Shares of Chinese furniture and leather products maker Kasen International Holdings lost 90 per cent of their market value after short-seller Blue Orca Capital issued a research report critical of its operations and investment.
The shares slumped to 45.5 HK cents before trading was suspended around mid-day on Thursday, wiping out HK$6 billion from its market capitalisation as the report questioned its accounting and the sale of its assets in Cambodia involving its chairman Zhu Zhangjin and his family. The Zhejiang province-based company, which also develops properties, said the report contains “untrue and misleading” information” without elaborating, according to a stock exchange filing. Two phone calls by the South China Morning Post to the company went unanswered.
According to Blue Orca, Kasen sold its best assets cheaply to Zhu’s family members three years ago after understating its revenue and profit. Investigations by the short-seller show Kasen’s Cambodian projects to be vacant and undeveloped, it alleged.
Blue Orca pegged the fair value of Kasen stock at 67 HK cents, and simply uninvestable, according to the report.
Kasen’s shares had surged 250 per cent through Wednesday from the start of 2018 on strong residential home sales in China and its Cambodian projects. Property sales accounted for 75 per cent of its revenue last year.
Zhu has a 36.1 per cent stake in Kasen through direct and indirect holdings, according to its interim report. The company was reorganised from a factory that made leather products and went public in Hong Kong in 2005. Its first-half net income jumped 171 per cent to 243 million yuan (US$34.5 million) from a year earlier.
Blue Orca is founded by Soren Aandahl, who has a record of making bearish bets on Chinese companies trading in Hong Kong. Its reports earlier this year included critical analyses on the accounting and governance at baby-milk formula maker Ausnutria Dairy and sportswear maker Anta Sports Products, causing both to tumble.
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