Chapter 1 ST Stock Overview
ST stock refers to a special type of stock on the Chinese stock market, which is called "special treatment stock" or ST stock for short. On April 22, 1998, the Shanghai and Shenzhen Stock Exchanges announced that they would carry out special treatment for the stock transactions of listed companies with abnormal financial conditions and other financial conditions. For ST shares.
The exception mainly refers to two situations:
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The net profit of the listed company in the audited two fiscal years is negative;
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The audited net assets per share of a listed company in the latest fiscal year is lower than the par value of the stock.
The so-called abnormal financial situation means:
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The audit results of the most recent fiscal year show that shareholders’ equity is negative; the net profit after deducting non-recurring gains and losses is negative;
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The audit results of the most recent fiscal year show that its shareholders’ equity is lower than its registered capital, that is, its net assets per share are lower than its par value;
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The certified public accountant issues an audit report with disclaimer or negative opinion on the financial report of the most recent fiscal year;
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The audited shareholder's equity in the most recent accounting year deducting the part not recognized by the certified public accountant and relevant departments is lower than the registered capital;
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The latest audited financial report adjusted the profit of the previous year, resulting in a loss for one consecutive fiscal year;
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It is determined by the stock exchange or the China Securities Regulatory Commission that its financial status is abnormal.
The emergence of ST stocks aims to give special treatment to those listed companies that are facing delisting due to poor management, financial difficulties, violations of laws and regulations, and other reasons. The special treatment methods for ST stocks include but are not limited to: the company is suspended from listing, the company's stocks face the risk of delisting, and it is necessary to increase registered capital or improve financial conditions as required. During the special treatment period, stock trading will also be subject to certain restrictions, and investors need to be fully aware of and prepared for the risks of such stocks.
*ST is a delisting risk warning. The following seven situations will be marked with "*ST" by the exchange:
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Consecutive losses in the last three years (based on the audited net profit disclosed in the annual report for the last three years);
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Due to major accounting errors or false records in the financial accounting report, the company voluntarily corrects or is ordered to correct by the China Securities Regulatory Commission, and retroactively adjusts the financial accounting report of the previous year, resulting in consecutive losses in the last three years;
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Due to major accounting errors or false records in the financial accounting report, the China Securities Regulatory Commission ordered to make corrections but failed to make corrections within the prescribed time limit, and the company’s stocks have been suspended for two months;
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The company's stock has been suspended for two months if the annual report or semi-annual report is not disclosed within the statutory time limit;
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During the period from the trading date of resumption of listing of stocks to the disclosure date of the first annual report after the resumption of listing;
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Before the acquirer discloses the report on the tender offer of the listed company and the specific plan for maintaining the listing status of the acquired company is implemented, the equity distribution of the acquired company due to the tender offer does not meet the listing conditions stipulated in the Company Law, and the acquirer holds shares The proportion does not exceed 90% of the total share capital of the acquired company;
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The court accepts cases concerning the bankruptcy of the company, and the company may be declared bankrupt according to law.
ST stocks are classified as follows:
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S - share reform has not been completed
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ST - The company has lost money for two consecutive years, special treatment
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*ST - The company has lost money for three consecutive years, delisting warning
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SST - The company has lost money for two consecutive years, special treatment + share reform has not been completed
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S*ST - The company has lost money for three consecutive years, delisting warning + share reform has not yet been completed
Chapter 2 Investment Strategy Ideas
2.1 Analysis factors
In general, the investment strategy of non-performance loss ST stocks is based on big data analysis, and the fundamentals are expected to improve significantly, as well as the expectation of uncapping and the "doomsday round" hype.
The following are some common analysis factors:
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Corporate Governance: The quality of corporate governance is critical to the future performance of ST stock. Look at the quality of the company's executive team, incentives, transparency of decision-making, and shareholder protection.
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Fundamental analysis: study the company's financial statements, focusing on indicators such as revenue, gross profit margin, net profit, debt ratio, and cash flow. Observe whether the company's operating conditions have improved.
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Industry Position: Understand the company's position, market share, and competitive advantage in its industry. This helps to assess the company's ability to move out of ST status in the future.
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Industry prospect: study the development trend and prospect of the industry in which the company is located, and understand whether the industry is conducive to the company's recovery and development.
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Policy support: analyze the impact of policies on the industry in which the company operates, and understand the degree of government support for the industry or company.
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Restructuring expectations: Find out whether the company has restructuring plans or potential mergers and acquisitions, which may bring financial support to the company and help it get rid of ST status.
