Asian Bamboo - growing like a weed.

part of the portfolio since 11/2011

2007 was a good time for the market. The sky was the limit and money was easy.

At that time several chinese companies (attracted by ... drum roll... Deutsche Bank) used a german based listing to raise equity.

Deutsche Bank pitched those listings with the promise of stupid german money, "better transparency" and a "higher standard of the german market" overall. Bull****.

One of the most successful companies was called "Asian Bamboo AG". Headquartered in Hamburg with operations in Fuzhou, China they were pretty popular for some time.

The story was pretty simple: Bamboo is growin like a weed and has multiple use cases. The bamboo wood can be used for construction or producing pulp and paper, the sprouts can be eaten. This is all you need.

Over the years Asian Bamboo took in EUR 140mn via selling shares in several tranches of equity to the public and "reinvested" those funds in chinese bamboo plantations.

The stock was floatet around EUR 16 in 2007 and first went down -70% to EUR 5 in March 2009. What happend then is astonishing: Asian Bamboo convinced the market that it was an real an legitimate business. They bought plantations for EUR 43mn in 2008, EUR 51mn in 2009 and EUR 55mn in 2010.

Due to accounting rules the company could show a healthy raise in revenue and profits in those years. Revenues went from EUR 15 mn in 2007 to EUR 90 mn in 2011 and operating profit went from EUR 7 mn to EUR 37 mn during that period. The stock price took of like a rocket and seven-folded. Marketcap reached around 500 mn at peak. Not too shabby!

There is a great series from the spring 2011 at an highly respected Blog (www.valueandopportunity.com) about the company, the business model and accounting at the time for further reading and details. It is worth the reading -> unfortunately German only - use Google Translate. 

1) "Short Asian Bamboo"

2) "Annual Report 2010 part 1 wrong calculation of EPS growth"

3) "Annual Report 2010 part 2 - liquidity"

4) "Annual Report 2010 part 3 - biological assets"

5) "Annual Report 2010 part 4 - cashflow shenanigans"

6) "some questions to IR"

7) "some interesting details from parent company report"

8) "the cotton story"

9) "muddy waters - parallels and differences"

In June 2011 Muddy Waters Research published a short-report on a pretty similar chinese US-Listed company called Sino Forest (report) and crashed all hopes of a recovery. After there was only one direction: down hill.  

After several of diminishing returns they changed their business model to "chinese real estate" in 12/2013 and tried unsuccessful to raise further capital. After a relatively short period of twitching and several depatures of executives the company filed for bankruptcy in 2015.

This "emotional short" would have worked out pretty well with an decline in stock price of -99% since November 2011.