The 7 zombie companies lurking on the ASX 300

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The media has been circling WiseTech Global's Richard White and Mineral Resources' Chris Ellison in recent months. White has stepped down while Ellison plans to step down from his post within 18 ...

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White has stepped down while Ellison plans to step down from his post within 18 ...</p>\n\n<a href=\"https://www.livewiremarkets.com/wires/the-7-zombie-companies-lurking-on-the-asx-300\">Source Link</a>\n\n</div>\n","source":"livewire_stock","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>The 7 zombie companies lurking on the ASX 300</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nThe 7 zombie companies lurking on the ASX 300\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-13 04:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.livewiremarkets.com/wires/the-7-zombie-companies-lurking-on-the-asx-300><strong>LiveWire</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The media has been circling WiseTech Global's Richard White and Mineral Resources' Chris Ellison in recent months. White has stepped down while Ellison plans to step down from his post within 18 ...</p>\n\n<a href=\"https://www.livewiremarkets.com/wires/the-7-zombie-companies-lurking-on-the-asx-300\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK7084","symbol_name":"电子设备和仪器","start_time":0,"source_url":"https://www.livewiremarkets.com/wires/the-7-zombie-companies-lurking-on-the-asx-300","article_id":"2483055804","we_media_id":null,"thumbnails":[],"rights":{"source":"livewire_stock","url":"https://www.livewiremarkets.com/wires/the-7-zombie-companies-lurking-on-the-asx-300","rn_cache_url":null,"directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2483055804","pubTimestamp":1731441610,"sourceInfo":{"source_id":"livewire_stock","name":"Livewire Markets"},"weMediaInfo":null,"summary":"The media has been circling WiseTech Global's Richard White and Mineral Resources' Chris Ellison in recent months. White has stepped down while Ellison plans to step down from his post within 18 months. Both were the result of investigations and intense scrutiny.Although there are red flags surrounding both these companies, Plato Investment Management's Dr David Allensuggests these are not the only companies in the ASX 300 that investors should be taking notes on.Zombie companies are defined as businesses where their interest costs or debt repayments exceed their cash flows over long periods of time, say three years or more. Usually, they trade at high multiples and have a captivating story that sees investors take a punt on these profitless or hardly revenue-generating companies - like a junior mining business sitting on a very large pot of gold, or a biotech with plans to revolutionise healthcare.\"If a company's got negative operating cash flow and it can't even cover its interest co","collect":0,"end_time":0,"defaultTopTitle":"livewiremarkets.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK7084":"电子设备和仪器","IMM.AU":"IMMUTEP LTD","BK7067":"生物科技","BK7083":"煤与消费用燃料","BK7503":"科技股","CAD.AU":"Caeneus Minerals","BK7016":"应用软件","ADT.AU":"ADRIATIC METALS PLC-CDI","BK7504":"锂钴概念","MIN.AU":"MINERAL RESOURCES LTD","NVX.AU":"NOVONIX LTD","BK7095":"多种金属与采矿","BK7501":"新冠治疗股","NXG.AU":"NEXGEN ENERGY LTD-CDR","XAO.AU":"标普/澳交所 普通股指数","BOE.AU":"BOSS ENERGY LTD","XJO.AU":"标普/澳交所 200指数","XKO.AU":"标普/澳交所 300指数","INR.AU":"IONEER LTD","BK7507":"资源股","MSB.AU":"MESOBLAST LTD","WTC.AU":"WISETECH GLOBAL LTD","BK7508":"医药生物股"},"translate_title":"潜伏在ASX 300上的7家僵尸公司","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ADT.AU":1,"WTC.AU":1,"NXG.AU":1,"NVX.AU":1,"MSB.AU":1,"MIN.AU":1,"INR.AU":1,"IMM.AU":1,"BOE.AU":1,"CAD.AU":1,"XKO.AU":0.66,"XJO.AU":0.66,"XAO.AU":0.66},"content_text":"The media has been circling WiseTech Global's Richard White and Mineral Resources' Chris Ellison in recent months. White has stepped down while Ellison plans to step down from his post within 18 months. Both were the result of investigations and intense scrutiny. \nAlthough there are red flags surrounding both these companies, Plato Investment Management's Dr David Allen suggests these are not the only companies in the ASX 300 that investors should be taking notes on.\nZombie companies are defined as businesses where their interest costs or debt repayments exceed their cash flows over long periods of time, say three years or more. Usually, they trade at high multiples and have a captivating story that sees investors take a punt on these profitless or hardly revenue-generating companies - like a junior mining business sitting on a very large pot of gold, or a biotech with plans to revolutionise healthcare. \n\"If a company's got negative operating cash flow and it can't even cover its interest cost, they're going to have to keep tapping the market to get financing just to stay afloat. Their core operations are value-destroying,\" Allen says. \n\"When you look at that as a red flag, a company that is a zombie, they perform horribly on average. It's often the case that they're companies that have a bit of a lottery profile where they could be 10 baggers.