periods. As a result of these cut-off errors, sales, cost of sales and net income for individual financial reporting periods (annually and quarterly) have been misstated.
On the plus side, they've hired PwC to help fix their systems.
WATG is hitting 52 week lows. Looks like a potential bargain at a P/E ex-cash of 4.6x, but how can anyone be sure the underlying figures are accurate? I am staying away from Chinese firms until I have reason to be confident in the reported figures.
Author Disclosure: No position