Minzhong Refutes Glaucus Report as Aimed at Pushing Shares Lower

Minzhong Refutes Glaucus Report as Aimed at Pushing Shares Lower

China Minzhong Food Corp. (MINZ), the vegetable processor targeted by Glaucus Research Group, said it “strongly” refutes the short-seller’s report, describing it as going beyond fair comment. Glaucus’s statements on the Putian, China-based company’s performance were made with the sole objective of driving down the company’s share price and gaining from the decline, Minzhong said late yesterday in a statement. The response follows a collapse in Minzhong’s market value after Glaucus said the company deceived investors and regulators. More Chinese businesses trading in Hong Kong, Singapore and New York are drawing scrutiny from short-sellers. China Minzhong tumbled 48 percent, the most on record, in less than two hours on Aug. 26 after Glaucus, which has an office in Newport Beach, California, questioned the company’s accounts in a report.“The manner in which they made these statements and the conclusions which they drew from them were mischievous and calculated to cause panic and impose maximum damage on the price of the company’s securities for their own benefit,” Minzhong said in a 19-page statement that was accompanied by invoices and pictures of its factory lines and warehouses.

The stock was suspended from trading at 53 Singapore cents, after falling the most since the company’s share sale in April 2010, when it raised S$237 million. Shares will resume trading tomorrow after suspending it for a week.

James Hill, principal at RLM Finsbury in Hong Kong, a public relations firm that represents Glaucus, couldn’t be reached for a comment on his mobile phone yesterday. Glaucus didn’t respond to an e-mail.

Chinese Listings

Minzhong is among 143 China-based firms listed on Singapore’s $558.4 billion stock market, according to the latest data from the exchange. Short interest in the stock rose to a record 7.2 percent of the outstanding shares on Aug. 28 from this year’s low of 3.8 percent in March, according to the most recent data from research company Markit Group Ltd.

The issues raised by Glaucus show “a complete lack of understanding of the way we conduct our business as well as the operating environment in the People’s Republic of China,” Minzhong said, reiterating an Aug. 29 statement. The company didn’t falsely record sales and is consulting legal advisers on its options, it said then.

Minzhong may have fabricated sales and payments to its largest supplier, doctored accounts and overstated capital spending, Glaucus said in the report. It also questioned the food processor’s reported receivables and cash balance.

Fabricated Sales

“Evidence indicates that Minzhong fabricated sales to its top two customers, suggesting that the company overstated revenues in its IPO prospectus by at least a third during the track record period,” Glaucus said.

The Chinese company said it has documentation, including sales contracts, to defend the allegations. Glaucus “used terms such as ‘doctored SAIC financials,’ ‘fabricated sales’ and ‘cover up,’ which they know or ought reasonably to have known are false or misleading,” Minzhong said.

Glaucus was founded by Matt Wiechert, a former investment banker, to probe companies that appear “too good to be true,” according to its website. It has also issued reports on Hong Kong-traded China Metal Recycling Holdings Ltd. (773) and China Medical Technologies Inc. and SouFun Holdings Ltd. (SFUN) in New York.

Hong Kong’s securities regulator said in July it found evidence China Metal had inflated the size of its business and is seeking to wind up the company. China Medical filed for Chapter 15 foreign-firm bankruptcy protection in New York last year, while SouFun, China’s biggest real-estate website owner, has surged more than 70 percent since Glaucus’s April report.

Minzhong’s biggest investor, PT Indofood Sukses Makmur (INDF), the parent of Indonesia’s largest instant-noodle maker, said last week it’s comfortable with its investment. Indofood, which doubled its stake in Minzhong to 29.3 percent in March, conducted due diligence before making its investment, Director Thomas Tjhie said Aug. 26, adding that he had spoken to Minzhong’s chief financial officer about the Glaucus report.

To contact the reporter on this story: Michelle Yun in Hong Kong at myun11@bloomberg.net

Indofood May Bid for Rest of China Minzhong Amid Glaucus Attack

PT Indofood Sukses Makmur, the Indonesian noodle maker, may bid for the rest of China Minzhong Food Corp. after a slump in the vegetable processor’s shares following a report by short-seller Glaucus Research Group.

Putian, China-based Minzhong received a letter from Indofood saying an offer may be made today, according to a statement from Minzhong. Indofood doubled its stake in Minzhong this year to 29 percent, according to data compiled by Bloomberg.

Minzhong tumbled 48 percent on Aug,. 26, the most since its April 2010 share sale in Singapore, taking its market value to S$347 million ($272 million) after Glaucus questioned the company’s accounts in a report. The company last night denied the allegations, describing them as going beyond fair comment.

The statements by Glaucus, which has an office in Newport Beach, California, were made with the sole objective of driving down the company’s share price and gaining from the decline, Minzhong said yesterday.

Jakarta-based Indofood said last week it’s comfortable with its investment. Indofood conducted due diligence before making its investment, Director Thomas Tjhie said Aug. 26, adding he had spoken to Minzhong’s chief financial officer about the Glaucus report.

To contact the reporter on this story: Michelle Yun in Hong Kong at myun11@bloomberg.net

Glaucus’ accusations calculated to damage share price, says China Minzhong

SINGAPORE — China Minzhong Food Corp yesterday released a 19-page statement hitting back at a report by Glaucus Research, saying the short-seller’s accusations of accounting irregularities were “reckless” and calculated to damage the Singapore-listed company’s share price to Glaucus’ benefit.

BY TAN WEIZHEN –

5 HOURS 5 MIN AGO

SINGAPORE — China Minzhong Food Corp yesterday released a 19-page statement hitting back at a report by Glaucus Research, saying the short-seller’s accusations of accounting irregularities were “reckless” and calculated to damage the Singapore-listed company’s share price to Glaucus’ benefit.

In a statement to the Singapore Exchange (SGX) yesterday, the S-Chip clarified its accounting practices and directly addressed points raised by Glaucus, which last week accused the vegetables producer of misleading investors over its sales and expenditure, sending the latter’s shares plunging to almost half of its market value.

Addressing Glaucus’ claim that it fabricated its sales to two of its biggest customers — Hong Kong Yifenli Trading and Putian Daziran Vegetable Produce — China Minzhong said its sales were supported by export sales and custom documents from the relevant Chinese authorities and VAT invoices.

As for the allegation that China Minzhong had overstated its capital expenditures to mask fake sales on its balance sheet, the company said it has documents and photographs to prove that the expenditure was incurred. It also released scans of the relevant invoices and balance sheets to support these points.

With regard to the accusation that China Minzhong had fabricated its accounts amid a wave of accounting scandals and de-listings among other S-Chips in 2011, the firm put it down to a change in its practices: Previously it had outsourced its State Administration for Industry and Commerce (SAIC) filings to an external agent but started filing these on its own in 2011.

As a result, the two sets of figures for 2010 — one by the company and one by the agent — do not tally as different comparative figures were used.

On doubts cast by Glaucus on China Minzhong’s financial performance, which pitted its exceptionally high performance against its negative cash flow, the company said that its calculation of Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) differed from that of Glaucus. It also stated that its cash flows had been positive from operating and investing activities for FY2013.

“While we respect the right of our shareholders and the public to raise their concerns and queries regarding the published results and performance of the group, what Glaucus (as a short seller) did in their report has gone beyond fair comment. It is apparent from the above as well as other similar allegations made in their report that their sole and main objective was to benefit from the decline in the company’s stock prices,” said China Minzhong.

It added that it is consulting its legal advisers on possible recourse.