Dawnrays fights back over e-mail attack
The pharmaceutical company whose Hong Kong listing was threatened by an anonymous e-mail went on the counter-attack yesterday, saying its figures were sound and that the e-mail came from a disgruntled broker.
The offer of 248 million shares of Dawnrays Pharmaceutical (Holdings) opened on Monday and closes tomorrow. It will begin trading on the main board on July 11.
An anonymous e-mail sent to newspapers in Hong Kong last week questioned the firm's profit figures and said lead manager ICEA, a subsidiary of Industrial and Commercial Bank of China, was repeating errors made last year in its underwriting of Euro-Asia Agricultural (Holdings). The China Securities Regulatory Commission has accused Euro-Asia of inflating itsprofits before listing.
To rebut the allegations, the company yesterday flew a group of reporters from Hong Kong to tour its plant in a Suzhou industrial zone and meet top officials.
The officials gave a detailed defence of the profits, sales and market outlook in its prospectus that were challenged by the e-mail.
They said that they were among the leading makers in China of the antibiotic cephalosporine. Products derived from this accounted for 48.5 per cent of antibiotics sold in China last year and that cuts in production costs had given them higher market penetration.
'We learnt about the e-mail when the Hong Kong newspapers published it,' said vice-president Zhao Shixi. 'It was not sent to us. We were angry, yes, but calm because it was sent by someone with a grudge against ICEA.'
Mr Zhao said many brokerages had approached Dawnrays in spring last year when they learned of its listing plans.
'We chose ICEA because it had the best results in Hong Kong in 2000 and its staff were very diligent. We signed a contract with them in July. The problems with Euro-Asia came to light later in the year,' he said.
Vice-financial controller Peter Wang said Dawnrays asked ICEA for an explanation. 'They said that it was the work of a group of people who had left the firm,' he said.
Dawnrays engaged a second sponsor, Citic Capital, and considered cancelling the contract with ICEA. 'But we thought that after Euro-Asia they would have to do a good job and their team was very professional,' Mr Wang said.
An additional factor was that the firm badly needed capital to help fund a 60 million yuan (HK$56.22 million) expansion that would increase production capacity sixfold.
'Time was pressing. We have clients waiting for goods who will go elsewhere if we do not supply them,' Mr Wang said.
'We have a credit line of 320 million yuan [with] the banks which we could use. But a listing brings not only capital but a higher profile, better management because of the competitive pressure, and allows the company to offer options to its staff.'
