China Feihe bounces back from attack

It was a roller coaster ride for shares of China Feihe (6186) yesterday, as the mainland baby formula producer issued a positive profit alert after a shortseller attack.

Feihe's shares ended 7.21 percent higher at HK$16.96 yesterday after plummeting as much as 8.5 percent in the morning.

Activist shortseller Blue Orca Capital issued a report targeting the Beijing-based company yesterday morning, which questioned whether Feihe had inflated its profitability by overstating its revenue from infant milk formula and understating billions in operating costs, such as advertising and labor expenses.

The shortseller values Feihe at HK$5.67 per share, only 33 percent of yesterday's closing price.

Feihe denied the allegations, calling them "inaccurate and misleading," according to an announcement on the Hong Kong Stock Exchange at midday yesterday.

The company said in the same announcement that it expected to record a more than 40 percent year-on-year increase in revenue in the first half, mainly due to the substantial increase in the sales volume of high-end infant milk formula.

Feihe raised HK$6.7 billion through its Hong Kong initial public offering in November last year after delisting from the New York Stock Exchange in 2013.