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Shareholder background: pay attention to the company's major shareholders and their background, and understand whether the major shareholders are capable of supporting the company out of the predicament.
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Technological innovation: Find out whether a company has technological innovation capabilities, which may help improve the company's competitiveness and drive business growth.
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Stock price and valuation: Pay attention to the fluctuation of the company's stock price and the market's valuation of the company to evaluate the investment opportunity.
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Market sentiment: ST stocks with non-performance losses are greatly affected by market sentiment, so it is necessary to pay close attention to changes in market sentiment towards such stocks.
2.2 The direction of ST stock selection under the new system
Emphasis on "machine" rather than "danger"
Delistings are becoming more and more normal. In the past, ST shares were rarely delisted. The more critical the moment, the greater the potential profit. This has spawned a legion of gamblers. There are even many players who hold a large number of positions and fight for the future at a low price during the suspension of listing; the registration system is different. Strictly dividing the red line of life and death for delisting, and canceling the "death reprieve" observation period for suspending listing, the time for the company to rescue the crisis is very short, basically only one year. Unless you have made a detailed argument and are completely confident that the company will come back, don't touch this kind of stock that is on the verge of delisting.
Emphasis on "big" rather than "small"
Under the old system, "small market capitalization" is one of the important directions for ST stock selection. Whether it is to recover profits or backdoor reorganization, small market capitalization is easier to operate. Under the registration system, IPOs continue to surge, listing conditions are continuously relaxed, and the value of "shells" is gradually weakening. When profits are difficult to guarantee, operating income becomes a life-saving weapon. In this case, of course, the company "bigger" the better.
Emphasis on "quality" rather than "quantity"
In the past, the company's frequent fancy operations, including replacing the actual controller and injecting various non-main business profits, etc., will stimulate the rise of ST's stock price. The registration system focuses on the main income and "the lower of net profit and non-profit deduction". If you want to save your life, you must either forcefully increase your income or expand non-profit deductions. This cannot be solved by simply changing the actual controller. It is really necessary to examine the qualifications of the funder, which requires strong strength, strong background, abundant resources, and state-owned enterprises are the best.
Emphasize "simple" over "complex"
The more concise and clear the company's reasons for wearing a hat, the better, and the lower the stock price, the better. He comes from a clean slate and is hated purely because of financial risk. Try not to include illegal appropriation of funds, illegal guarantees, litigation, etc., and do not involve complicated disputes such as shareholders and debts. Simply put on the ST hat, honestly fell desperately, and took off the hat to counterattack.
2.3 buy
Slowing down and accelerating
There was an obvious downward trend before, and the killing was often relatively fierce; then it rose slowly for more than two weeks. The daily limit is the buying point, and the next step is often to accelerate the upside, and it is easy to hit it continuously.
Figure ST blackening
Source: Asset Information Network Qianji Investment Bank
Figure ST Baoshuo
Source: Asset Information Network Qianji Investment Bank
The waves behind push the waves ahead
If the adjustment time for general stocks is relatively short, it is difficult to get out of the back waves pushing the front waves, but ST stocks are different.
Figure ST Asia Pacific
Source: Asset Information Network Qianji Investment Bank
Chapter 3 Analysis of Trading Ideas
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Group hype, there is an obvious linkage effect;
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The concept of "doomsday round" hype, that is, gambling hype between delisting and non-delisting, attracting high-risk and high-profit funds that like gambling to participate in the hype;
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The hype time is generally between October of each year and the end of April of the next year, and it has become a regular hype of a group of planned hype funds, forming a "fixed" hype opportunity;
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Compared with the huge risk of a single product (because it faces an indefinite suspension at any time, the fundamentals are very bad), the countermeasure is to intervene in the speculation by product, each time divided into 3~5 individual stocks, and the participation funds of each product shall not exceed 30%. Avoid a single risk, and form a 30% fund to intervene in a single type of ST stock speculation;
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Because it is a "doomsday-like round" hype, stocks with poorer fundamentals have greater chances, and even stocks with relatively higher stock prices have greater chances (in principle, within ten yuan), and stocks with lower net assets or even negative values have greater chances. big;
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It must be the hype mentality of "Doomsday Wheel" and follow the information on the disk;
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Generally, after the general market rebounds and other stocks are generally hyped for a round, ST stocks will perform. However, there are also varieties that ignore the market and walk independently. Such varieties should be highly valued;
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The trading volume is very sensitive to the hype of ST stocks;
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Real estate and other strong industry backdoor varieties are the most hyped.
