Ping An’s investment in Chinese cosmetics company Jahwa turns sour; public is keen to know what went wrong with to the seemingly perfect investment

Ping An’s investment in Jahwa turns sour

Staff Reporter

2013-05-16

After Ge Wenyao stepped down as chairman of Shanghai Jahwa United, a listed Chinese cosmetics company, the public is keen to know what went wrong with to the seemingly perfect investment made by the Ping An Trust, a strategic investor that was introduced into the business by Ge himself.On May 13, Jahwa’s share price slumped by over 8% on the local bourse before rebounding to close down 5.3% on the day.

A day earlier, Ge wrote on his Weibo microblog that the company’s name is the only thing Jahwa had left after Ping An came into the picture, and all the company can do is sell its assets.

“The organization structure of a listed company has prevented them from doing whatever they want. Currently the operations (of Jahwa) are normal, and employees are not affected,” he wrote.

Soon after Ge’s statement, Jahwa confirmed that Ge had stepped down from his post as chairman. Hours later, Ping An also confirmed Ge had been relieved of his posts as chairman and general manager of the Jahwa group.

This has led many to ask why Ping An would remove Ge, who was a key figure in bringing the two companies together.

According to cnstock, the online website of the China Securities Journal, the Ping An Trust had confirmed on May 11 that Jahwa’s board had designated Zhang Liqing, a sitting board member and also deputy general manager of the Ping An Trust, to replace Ge as chairman.

Ping An Trust also said that it had been informed by some whistleblowers within Jahwa that some managers had been involved in embezzling company funds and interfering with the benefits of retired employees since March.

Market sources believe that Jahwa’s planned Seagull Watch investment project, which Ping An had opposed, was the root cause of quarrels between the two company’s management teams.

As an investor, Ping An cared only about projects and business risks, market analysts said, noting that because it had little knowledge of the sophisticated mechanical industry, it would not risk investing in a business that needed long-term funds and had limited output.

Ping An beat its competitor, HNA Retailing, in bidding for Jahwa in November 2011 with an offer of 5.1 billion yuan (US$831 million), with Ge’s full support.

Critics have said Ge was wrong when he claimed Ping An was not a short-run investor, but one which would hold Jahwa stocks for the long-term and invest in the enterprise’s development. Ge failed to see that Ping An was primarily interested in profiting from selling or using the company’s assets, the critics added.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: