Loquat Fan, who contributed this article to NextInsight, highlights that GeoInvesting has cast an aspersion on the reputation of certain professionals as well as owes investors an explanation as to whether certain Chinese official documents it has are real or otherwise. This follows from GeoInvesting's 25 Oct report containing allegations about Sino Grandness' business.

GeoInvesting first article on 25 Oct

highshelf3.15Sino Grandness' loquat drinks on a shelf in a supermarket. File photo.GeoInvesting, in its article, "Is This Singapore Listed Company Rotten At Its Core", made negative references to the professionals associated with Sino Grandness:

"We also wanted to make note of potential liability for the sponsors of the company’s beverage business IPO in the event that its financials and business condition are untrue or have been misrepresented....

"It should also be noted that SGFI’s Singapore auditor is Foo Kon Tan LLP, a former member of Grant Thornton in Singapore. Foo Kon Tan LLP separated itself from Grant Thornton in 2015. Foo Kon Tan LLP was also the auditor for two other Singapore listed China related frauds: China Printing & Dyeing Holding Limited and China Fibretech Ltd. SGFI’s Hong Kong auditor for its planned IPO is BDO Hong Kong, an audit firm that also has associations with notorious Chinese frauds, such as China Biotics (CHBT).

"Should SGFI’s planned beverage subsidiary IPO continue, we would urge its sponsors to conduct further due diligence befitting of a company to which they wish to lend their name and credibility."

Sino's response on 31 Oct

Sino Grandness refuted GeoInvesting's allegations about its business and concluded:

"The Company views the Report as damaging the value that the Company has created for shareholders over the years and reserves the right to consult its legal advisers on its possible recourse. The Company and the professionals named in the Report reserve the right, and will be taking legal actions on the advice of its legal counsel to defend their rights and reputation."

Will the parties, for whom their professional reputation is everything, take legal action? What about Sino Grandness, which has renowned supermarket chain clients such as Lidl (operates around 10,000 stores in Europe)?  

Clients will not wish to be associated with suppliers with major problematic issues, nor will a wide range of other parties including employees. Time will tell if GeoInvesting will face legal action. Or will an apology from GeoInvesting suffice?

GeoInvesting's response on 31 Oct 

GeoInvesting, responding to Sino's rebuttal, stated that they "appreciate the opportunity to bring clarity to these five key points and we look forward to helping investors get the transparency that they deserve with regard to Sino Grandness moving forward."  

The above comment reads like a lame reason when confronted with the rebuttal by Sino Grandness.  

If GeoInvesting's purpose is to bring clarity, it ought to have checked with Sino Grandness on various matters before issuing its report. It should also have been more thorough in its investigations on the company and of documents that are publicly available.

For example, in the application proof submitted to the Hong Kong Stock Exchange, Garden Fresh (Sino's beverage subsidiary) explained that it has been replacing under-performing distributors by larger, stronger one. But in questioning why Garden Fresh could grow its sales when the number of distributors was on the decline, GeoInvesting omitted Garden Fresh's explanation.

Sino's second response on 2 Nov  

Sino Grandness stated that "only basic corporate information such as company registration information, address and legal representative may be extracted by the public. But comprehensive information which includes financial information may only be officially extracted directly from SAIC by parties with authorisation letters from relevant departments or parties on official or court matters with valid documentations....

The management of the Company have confirmed to the Board that the each of the Group’s PRC subsidiaries have only made one SAIC filing each for FY2014 and FY2015 respectively. The Company further confirms that it has never authorised GeoInvesting to access the Group’s SAIC file records."

In its article, Geoinvesting claimed that it has two SAIC filings for year 2015, and the second contains adjustments that "could help get the combined net income in the second set of SAIC files we obtained closer to the net income reported in the IPO filing."

Given Sino's categorical statement that

(1)  it has not authorised GeoInvesting to obtain comprehensive information from SAIC, and 

(2) its subsidiaries had made only one SAIC filing each year  

GeoInvesting should shed light on the genuineness of its two SAIC files for year 2015. After all, it is GeoInvesting's intention to help "investors get the transparency that they deserve with regard to Sino Grandness".

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