Too good to be true?, page-6

@MarsC


These are some of the "red" flags that you might want to consider:

- I have only briefly looked at the latest annual report and I couldn't find any information about where the cash is held, i.e. is it in AUD sitting in an Australian Bank, or is it in RMB sitting in a Chinese bank. If it's in RMB then you have to weigh the possibility of RMB devaluing. You might also want to know what kind of bank the deposit is held in, if the deposit is held in a small Chinese bank, then you have to consider the possibility of that bank going belly up.

- There are too many related party transactions to my liking

- The operation is in China and we can't physically check the conditions of the store, etc.

- A few months ago, when the share price was higher, let's say, $0.04, this company could also be bought at less than CAV, albeit with a smaller margin of safety. The question that we need to ask ourselves is, how likely is it that we are able to withstand the ensuing drop in share price without getting worried? For myself, I probably would have sold earlier and cut my loss. My point is, it is possible for this company to continue to trade at low prices or even much lower prices much longer than we would like and when this happens, how strong will our resolve be?

Good luck.

Cheers