Chaoda Halves Asian Citrus Holding, May Book Loss

Chaoda Modern Agriculture Holdings Ltd., a Chinese vegetable supplier which has been suspended from trading since Sept. 26, cut its stake in Asian Citrus Holdings Ltd. by more than half, citing market volatility.

Chaoda may book a loss of HK$91 million ($12 million) after selling 100 million Asian Citrus shares, the company said in a regulatory filing yesterday. After selling the 8.2 percent stake it will still hold 5.4 percent of Asian Citrus, it said.

Chaoda delayed its annual earnings release last month to audit its accounts after a report from Anonymous Analytics questioned the company’s finances. The delay prompted Standard & Poor’s Ratings Services and Moody’s Investors Services to cut their credit ratings on the company.

The funds from the share sale will be used for “general working purposes,” Chaoda said in the statement.

Global markets have lost $10 trillion, or 19 percent, this half as economic conditions deteriorate and investors speculate Europe’s debt woes will weigh on global growth. The Hong Kong benchmark index has declined 22 percent in the same period.

Asian Citrus shares closed at HK$4.80, advancing 2.4 percent. The orange vendor has fallen 50 percent this year. The share sale is not expected to have “any significant impact” on its daily operations, Asian Citrus said today in a statement.

It bought back one million shares today for about HK$4.8 million, it said separately. The buyback was funded internally and the company may make more repurchases “according to market conditions,” it said.

Fertilizer Agreement

Asian Citrus said last month that it won’t renew a fertilizer supply agreement with a company owned by Chaoda Chairman Kwok Ho.

Kwok, Chaoda Chief Financial Officer Andy Chan and Fidelity Management’s George Stairs were accused by Hong Kong’s financial secretary of insider trading, according to a Sept. 28 notice by the city’s Market Misconduct Tribunal.

Kwok and Chan dispute the Hong Kong tribunal’s insider trading allegations, Chaoda said on Sept. 30. Boston-based Fidelity Investments conducted a thorough internal review of the matter in 2009 and believes that Stairs didn’t violate any laws or regulations, according to spokesman Vincent Loporchio.

Close Ties

Asian Citrus’s “close tie with Chaoda is arguably the biggest overhang ever since its listing in Hong Kong,” Alex Cheng, a Hong Kong-based analyst at Industrial & Commercial Bank of China Ltd., said in a note yesterday.

Asian Citrus’ Vice Chairman and a non-executive director Ip Chi Ming is also a director at Chaoda’s subsidiaries, according to Chaoda’s website. Chaoda’s board representative “does not participate in the daily management” of Asian Citrus and Chaoda is “merely a passive financial investor,” Asian Citrus said in an Oct. 6 statement.

(Corrects name of bank in eleventh paragraph.)
Before it's here, it's on the Bloomberg Terminal. LEARN MORE