FernvaleDK also shared with us of a method to cook the balance sheets for companies with weaker cashflows.
Many big local companies suffer from negative cashflow now and property prices are weaker now. To make ends meet, they setup a shell subsidiary and bargain for a cheap newly-acquired industrial property that is suitable for their own use (eg. pay $5million for $5.5million valuation).
Immediately, this shell company is transferred to a bank or finance company and get reimbursed $5.5million. As a result, the big company get a $500K lifeline which boosts their Profits and Cashflow. However, they are obliged to take up a 7-10years rental with that bank or finance company. The directors are the guarantors of this lease. Overnight, the company looks very healthy and the $500K buys them time to survive the slowdown but the lease commitment strains them in the years ahead.
Many years ago, AirAsia is known to purchase their fleets at bargain prices by placing large order. Then the planes are sold to leasing companies for an immediate capital gain and AirAsia commits to lease back the planes for their own use. Today, the same concept is used by larger local companies who needs some quick immediate relief for their cashflow.