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Filthy Forty Walcom – no silk purse, it’s a sow’s ear of a trading statement

By Nigel Somerville, the Deputy Sheriff of AIM | Tuesday 14 November 2017


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


ShareProphets AIM-China Filthy Forty play Walcom (WALG) hasn’t provided as much entertainment as some of its fraudulent brethren, but yesterday’s trading statement – issued at 10.36am, so bad news – is a bit of a gift.

Apparently trading has remained challenging and the hoped-for pick up in feed milling, pig farming and slaughtering and pork product production hasn’t happened. Oh, and material outstanding customer hasn’t paid up leaving the company running out of cash. So the company is heading off to the bank to ask for its bacon to be saved and prevent the show from going (pork) belly up. Never mind the sausages, shareholders about to get skinned. Etc etc (that’s enough pork gags, ed).

The company tells us that as at the end of October it has cash and cash equivalents of  HK$3.4 million (c. £330,000)….with a bank loan repayment due of HK$2.3 million (c. £220,000). Yikes – and we’ve not been given the state of payables/receivables.

The interims (to June) revealed a balance sheet showing net current assets of HK$ 8.8 million – healthy enough – but only HK$4.3 million of cash. Meanwhile inventories (and I don’t suppose there was the most lengthy shelf-life to the pork products) sat at HK$2.9 million and ballooning trade receivables sat at HK$9.3 million. How big is the outstanding trade creditor? Is the inventory set for a write-down?

Meanwhile the bank loan remains due and HK$ 5.1 million of payables are sitting there. What is the state of Net Current Assets? The good news is that the company has negotiated and agreed a new short-term Renminbi bank loan equivalent to the same amount as the to-be-paid-back loan. But we don’t know how short the short-term is.

Then there is the loss of an integrated meat producing customer. But it's alright:

However, further tenders are expected in the new year and the board remains optimistic about additional wins in this area.

Hmm. Think Tom Winnifrith and Dallas Cowboy Cheerleaders. And it sounds as though there is some doubt about the replacement bank loan:

Receipt of the new loan and repayment of the existing loan is due to occur in mid-November 2017

That looks like some wriggle room to me. And then the company tells us that:

The Company will closely monitor its working capital requirements and proposes to seek further bank financing if necessary.

…and Tom Winnifrith proposes to seek an introduction to the Dallas Cowboy Cheerleaders, but that is not to say it will happen or be effective. Finally, the company tells us that:

As a result, revenues generated by Walcom from PRC have and continue to be less than anticipated….. the Company expects that Group revenues for the full financial year will be materially less than those achieved in FY16 and as a consequence the Company expects to be loss making for the full year.

Given that the company reported Total Comprehensive Losses for H1 this year (HK$1.8 million), H1 last year (HK$2.4 million) and for FY16 (HK$1.2 million) that’s hardly a surprise. The question is how big will the loss be? And the cashflow in the same periods was minus HK$5.0 million, minus HK$2.2 million and minus HK$4.4 million. In other words it is looking like toast.

Advfn has the market capitalisation marked up at £860,000. That looks about £860,000 to high to me, with the company now a frontrunner for the next Filthy Forty execution, after Northwest Investment Group (NWIG) this weekend and still results-less Aquatic Foods Group (AFG).


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