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Beware of interested party transaction

by Level13 on April 22, 2009

Photo by buggolo

Photo by buggolo

C&G used to be a stock market darling from 2006 to 2007. But this should no longer be the case going forward with their latest announcement.

Basically, C&G is signalling to its investors that there is not much light at the end of the tunnel for the textile industry. To me, textile is a commodity and there is no pricing power for companies in this industry. Of course, this does not mean that C&G will report a loss in the next few quarters but growing profits will become increasingly difficult as we move on. This is the main reason why i did not buy into C&G after looking through its report in 2006. Yes i missed out on the wonderful gains as the share price went up throughout 2007. But again, a uptrending share price tells you nothing on the business and industry outlook, which one ultimately has to take into consideration when buying shares.

The next thing investors should take note of is the interested party transaction involved for this latest acquisition. Mr. Lam Chik Tsan who is the Executive Chairman and Director of C&G, owns 60% of the issued and paid up share capital of Vendor. Accordingly, the Vendor would be deemed as an “associate” of Mr. Lam Chik Tsan and an “interested person” in the context of the Proposed Acquisition. It should also be noted that Mr. Cai Junyi who is the Company’s Executive Director and Chief Executive Officer, owns approximately 17.5% of the issued and paid-up share capital of the Vendor. The 2 of them in total owns 77.5% of the vendor. Read more…


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