Chapter 4 Advantages and Disadvantages of Non-Performance Loss ST Stock Strategy
advantage
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Potential gains: Non-performance loss ST stocks often cause stock prices to fall due to certain non-financial factors. Once these problems are resolved, the stock may rebound significantly and bring higher returns to investors.
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Undervaluation: Non-performance loss ST stocks may be affected by market sentiment, and the stock valuation level is low, which provides investors with better investment opportunities.
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Low market attention: Since ST stocks often have certain problems and relatively low market attention, investors may find undervalued opportunities in such stocks.
shortcoming
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Higher risk: Non-performance loss ST stocks usually have issues such as corporate governance, policy risks, and legal proceedings. These issues may lead to uncertainty in the company's performance, thereby increasing investment risks.
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Poor liquidity: Due to the low market attention and relatively small trading volume of ST stocks, the liquidity may be poor, and investors may be greatly affected by the price when buying and selling.
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Uncertain duration: The time to solve the problem of non-performance loss ST stocks is uncertain, and investors need to bear the uncertainty for a long time, which puts forward higher requirements for investors' psychological endurance.
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Weaker investor protections: Relative to other types of stocks, investing in ST shares has weaker investor protections, which can expose investors to greater risk in the event of losses.
Chapter Five Environmental Analysis under the Registration System
5.1 The transformation of the old ST system and the registered ST system
ST stocks are divided into *ST stocks (delisting risk warning) and ST stocks (other risk warnings).
*ST (delisting risk warning) is an extinction risk, which will directly lead to delisting if not resolved, mainly including serious financial risks (financial), serious operational problems (regulation) and major violations (illegal).
ST (Other warnings) is a disease risk. If it does not continue to deteriorate, it will not directly lead to delisting. It mainly includes serious impact on main business, freezing of main bank accounts, failure to hold board meetings normally, illegal occupation of funds and illegal guarantees, etc.
Changes in institutional design
First, the rise and fall of ST stocks on the GEM are the same as those of normal stocks, and the daily rise and fall limit is 20%.
The second is that ST stocks on the GEM canceled the suspension of listing and simplified the process. Once the delisting conditions are triggered, they will be delisted directly, unlike the old system that suspended listing at this stage of the "death reprieve" observation period.
Changes in the conditions of inspection
For ST (other risk warnings), the details of the new and old systems are slightly different, but the whole is similar.
For *ST (delisting risk warning), there is not much difference between regulatory and illegal risks. The biggest difference is reflected in financial risks, which mainly include two aspects:
The first is to focus on the ability to continue operating. Take the GEM's financial delisting risk warning (*ST) conditions as an example: the first item of the specific standard for the inspection of operating capabilities is: "The audited net profit in the latest fiscal year is negative and the operating income is less than 1 100 million yuan, or the net profit in the most recent fiscal year after the retrospective restatement is negative and the operating income is less than 100 million yuan."
On the other hand, the inspection condition has been changed from negative net profit for two consecutive years to negative net profit for one year, which reflects the real-time tracking of operating conditions, which is stricter than before.
The second is to examine the actual level of profitability. In the financial delisting risk warning, a note was made on the net profit:
"The net profit mentioned in this article is the lower one before and after deducting non-recurring gains and losses. If the listed company's operating income mainly comes from trading business that has nothing to do with its main business or related transactions that do not have commercial substance, and the company obviously loses the ability to continue operating, The Exchange may submit to the Listing Committee to determine whether to deduct the aforementioned income when calculating the operating income indicators prescribed in the preceding paragraph, and notify the listed company.”
5.2 Opportunities for ST under the registration system
From the above comparison of the old and new ST systems, it can be seen that under the registration system, more emphasis is placed on the ability to continue operating, and the inspection of the actual level of profitability is highlighted. According to the new rules of the game, as long as the company’s profit or operating income is large (more than 100 million yuan), it will not be ST. This is a potential major benefit of the current ST sector.
At present, there are 222 ST stocks (including B shares) in the two cities, of which 148 have an operating income of more than 100 million yuan, accounting for two-thirds. Under the registration system, they are no longer ST poor students. Once the full registration system is implemented, they will be rejuvenated. The current severe stock price depression caused by wearing caps will be repaired, which will definitely bring an overall increase to the current valuation of the ST sector. .
Cover Photo by Jess Bailey on Unsplash