Canaccord Genuity analysts aren't taking any more chances with RINO International Corp., the Chinese environmental protection company that has been coated with the whiff of fraud. Analysts Michael Deng and Honghua Chen cut their recommendation on the stock to "sell" and put their target price of $18 (U.S.) under review.
Their change of heart comes after disappointing third quarter results, which included a 17 per cent drop in revenue. But a damning report from Muddy Waters, the Hong Kong-based research firm, was the clincher. The firm contacted a number of RINO's apparent customers in the steel industry and found that six of them had no relationship with RINO. Ouch.
"We believe these allegations are difficult to dismiss, and RINO's real business could indeed be significantly smaller than its reported financial statements suggest," the Canaccord Genuity analysts said in a note.
They're a bit late in their recommendation shift, though. The Muddy Waters report was released last week. And Barron's pointed out in August that something was fishy with RINO - a Chinese company that fast-tracked a listing on Nasdaq by taking over a U.S. shell company - because it "has had three auditors and four CFOs in the past four years, while restating its financials twice."
Meanwhile, the stock has had a bumpy ride over the past year, rising to a high of $34.25 in Nov., 2009, and then trading between $12 and $15 for most of the past six months. With Monday's 31 per cent get-me-out-of-this-stock decline, the RINO has fallen a total of 77 per cent from his 52-week high.