Replies to MK Fool

1. Insiders (who would theoretically have more information than buyers) began heavily selling their shares, virtually as soon as their shares came out of the six month escrow period. Many of those insiders are companies registered in a notorious tax haven, the British Virgin islands.

Firstly, Only 20% seed investors sold their position. Those seed investors were probably not involved in day to day business operating if you LOOK deeply.

1. Unusually high profit margins and return on assets. Given Sunbridge’s model of outsourcing both the retailing and the production of its goods, you have to wonder what sort of margins its distributors and suppliers are earning, especially in China’s highly competitive fashion industry.

The competition is high and Sunbridge continues growing over last 5 years and paid over $37m dividends.
The company was named “Top 10 Influential China Fashion Enterprise".

1. Loan guarantees to unrelated companies that are held off balance sheet. Sunbridge says this is common business practice in China.

The loan guarantees of about $11m, have indemnity by MD Mr. XU, who owns 55% of the company. He is a very wealthy person. Only dividends, He collected over $20m dividends from the company. If default, MD should have enough money to repay the company without selling SBB shares.
Also, the company will not guarantee these loans when expiration around late next year.

1. The construction of an 8-storey head office. We can’t see the point of this, and we also note that capital expenditure in the company’s cash flow statements over the past two and a half years does not reflect a heavy spend on this building, nor any other property, plant and equipment the company says it is spending money on. (We also note that the artist’s impression of the building appears to show 11 levels).

It's not that expensive to build an 8-storey head office in China, approx. $2 to $4m.
This is part of improving company icon, saving advertising fees.

1. The resignation of the CFO the day after our first article appeared. We also note that the CFO was previously employed by Grant Thornton, which also happens to be Sunbridge’s auditor.

MK is challenging Grant Thornton credibility. Grant Thornton audited annual accounts for last 3 years.
CFO resignation, is not common without any fraudulent?

1. The ASX only reviewing the business structure and objectives of one out of three emerging markets companies listed on the ASX according to ASIC.

Excellent, ASX didn't do a good job. How about all these mining juniors listed, just erode mum and dad investors hard earned money!