\"\nSo, which seven businesses are zombies on the ASX? In this wire, you'll find out. \n\n\n\n\n\n\n\n\n\nSource: Plato Investment Management \nHow Plato's Red Flag process works \nWhile many investors and fund managers will use red flags to inform their investment decisions, Plato has fully systematised it. Using an automated system, the Plato Global Alpha team can assess up to 150 red flags across 17,000 global companies, and instantly see what they should be worried about. \nThese span everything and anything from forensic accounting to corporate governance to remuneration structures and the history of executives (like whether they have been involved in misconduct in the past). It also takes into account the activity of the hedge fund community, the short positions in the company, related party transactions and director buying and selling - anything that might give you pause. \n\"We'll test it using 20-25 years of data across tens of thousands of companies to demonstrate that those red flags actually do predict underperformance,\" Allen says. \nThe process came about when Allen was invested in a Spanish tech company back in 2014 - a company that had, up to this point, been a 10-bagger for the team. One day, its share price had plummeted to zero. Its CEO had been indicted. \n\"It was accounting fiction. So, to ensure we never went through that again, we tried to see what we missed. And one of the biggest things that we missed was the auditor was obscure - no one else in Europe was using them at all,\" he says. \n\"That actually seems to pop up repeatedly in accounting manipulation cases. It's almost as if companies that are pushing the boundaries of the accounting rules will intentionally gravitate towards a lighter-touch auditor.\" \nOne red flag is a valuable insight, but the magic number that screams run (or short) is typically eight, Allen says. \n\"Over the course of the last 10 years, we've looked at every corporate failure and fraud we can get our hands on and built up that red flags model,\" he says. \n\"So, looking at companies like Enron, the poster child for special purpose vehicles, and related-party transactions. We've looked at the big banks like Morgan Stanley and Lehman during the GFC. We borrow a lot from the forensic accounting literature, which has some tremendous techniques that are almost unknown in the fund management sphere.\" \nTake Benford's Law, for example, which allows investors to identify potential cases of financial manipulation. \n\n\n\n\n\n\n\n\n\nBenford's Law says that the leading digit in a number is more likely to be a small number like 1, 2, or 3 than a large number like 7, 8, or 9. It also states that one is the most likely leading digit to occur by far. (Source: Plato Investment Management)\n\"You go down the P&L, the cash flow statement and the balance sheet and see how common each of the leading digits are one through nine,\" Allen explains.  \n\"You think it'd be random, that it's just all over the show, but if the numbers have been arrived at organically and naturally then you'll find you get about 30.1% ones and 4.6% nines.\n\"So, that's something that we have used to analyse every line item in every company in the world over the last five years. We generate what the distribution looks like for that company. When there are big deviations then it's indicative that something is potentially being manipulated.\"\n\n\n\n\n\n\n\n\n\nSource: Plato Investment Management \nRed flags for Mineral Resources (ASX: MIN) and WiseTech Global (ASX: WTC)\n\nMineral Resources (ASX: MIN)\n\nDespite the obvious management red flags in Mineral Resources, given that Chris Ellison has recently been fined $8.8 million over accusations that he failed to disclose revenue generated by overseas entities to tax authorities - and also reportedly used company resources and employees for his own benefit, the red flag that Allen points to here is the company's use of an unusual or small auditor. \nMineral Resources used RSM Australia up until 2022. According to Factset data, not a single ASX 100 company uses RSM as a parent auditor. In fact, not a single company in the ASX 200 uses RSM. \n\"This is not to say there is anything wrong with RSM, they do some very fine work, just that they are not auditors of choice for large listed Australian companies,\" Allen says. \n\"We are also wary of companies that are paying a very small audit fee relative to revenue. In 2022, Mineral Resources paid just $743,000 in audit fees which is just 0.02% of revenue. To put this into context, microcap cap minnows EML Payments and Zip Co spent $2.18 million and $2.6 million respectively for audit fees in the same year. Of note, Mineral Resources’ audit fees have since jumped to $5.9 million.