IG Markets strategist Kelly Teoh said: " The main issue here is they are unable to refute the claims in a very clear and strong manner, which investors are expecting. That reflects the quality of management.

" For the time being, I don't think it is giving investors any confidence at all in the company's stock."

China Minzhong shares plunged 47.8 per cent from last Friday's close of S$1.015 apiece to 53 cents before trading was halted on Monday. The company said it would take " all necessary steps" to defend its reputation, including legal action against parties spreading false information.

But analysts warn that the stock will continue to languish unless the S-chip is able to defend its accounts.

" The allegations made are very specific and these are huge claims, but the statement (by China Minzhong) didn't directly refute any of these. The next statement has to be stronger in addressing the claims in order to switch investors over and regain some market value in its stock," Ms Teoh said. (Source: Today)

Short-seller Glaucus does not understand our business model: China Minzhong

  BY  LEE YEN NEE  -  30 AUGUST

SINGAPORE ? China Minzhong Food Corp yesterday sought to refute a report by short-seller Glaucus Research that accused the Singapore-listed company of widespread accounting irregularities, saying it showed ?a complete lack of understanding? of the Chinese vegetable producer?s business model.

The S-chip said it was preparing a detailed response to address issues raised by California-based Glaucus, which will be released by the end of this week, in a bid to restore investor confidence in its business model and financial performance.

The Glaucus report triggered a sell-down in China Minzhong?s shares on Monday, which wiped out S$318 million or almost half of its market value. Trading was halted on Monday morning at China Minzhong?s request and the company had extended the halt until the end of today?s session.

The Fujian-based company said in a statement to the SGX yesterday morning: ?Most of the issues raised by Glaucus with regard to the financials of the company were nothing new and arose out of a complete lack of understanding of the company?s business model as well as the operating environment in China.?

?They have also failed to analyse the company?s growth path over the years and have chosen to take snapshots of the company?s results at specific times,? it added.

Analysts said China Minzhong?s business of producing and distributing vegetables was not a complex one and it should have been relatively straightforward for the company to explain itself and refute the claims by Glaucus.

IG Markets strategist Kelly Teoh said: ?The main issue here is they are unable to refute the claims in a very clear and strong manner, which investors are expecting. That reflects the quality of management.

?For the time being, I don?t think it is giving investors any confidence at all in the company?s stock.?

China Minzhong yesterday also delayed the release of its corporate results for the financial year ended June 30, originally scheduled before trading hours, to aftermarket hours ?to facilitate the verification and confirmation of certain issues referred to in the (Glaucus) report?.

It also postponed its results briefing, which was slated for yesterday afternoon.

For the year ended June 30, China Minzhong reported net profit grew 11.1 per cent to 755.1 million yuan (S$157 million) as revenue surged 26.4 per cent to 3.25 billion yuan. It attributed the improved performance to strong demand from existing and new customers, as well as contributions from new productive farmland. The company also declared a dividend of 1 Singapore cent per share.

In a 49-page report released on Monday morning, Glaucus accused China Minzhong for misleading investors over its sales and expenditure. It alleged that a Taiwan-based food distributor that China Minzhong said was its largest customer between 2007 and 2009 was only incorporated in November 2009, suggesting the company ?simply fabricated the sales figures in its prospectus?.

The S-chip was listed here in April 2010.

Glaucus had also alleged that, according to filings by China?s State Administration for Industry and Commerce (SAIC), China Minzhong?s second-biggest customer had ?zero revenue and zero cost of goods sold? in 2009, instead of sales of 142 million yuan as claimed.

China Minzhong shares plunged 47.8 per cent from last Friday?s close of S$1.015 apiece to 53 cents before trading was halted on Monday. The company said it would take ?all necessary steps? to defend its reputation, including legal action against parties spreading false information.

But analysts warn that the stock will continue to languish unless the S-chip is able to defend its accounts.

?The allegations made are very specific and these are huge claims, but the statement (by China Minzhong) didn?t directly refute any of these. The next statement has to be stronger in addressing the claims in order to switch investors over and regain some market value in its stock,? Ms Teoh said. (Source: Today)