Illustrating the uncertainties and volatility associated with Chinese stocks, wooden home furnishings and solid wooden doors maker Jiasen (JSI:AIM) slumps 23% to 3p on dire annual numbers, sales and profits down materially due to the property market slump in China.
Click here to view calendar 2015 results from the property fit-out business, which makes and installs wooden products for residential properties under the 'Fuyou' brand. Quanzhou City-based Jiasen's shares have collapsed from their July 2014, 82p IPO issue price following a string of disappointing trading updates, something of a revolving door of directors as well as the increasingly negative sentiment towards Chinese small caps.
Shares urged investors to steer clear of Jiasen in October 2014 due to the risks hanging over the investment case and our caution has proved well-founded. Jiasen joined AIM arguing urbanisation and the easing of property cooling measures in China would boost sales of its high-end wooden doors to property developers and also held out the promise of a chunky dividend yield, though the slowdown in the Asian economic powerhouse has pummelled sales, profits and the share price.
Sales fell 27% to RMB 639.2 million (£71.5 million) in 2015, as China's slowdown hit consumer confidence and demand for 'semi-furnished homes', developers stalling on projects and slashing investment in residential developments. Taxable profits crumbled by 64% to RMB 77.9 million including an RMB 52.3 million provision against bad debts.
Compounding the misery, cash decreased by 10% to RMB 299.1 million and given a bleak short-to-medium term outlook, trading still challenging in the opening five months of 2016, jittery Jiasen has shelved the dividend.
In addition, the AIM micro cap has agreed with the local government – Quanzhou Economic Development District - Guangqiao Sector or 'QEDD' – to defer the purchase of 47 hectares of land for a new factory until the end of 2016 given the downturn in demand for its products.
Chairman Weigang Chen concedes 'the group has seen consumer confidence impacted as a result and this is effecting our revenue. Jiasen is taking mitigating actions to ensure that we are protected both now and in the short to medium term by diversifying our revenue mix, reviewing the purchase of land for our new factory, and suspending dividend payments.'
He says 'the board remains committed to the long-term opportunities that the Chinese property market offers, and is confident that we have the fundamentals in place to manage the business through these challenging times.' Evidently, investors don't share his faith at present.