\"\nWhen Plato initiated a short position on 31 January, the company had six red flags. Its share price has fallen around 38% since then. \nWiseTech Global (ASX: WTC)\nWhile Richard White isn't leaving the business like Chris Ellison is, he has stepped down from the CEO role following a dispute with a former lover in the federal court, and several allegations that he bought houses for his lovers and invested in their businesses in exchange for sex. \nIn addition, the Plato team also employs a proprietary model that identifies companies with an above-average probability of having to restate earnings. \n\"WiseTech ranks in the top 5% of companies globally based on this model. This is of course not conclusive and we're not saying that earnings are being inflated. It is also noteworthy that the CFO has recently departed,\" Allen says. \nThe 7 zombie companies on the ASX\n1. NexGen Energy (ASX: NXG)\n\n\nMarket cap: $5.55 billion (CAD)\n\n\nRevenues: $0 \n\n\nZombie status: 5, 7 and 10 years\n\nNumber of Red Flags: 6\n\n12-month share price performance: 20.11%\n\nNexGen Energy is a Canadian company focused on developing its Rook I Project into the largest, low-cost producing uranium mine globally. It has 10 red flags and is the only business on the ASX that has been a zombie company for the last five, seven and 10 years. That said, if the world does transition to nuclear energy and uranium prices go through the roof, this could be an incredible investment given it is sitting on a very large uranium deposit. \n2. Mesoblast (ASX: MSB)\n\n\nMarket cap: $1.52 billion\n\nRevenues: $5.9 million \n\nZombie status: 5 and 7 years\n\nNumber of Red Flags: 12\n\n12-month share price performance: 259%\n\nMesoblast is an Australian biotech using its proprietary technology platform to develop and commercialise innovative allogeneic cellular medicines to treat complex diseases resistant to conventional standards of care and where inflammation plays a central role. If that was too complicated to understand, it develops cellular treatments to treat inflammatory diseases. \nIts cell therapy has been rejected by the FDA twice. They also had to settle a class action lawsuit over a COVID treatment where they reportedly misrepresented the benefits of the treatment. Mesoblast has been a zombie company over the last five and seven years. \n3. Immutep (ASX: IMM)\n\n\nMarket cap: $422 million \n\nRevenues: $0 \n\nZombie status: 5 years\n\nNumber of Red Flags: 5\n\n12-month share price performance: -3.33%\n\nImmutep is a clinical-stage biotechnology company at the forefront of developing novel LAG-3 Immunotherapy for cancer and autoimmune diseases. It has faced some delays in getting its drugs approved. Immutep has been a zombie company over the last five years. Its share price hasn't really gone anywhere over that period. It has zero revenue. \n4. Novonix (ASX: NVX)\n\n\nMarket cap: $353 million \n\nRevenues: $8.1 million\n\nZombie status: 5 years\n\nNumber of Red Flags: 19\n\n12-month share price performance: -8.86%\n\nAccording to Novonix's website, the company is a leading battery technology company revolutionising the global lithium-ion battery industry with innovative, sustainable technologies, high-performance materials, and more efficient production methods.\nDespite these big claims, it's been a zombie company over the last five years - and its share price has cascaded more than 93% after peaking in November 2021. \n5. Ioneer (ASX: INR)\n\n\nMarket cap: $538 million\n\nRevenues: $0\n\nZombie status: 5 years\n\nNumber of Red Flags: 10\n\n12-month share price performance: 35.29%\n\n\nIoneer is a lithium developer, aimed at advancing the Rhyolite Ridge Lithium-Boron Project in Nevada, in the US. Its core mission is to develop a US-based source of lithium and boron to be used in modern technologies and clean energy sources. The company is committed to sustainable practices, including low emissions and water usage, and protecting local biodiversity.\nIt's been a zombie company over the last five years and has zero revenue. \n6. Adriatic Metals (ASX: ADT)\n\n\nMarket cap: $846 million\n\nRevenues: $0\n\nZombie status: 5 years\n\nNumber of Red Flags: 6\n\n12-month share price performance: 17.33%\n\nAdriatic Metals is a precious and base metals explorer and developer that owns the Vares silver project in Bosnia & Herzegovina and the Raska zinc deposit in Serbia. Despite its lack of revenues, its share price has soared around 305% over the last five years - during which time, it has been a zombie company. \n7. Boss Energy (ASX: BOE)\n\n\nMarket cap: $1.32 billion\n\nRevenues: $5.5 million\n\nZombie status: 5 years\n\nNumber of Red Flags: 14\n\n12-month share price performance: -25.98%\n\nBoss Energy (formerly Boss Resources Limited) is a minerals exploration company focused on the Honeymoon Uranium Project in South Australia - its market cap is truly astounding when put into context with its revenues. \nIts share price has lifted a whopping 5,266.67% over the past five years - all the while being a zombie company. \nOne last thing is worth noting - all of these companies and their share prices may possibly have significant upside. But Plato's research shows that zombie names do tend to underperform on average.\n\n\n\nManaged Fund\nPlato Global Alpha Fund\nGlobal Shares\n\n\nView\n\n\n\n\n\n\n \n\n\nNever miss an update\n\n    Enjoy this wire? 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