Sound Global suspended from trading under order of Hong Kong regulator

PUBLISHED : Wednesday, 13 April, 2016, 3:23pm
UPDATED : Wednesday, 13 April, 2016, 3:32pm

Sewage treatment company Sound Global was suspended from trading on Wednesday under order of the Securities and Futures Commission, although no reasons for the trading halt were given.

Sound Global said in an announcement on Wednesday that the SFC under trading rule 8.1 has directed to the Stock Exchange of Hong Kong to suspended all dealing of its shares from 9am.

A spokesman of the SFC said the trading suspension was directed under a specific section of the listing rules concerning information disclosure by listed companies.

“The rule permits the SFC to direct the stock exchange to suspend trading in a company where false or misleading information is included in a document issued in connection with a listing where it is necessary to ensure an orderly market or it is in the interests of the investing public,” the SFC spokesman said.

The company last closed at HK$2.98 on Tuesday, down 3 per cent from its previous close.

The company was first listed in Singapore in 2006, but was later moved to Hong Kong in September 2010. The company is mainly involved in sewage treatment projects in mainland China. In a press release last month it said it had won several mainland projects.

Credit rating agencies downgraded Sound Global in April last year, citing governance deficiencies and internal controls concerns after the Beijing-based firm said it had “potential audit issues” and would set up an independent review committee that might engage forensic accountants.

Standard & Poor’s last year lowered its credit rating of Sound Global from BB-minus to B to reflect concerns over governance deficiencies. Moody’s also cut its “corporate family rating” on Sound Global to Caa1 from Ba3.

The company has said there is no truth to allegations made by research firm Emerson Analytics that it had faked and inflated revenues in the past few years.

Emerson issued a report on February 4, 2015 saying that “a secret engineering technology service” accounting for some 40 per cent of its sales between 2011 and 2013 was conducted by “a mysterious subsidiary that leaves no trace in the Chinese water industry, a strong indication that the revenue just didn’t exist”.

Sound Global said Emerson’s allegations were based on the firm’s voluntary announcements, an industry portal and anecdotal evidence, which could not be used to draw conclusions.

According to the stock exchange filing, Sound Global has a net asset value at 4.71 billion yuan (HK$5.65 billion) as of the end of last year, while its net profit last year stood at 455.42 million yuan.

According to its listing prospectus, most of the company’s business is on the mainland but it gained its first major overseas contract with a 624 million yuan engineering, procurement and construction water project in Saudi Arabia in 2009.