$丰盛控股(00607)$
Glaucus Research Group California LLC initiates coverage on Fullshare Holdings Ltd. (HK: 0607)

We believe that Fullshare Holdings Ltd. (HK: 0607) (“Fullshare” or the “Company”), a 2013 reverse merger, is one of the largest stock manipulation schemes trading on any exchange anywhere in the world. In our opinion, Fullshare resembles Tech Pro Technology (HK: 3823), Huishan Dairy (HK: 6863), and Hanergy (HK: 0566), schemes whose stock price collapsed in spectacular fashion.

We analyzed intraday trading patterns and found that just like Hanergy and Tech Pro, the inexplicable appreciation of Fullshare’s stock price is due to unusual gains posted in the final hour of trading. If an investor bought and held Fullshare’s stock from November 14, 2016, through April 21, 2017, it would have generated a loss of -34%. But if an investor bought Fullshare’s shares at the beginning of the last trading hour and sold at the close of the trading day (and reinvested the proceeds the next day in the same manner), Fullshare’s stock would have returned an inexplicable 76%! The difference between the returns in trading Fullshare’s stock with a last-hour trading strategy and a buy-and-hold strategy was 110% over this period. This staggering difference is highly unusual when compared to other Hong Kong stocks, and in our opinion, strong evidence of manipulation.

We believe that insiders have used the smokescreen of a rising stock price to secretly transfer some of the Company’s most valuable assets to the chairman and his family. Fullshare is supposedly a commercial and residential property developer, but this business is tiny compared to its market capitalization. In FY 2016, Fullshare generated a paltry RMB 132 million in EBIT from continuing operations, meaning it currently trades at 431x recurring operating profits. This is a ludicrous valuation. Even if we ignore all evidence of corruption or embezzlement, Fullshare’s operating business is so insignificant that if we value Fullshare at the median multiple for HSCIPC companies (either on an adjusted P/E or adjusted P/B ratio), we would expect Fullshare’s stock to decrease by 70-80%. However, given the evidence of multiple undisclosed related party acquisitions and dispositions, we believe Fullshare’s management displays such a blatant disregard for shareholders and Hong Kong securities rules that the Company is simply uninvestible.