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PET - Phoslock Environmental Technologies

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Dona Ferentes said:
Be wary of the China dependency, myself
Click to expand...

Yes, this is definitely a potential long term concern. Short term, China is being very antagonistic to selective (soft target) Aust interests.

PET sources it raw materials within China, manufactures its end product in China and the majority of its projects are in China. However its head office is in Aust.

Since the company last sales revision (reduction) price has continued to fall. It's now well below the last SPP (@ 0.50). I suspect that management were expecting some impact to their business and conveniently blamed the rise in corona virus numbers and the potential for a second wave (news 16/6). If they were aware of any political interference they certainly couldn't go public.

Price is now back at the covid low. If it doesn't get support here, it would indicate to me that PET has serious problems.

 
One thing I found interesting this week was that the ASX issued PET with a query letter on the 22/6 which went directly to the company ( not announced )

SP @ 22/6 = Closed down 2.9% to $0.34​

Published response to the ASX on the 25/6

SP @ 25/6 = Closed down 3.2% to $0.305​

So a few days in between the issue of query letter and response to ASX and SP tanked even further................make what you want of that but I think this stinks a bit and I am looking at another OGX or even CLA

Looks like I can pick them.
 
peter2 said:
PET sources it raw materials within China, manufactures its end product in China and the majority of its projects are in China. However its head office is in Aust.
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Red Flag ?? !!
 
Look at EHH.
Big red flag for PET and anything else owned by aus.
Trading suspended for months now.
I suspect that the manufacturing facilities have been commandeered.
Commies dirty tricks.
Wouldn't think the real risk would out way potential gains.
 
PET spiked higher today after news that Phoslock has obtained and started more projects outside of China. It seems that the market was waiting for this news and mgmt provided it in a timely manner.

Will monitor chart for signs that demand for PET stock is more solid than a "one day wonder" in response to mgmt spin.
 
What about manufacturing of the product used, still in China?
(Products often (usually) are rebadged out of the same factory, regardless of contracts.)
The "State" couldn't doesn't care.
 
The latest business update from PET disappoints.
Flooding in China has delayed progress on key projects.
COVID-19 impact delaying many overseas projects.
Higher than anticipated inventory impact cash flow in first half.

Phoslock, like many other companies must wait for conditions to improve.

Investors don't have to wait and have sold PET to redeploy their capital elsewhere.
 
It's worth noting however, no projects have been cancelled.
Depending on the "other" situation in said country, will just have to wait and see on diplomatic relations outcomes. Not a premium environment for the pet ATM.
 
Quite right. PET's business has been suspended for a while and my estimate would be 3 - 6mths to allow flooding to subside and waterways to settle.

They're going to reduce manufacturing and postpone their plans to boost production in order to lower costs during this period. They've no debt and currently, little revenue.
 
frugal.rock said:
Big red flag for PET and anything else owned by aus. ..Trading suspended for months now.
I suspect that the manufacturing facilities have been commandeered.
Commies dirty tricks.
Wouldn't think the real risk would outweigh potential gains.
Click to expand...
Market Update – China accounting irregularities; audit investigation ongoing

Phoslock Environmental Technologies wishes to advise that an ongoing independent investigation initiated by the Chairman and Managing Director has revealed certain accounting irregularities relating to PET’s China Operations.

The investigation, being undertaken by KPMG’s forensic accounting division, follows suspected accounting irregularities discovered during the audit process for the half year ended 30 June 2020.

The company will seek to leave the current voluntary suspension of trading in place until the investigation and resulting KPMG report is completed and the impact of any irregularities is quantified

Outweigh? Way out
 
Interesting announcement out yesterday with the resignation of a couple of directors.

Obviously doesn't look good for these two and the company, but we will have to wait for more news once the audit is complete to see if the company can recover from this.


 
Downside of
a) technological transfer
b) working in jurisdictions with little IP protection
c) having local partners / JVs forced upon you
d) dubious accounting standards
e) Covid
f) all of the above?
 
That sinking feeling

The Company now confirms that it has identified fraudulent activity relating to areas including false accounting and falsification of invoices and service contracts; improper tax reporting; potential misappropriation of funds including improper payment of bonuses; and undisclosed related party transactions.

In response to these matters, the Company has already:
• Commenced a restructuring of its organisation in China, with a number of senior and middle management employees terminated;
• Commenced a comprehensive and systematic review of all current China contracts and contractual arrangements with third parties, including sub-contractors and distributors, to help provide a sound basis for re-evaluating our near and mid-term expectations for revenue generation in China;
• Commissioned an independent market review of the waterways remediation market in China to help assess our opportunity in the region and to better inform decisions relating to organisation structure, location, etc;
 

KPMG says no conflict investigating Phoslock fraud

Phoslock hopes a KPMG report can draw a line under the shocking story of accounting fraud in China and investors left underwater.
www.afr.com

After signing off on the falsified accounts of the Chinese operations of water treatment company Phoslock Technologies, it seems auditor KPMG Australia saw no conflict in accepting more fees to investigate its own work.
Click to expand...

Great, instead of having a new pair of eyes on it, they let the same company check... as if they would be motivated to find more dirt than absolutely necessary to save their reputation.
 
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