Vitasoy defies short-seller attack to rise 5.6pcBusiness | Avery Chen 17 Jan 2020
Shares of local drinks manufacturer Vitasoy International (0345) rose 5.6 percent to HK$29.25 despite facing short-seller attacks.
Short-seller Valiant Varriors said in its report yesterday that Vitasoy has been overstating its Chinese and Australian profits and capital expenditures, inflating its margins while underplaying the impact of rising costs on its bottom line.
It also questioned Vitasoy's capital expenditures, pointing out the big discrepancy between its reported numbers and filings to the State Administration for Industry and Commerce. Valiant Varriors believed Vitasoy's shares are only worth HK$10 apiece, representing a 65 percent downside from current prices.
Vitasoy said yesterday that the report contained certain factual errors, misleading statements and unfounded allegations which may lead to unusual price movements. It said it will post further announcements to clarify and address the allegations and that it reserves its right to take legal action against the short-seller.
Vitasoy's net profit increased by 2.99 percent year-on-year to HK$533.21 million for the first half last year. Revenue during the period grew 5.33 percent from a year before to HK$4.68 billion. 70 percent of its revenue comes from the mainland market.
Shares of Vitasoy have fallen 38.1 percent from its peak of HK$47.25 last June.
The report was Valiant Varriors' first to target Hong Kong-listed companies. The institution, formed by a group of activist investors, has issued 15 reports so far, mainly targeting public companies in Singapore and South Korea.
More short-seller reports have been published in the local stock market, but with less impact on targeted companies, according to accounting and consulting firm Grant Thorton's report issued last October.
Short-sellers prefer to target big companies, especially those that have a market capitalization of over HK$5 billion as it could be due to the cost of stock borrowing, said Barry Tong, national head and joint APAC head of transaction advisory services.