Trading in China Green (Holdings) was suspended yesterday after the release of a securities firm's report questioning whether sales of the mainland fruit and vegetable producer's corn products were authentic.
According to a report by Bank of America Merrill Lynch, which was circulated to investors and fund managers on January 20, analysts said they failed to find corn products in stock in the outlets that were supposed to distribute grain beverages under China Green's own brand Cu Liang Wang.
China Green's financial report stated that corn milk accounted for more than 50 per cent of beverage sales last year.
The revenue of this product line was 200 million yuan (HK$235.9 million), constituting 11 per cent of China Green's 2010 turnover.
BAML analysts visited 25 outlets in Xiamen, Fujian province, where China Green's headquarter is located, but none of them stocked the company's corn products.
The company yesterday filed a statement with the Hong Kong stock exchange saying that it stopped selling corn milk products to supermarkets and hypermarkets channels in August last year.
But it said it continued to sell its corn milk products with 'different packages' through 'specialty' channels.
These include Xiamen Airlines, catering and various channels in Zhejiang, Jiangsu and Shanghai.
Instead of selling its corn milk products, China Green said it was now selling fruity sweet corn beverage products under the brand Cu Liang Wang which do not contain dairy ingredients.
In the exchange statement, China Green also said that it planned to launch a premium sweet corn beverage product in March.
According to another analyst who did not want to be named, investors were not sure why the company had to discontinue a profitable line and relaunch it. The analyst also said that the firm did not inform investors that it had stopped distributing the corn milk product.
In August last year, shares in China Green plunged as much as 45 per cent after it delayed reporting annual results. The delay was due to its auditor needing more time to collect information regarding China Green's customers.
'[China Green's] mis-communication was clearly a problem,' the analyst said. 'That the auditor wasn't able to get information regarding the billing of customers is another.'
China Green said in the exchange statement yesterday that it had applied for trading of its shares to be resumed on January 24.
China Green has had difficulties in recent months
In August, after it delayed reporting annual results, shares fell by as much as: 45%