Chaoda Modern Agriculture (Holdings) chairman Kwok Ho was at pains to distance himself from the woes of fellow private chip Euro-Asia Agricultural (Holdings) at a briefing on Monday. Mr Kwok said Chaoda would be reporting quarterly results to help restore investor faith in privately owned mainland companies. Embarrassingly for him, within a day trading in his firm's shares was suspended amid speculation there had been a falling out with auditors from PricewaterhouseCoopers over the full-year results announced on Monday. This meant Mr Kwok had to host a meeting with analysts and fund managers on Tuesday in which he was highly constrained in what he could say about his fast growing fruit and vegetable company. The still-suspended Euro-Asia, like Chaoda, was at one time feted by analysts and fund managers as the answer to their prayers. The private chips were portrayed as exciting, high-growth alternatives to stodgy Chinese state enterprises and all their extra baggage from meddling officials. Euro-Asia's star has not so much fallen as nosedived. It is now under investigation for allegedly inflating its revenue figures while chairman Yang Bin is under house arrest in his home town of Shenyang for unspecified economic crimes. Investors are now asking if Chaoda is another Euro-Asia or just a relatively innocent victim of circumstances. The answer probably lies somewhere in the middle, according to Jack Tsui of South China Securities, who used to follow the company closely. No doubt the suspension of the company will cost a lot in terms of credibility. Some sources say the problems centre on the HK$56 million tax provision that the company took in its results for the year to June. The suspension could also be the result of Chaoda failing to deliver on the extra year of tax holiday which earlier this year it had told the stock exchange it had obtained for being named as a leading enterprise in Fujian province, Mr Tsui said. This waiver notice caused analysts not to factor taxes into their earnings projections. As a result their numbers proved to be too optimistic. Whatever the outcome of the suspension, it will cause investors to revisit their evaluation of the company. Chaoda had probably not indulged in the flagrant abuses which Euro-Asia was accused of, Mr Tsui said. He has done the maths and worked out that the area of land the company is cultivating, its revenues and crop yields do match up to the average selling price of 2.20 yuan (about HK$2.06) per kilogram of vegetables. This figure is also is line with market prices in China. 'If they have cooked the books, they have done a brilliant job of it,' Mr Tsui said. But there are issues which need explaining. Chaoda's growth model depends on rapid expansion of land under cultivation. Often, it is Chaoda's parent which strikes deals with local governments or middlemen who have assembled plots of land for Chaoda to cultivate. The listed company then pays the parent up front for a lease of up to 30 years. So far, the prices paid by the listed vehicle to the parent had been fair, Mr Tsui said. But it could be an area of potential abuse in the future. And the case of minibus maker Brilliance China Automotive Holdings has highlighted how disputes over ownership rights can arise in the mainland. With Chaoda, there is a lack of transparency over the land deals and documentation. The payment up front for the land leases means the listed company is being lumbered with heavy capital expenditure which hurt cash flows. For the previous financial year to June, the listed company forked out 450 million yuan in capex, Mr Tsui estimated. This figure rose to 600 million yuan for the past financial year, which looks high against the 622 million yuan in net profit. Chaoda announced a generous dividend of nine cents per share, which will cost about $180 million. Besides its cash on hand, the company was this year boosted by a share placement. Questions have to be raised about the sustainability of the high dividend in future years if capex remains as onerous. Beyond this worries exist about the sustainability of Chaoda's farming methods. Can it produce a high yield of crops from intensively farmed land for the life of its 30-year leases? Mr Tsui asked. One other possible red flag was how Chaoda was able to buy a chronically loss-making orange farm in Guangxi province about two years ago from juice giant Tropicana and other foreign investors and get it contributing to the bottom line in the latest results. 'It's really strange they can improve it that rapidly. It is too amazing,' Mr Tsui said. Overall, the jury for Chaoda is still out. The level of disclosure investors will now demand from the company is going to be much higher if they are to jump on board its high-growth story.