China Minzhong Posts 11% Profit Gain

China Minzhong Food Corp. (MINZ), the vegetable processor whose accounts were questioned by short-seller Glaucus Research Group this week, said full-year profit rose 11 percent.

Net income advanced to 755.1 million yuan ($123.4 million) in the 12 months through June from 679.6 million yuan a year earlier, the Putian, China-based company said today in a statement. Sales jumped 26 percent to 3.25 billion yuan.

Minzhong is preparing a response to Glaucus’s report, which it expects to release by the end of this week. The company will seek to allay concerns as more Chinese businesses trading in Hong Kong, Singapore and New York become short-seller targets. Minzhong is among 143 China-based firms listed on Singapore’s S$967.4 billion ($758.3 billion) stock market, according to the latest data from the exchange.

Minzhong, a grower and processor of vegetables in China for local and international customers, has reported higher profit every year since fiscal 2007, according to data compiled by Bloomberg.

Glaucus said in a report on Aug. 26 that Minzhong had been “significantly deceiving” regulators and investors, sending the stock 48 percent lower in Singapore in less than two hours before trading was suspended. Minzhong said earlier today that the short-seller misunderstood its business.

Glaucus Report

Glaucus was set up to probe companies that appear “too good to be true” using experiences from accounting, law and capital markets, according to its website.

Minzhong may have fabricated sales and payments to its largest supplier, doctored historical accounts and overstated capital spending, Glaucus said in the report. It also questioned the vegetable processor’s reported receivables and cash balance. Minzhong said it will show its financials are sound and address specific issues raised by the short seller.

Glaucus, which has an office in Newport Beach, California, has also issued reports on China Metal Recycling Holdings Ltd. (773), China Medical Technologies Inc. and SouFun Holdings Ltd.

Provisional liquidators were appointed to China Metal in July and its Hong Kong-traded stock has been suspended since January. China Medical filed for Chapter 15 foreign-firm bankruptcy protection in New York last year. SouFun (SFUN), China’s biggest real-estate website owner, has surged 70 percent since the April report by Glaucus, compared with the 6.1 percent gain in the Bloomberg China-US Equity index.

Stock Suspended

Shares of Minzhong were halted at 53 Singapore cents after tumbling the most since the company’s listing in April 2010. The stock will remain suspended until the end of trading tomorrow. Short interest in the vegetable processor rose to a record 7.2 percent of the outstanding stock on Aug. 19 from this year’s low of 3.8 percent in March, according to the most recent data from research company Markit Group Ltd.

Minzhong’s biggest investor, PT Indofood Sukses Makmur, the parent of Indonesia’s largest instant-noodle maker, said this week it’s comfortable with its investment.

Indofood, which doubled its stake in Minzhong to 29.3 percent in March, conducted due diligence on the company 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

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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