China Minzhong Reports 11% Profit Increase

China Minzhong Food Corp., 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 yesterday in a statement. It has reported higher profit every year since fiscal 2007, according to data compiled by Bloomberg.

Minzhong is preparing a response to Glaucus’s claim that it has deceived regulators and investors. The company will seek to allay concerns as more Chinese businesses trading in Singapore, Hong Kong and New York become short-seller targets. It’s among 143 China-based firms listed on Singapore’s S$967.4 billion ($758.3 billion) stock market, the latest exchange data show.

Glaucus’s Aug. 26 report sent Minzhong stock 48 percent lower in Singapore in less than two hours before trading was suspended. Minzhong, a grower and processor of vegetables in China for local and international customers, said yesterday that the short-seller misunderstood its business and it expects to release a response by the end of this week.

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.

Glaucus Report

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., 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, 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 today. 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.

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