Shanghai Jahwa United Co., a cosmetics and household goods maker, dropped the most in three years in Shanghai after a nine-month trading suspension was lifted.
Jahwa United slid 8 percent to 34.2 yuan at the 3 p.m. close, the most since September 2008 after posting the biggest drop in a decade earlier. The stock was halted in December as its state-owned parent, Shanghai Jahwa Group, was in talks to sell its 29 percent stake.
The Shanghai Composite Index has lost 12 percent since Dec. 3, the last day Jahwa United traded before its suspension. The cosmetics maker today said the Shanghai government plans to sell its 100 percent stake in Shanghai Jahwa Group for 5.1 billion yuan ($782 million) through an auction starting today, according to a statement to the stock exchange.
“It’s a catch-up decline after the suspension of trading as the market has fallen by more than 10 percent during the period,” Liu Jinhu, a Shenzhen-based analyst at Sealand Securities, said in a phone interview. “The company’s fundamentals are still very good.”
Shanghai Jahwa Group is looking to sell its 29 percent stake in Shanghai Jahwa United to fund expansion into luxury products and the acquisition of foreign brands, Ge Wenyao, general manager at the parent and the unit’s chairman, said in an interview Aug. 23. The group plans to sell assets including the stake to a Chinese investor, he said.
The stake sale will help free Shanghai Jahwa United, maker of Herborist brand beauty products and GF men’s cosmetics, from government rules that bar it from investing in other industries, Ge said. It aims to compete with foreign cosmetic makers such as Procter & Gamble Co., he said.
Jahwa Group also plans to invest in food, jewelry, watches and the boutique hotel sector, which have higher margins and it will also look to acquire overseas cosmetic brands, Ge had said.
Shanghai Jahwa had a 1.6 percent share of China’s beauty and personal care products market, which is expected to surge 58 percent to 255 billion yuan in 2015 from 2010, according to London-based researcher Euromonitor International.