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Cathy Holcombe

In Hong Kong these days directors know they are having a bad day when their firm is featured on Webb-site.com, operated by independent financial investigator David Webb.

Town Health International Holdings, recently listed on the Growth Enterprise Market, is the most recent firm to wake up to that bad news.

Mr Webb posted a piece on Monday pointing to weak disclosure, a questionable connected transaction and inconsistency in financial reports.

Company directors spent two days wrangling with their lawyers before they posted an announcement through the stock exchange at midnight on Tuesday.

'They haven't slept much,' a public relations spokesman said.

The announcement admitted to an 'inadvertent mistake' to explain the inconsistency Mr Webb was quick to pounce on. However, they defended their disclosure record.

What was the inconsistency? The prospectus stated that none of the directors were among the top five suppliers of the health-care company.

However, a month after listing Town Health bought a company headed by one of its directors, Derek Sum Kwong-yip. The related announcement said this company, Jacobson Medical Hong Kong, was a top-five supplier.

Town Health said: 'The directors wish to clarify that Jacobson HK is not one of the five largest suppliers of the group.'

In Mr Webb's original piece, he wrote that Town Health 'has discovered the perfect acquisition, just four weeks after its listing, from someone who should have been identified in the prospectus'.

That someone is Lau Wing-hung, 85 per cent owner of Jacobson Medical Corp (JMC) - an associate of Jacobson HK. JMC owns 8.72 per cent of Town House and Mr Sum 15 per cent of JMC.

Mr Lau is identified in the prospectus only as 'the 85 per cent shareholder [of JMC]'. His name came up a month later when Town House announced it was buying a majority stake of JMC associate Jacobson HK.

Mr Webb yesterday said he was still cynical. 'I think the timing is questionable. We are asked to believe that a month earlier [at the listing in the middle of last month] no one knew there would be an attempt to effect the transaction.'

Mr Webb has called up Hong Kong companies previously for what he sees as faulty disclosure, such as the GEM firm that classified as 'independent directors' trusts owned by relatives of a top manager. None of his pieces have led to action against firms.

He believes Mr Lau should have been named in the prospectus. 'The regulations ask for details of initial management shareholders - I think that should include their names.'

He was not satisfied with Town Health's defence that Mr Lau's identity as an initial management shareholder was disclosed 'on an anonymous basis'.



Town Health issue raised