I have been a shareholder for a bit over a year. I invested...

I have been a shareholder for a bit over a year. I invested because I was backing the jockey. The CEO Mr Zhang has a controlling stake. My research (last year) showed he had a successful track record and, what appeared to be, connections within China. The question I wondered was why hold his business in an Australian company and not a Chinese company. I assumed he wanted to create wealth outside of China. Prior to investing I noted the company did not keep shareholders informed.

Things started go astray around middle of last year. The company expanded by establishing 100 retail outlets. I suspect it was taking time for the revenue to walk in the door. Around the middle of last year one or two of the directors resigned (at different times). A bit of a warning sign. The Board has been replaced. That is why the new directors do not have any shareholdings.

The full year performance will be announced next week. I suspect the 100 retail stores will be burning cash.

Why am I still holding and not a seller? I suspect the opening of the 100 retail stores is a transitional issue. I am prepared to give the company (and more particularly Mr Zhang) more time to establish these stores and the expansion of his business. The deal with ZNO could increase the foot traffic into the stores.

There is, of course, the prospect the 100 retails stores are approaching cash flow positive. But the resignation of the directors suggests there is a problem somewhere.