<TABLE cellSpacing=0 cellPadding=0 width=452 border=0><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published April 14, 2009
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>China Sky halts trading, market talk of forced-sale
By LYNETTE KHOO
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CHINA Sky Chemical Fibre halted trading yesterday morning, pending the release of an announcement. But already making the rounds was talk of a potential forced-sale of shares pledged by a major shareholder and a profit warning for the first quarter.
Chief financial officer Sunny Hui declined comment, saying that an announcement will be made within a day or two.
But UOB KayHian analyst Allen Jiao issued a note yesterday afternoon, saying that he contacted the management, who gave reasons for the trading halt.
He said that major shareholder and chairman Cheung Wing Lin had been forced to sell his pledged shares to meet obligations and that a profit warning was to be released on the company sinking into the red for the first quarter ended March 31.
'The major shareholder is in talks with the share pledge counterpart to decide on the amount to sell; thus it may take a few more days for trading to resume,' Mr Jiao added. 'We believe there would be strong selling pressure on the stock once trading resumes.'
He maintained his 'hold' call on the stock.
When asked if those issues were true, Mr Hui neither denied nor confirmed them. 'We have mentioned in our 2008 financial results that this year's performance will be weaker than 2008,' he said.
Filings with SGX last week showed that the group's chief executive, Huang Zhong Xuan, had his deemed stake in China Sky reduced to 37.85 per cent from 37.91 per cent due to 'sales initiated by financial institution to meet obligation'.
The forced-sale took place on China Sky shares held by Rock Mart Equities Ltd, which is jointly owned by Mr Huang and Mr Cheung, cutting the stake held by Rock Mart to 37.75 per cent from 37.81 per cent.
All of Mr Cheung's deemed stake in China Sky is held through Rock Mart, while Mr Huang owns another 0.1 per cent stake in the group under HL Bank Nominees, according to China Sky's 2008 annual report.
CIMB-GK research head Kenneth Ng, who covers the stock with a 'neutral' rating, said that if there indeed has been forced-sale of shares, then 'the question will go beyond the pledged share sale to whether the company's cash is real'.
He explained that with the stock trading below its net cash, it would have been more feasible for the group to declare dividends for fiscal 2008, which the major shareholders could use to repay their financial obligations. 'The question is why are they not doing that,' he said.
China Sky's net profit for 2008 fell 39.7 per cent to 392.82 million yuan (S$87 million), no thanks to slower sales and impairment losses from its acquisition of Qingdao Zhongda Chemical Fibre Company Ltd (QZ).
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</TD></TR><TR><TD vAlign=top width=452 colSpan=2>China Sky halts trading, market talk of forced-sale
By LYNETTE KHOO
<TABLE class=storyLinks cellSpacing=4 cellPadding=1 width=136 align=right border=0><TBODY><TR class=font10><TD align=right width=20>
</TD><TD>Email this article</TD></TR><TR class=font10><TD align=right width=20>
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</TD><TD>Feedback</TD></TR></TBODY></TABLE>CHINA Sky Chemical Fibre halted trading yesterday morning, pending the release of an announcement. But already making the rounds was talk of a potential forced-sale of shares pledged by a major shareholder and a profit warning for the first quarter.
Chief financial officer Sunny Hui declined comment, saying that an announcement will be made within a day or two.
But UOB KayHian analyst Allen Jiao issued a note yesterday afternoon, saying that he contacted the management, who gave reasons for the trading halt.
He said that major shareholder and chairman Cheung Wing Lin had been forced to sell his pledged shares to meet obligations and that a profit warning was to be released on the company sinking into the red for the first quarter ended March 31.
'The major shareholder is in talks with the share pledge counterpart to decide on the amount to sell; thus it may take a few more days for trading to resume,' Mr Jiao added. 'We believe there would be strong selling pressure on the stock once trading resumes.'
He maintained his 'hold' call on the stock.
When asked if those issues were true, Mr Hui neither denied nor confirmed them. 'We have mentioned in our 2008 financial results that this year's performance will be weaker than 2008,' he said.
Filings with SGX last week showed that the group's chief executive, Huang Zhong Xuan, had his deemed stake in China Sky reduced to 37.85 per cent from 37.91 per cent due to 'sales initiated by financial institution to meet obligation'.
The forced-sale took place on China Sky shares held by Rock Mart Equities Ltd, which is jointly owned by Mr Huang and Mr Cheung, cutting the stake held by Rock Mart to 37.75 per cent from 37.81 per cent.
All of Mr Cheung's deemed stake in China Sky is held through Rock Mart, while Mr Huang owns another 0.1 per cent stake in the group under HL Bank Nominees, according to China Sky's 2008 annual report.
CIMB-GK research head Kenneth Ng, who covers the stock with a 'neutral' rating, said that if there indeed has been forced-sale of shares, then 'the question will go beyond the pledged share sale to whether the company's cash is real'.
He explained that with the stock trading below its net cash, it would have been more feasible for the group to declare dividends for fiscal 2008, which the major shareholders could use to repay their financial obligations. 'The question is why are they not doing that,' he said.
China Sky's net profit for 2008 fell 39.7 per cent to 392.82 million yuan (S$87 million), no thanks to slower sales and impairment losses from its acquisition of Qingdao Zhongda Chemical Fibre Company Ltd (QZ).
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