Sanitary napkin giant Hengan was shorted. The founding duo was the richest man in Fujian.

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Sanitary napkin giant Hengan was shorted. The founding duo was the richest man in Fujian.

2018-12-12 20:25:05 258 ℃

Hang An International (1044.HK) was short-selled today and caused a sharp fall. Before the suspension, Hengan International fell 5.7%.

Bonitas Research released a report this morning, saying that Hengan International is suspected of financial fraud, forgery of profits, and pointed out that its stock value is "near zero."

Established in 1985, Hengan International, the main products include maternal and child health products and sanitary products, known as "seven space", "Aerle" and other sanitary napkin products. Listed on the Hong Kong Stock Exchange in December 1998, it was incorporated into the Hong Kong Hang Seng Index constituent stocks in 2011 and included in the Hang Seng China Enterprises Index in 2018.

Fujian Regal Shi Wenbo and Xu Lianjie are the founders of Hengan International, and they are also known as Hengan Shuangxiong. The semi-annual report of Hengan International disclosed in September this year showed that Shi Wenbo controlled 19.41% of Hengan International and Xu Lianjie controlled 20.08% of Hengan International.

Shi Wenbo and Xu Lianjie were once the richest people in Fujian. This year's latest Forbes China rich list, both tied for 110 with 16.56 billion wealth.

Boliday’s short report said that Hengan International has forged a net income of 11 billion yuan since 2005. In the first half of 2018, the operating profit margin of Hengan International Sanitary Napkin Business was 51%. The operating profit margin of competitors is only 15%; in addition, the historical return on assets of the sanitary napkin business disclosed by Hengan International has reached 72% in 2016, which is questionable.

Bolidays also questioned Hengan International’s book cash is not true. According to its research report, Hengan International is still insanely borrowing on the basis of a book capital of 19.8 billion in the first half of 2018 and a working capital balance of 7.6 billion.

In addition, the short report also believes that Hengan International is suspected of making false transactions with related parties, falsifying trading volume, income and profits. Boliday pointed out that Hengan International has paid dividends of 18.6 billion yuan since 2005, and Hengan has already issued about 7.8 billion yuan from China. In addition, Hengan has absorbed additional undisclosed benefits from the Fujian real estate investment transactions.

Bolidas’ report finally stated that Hengan will eventually face high debt and the equity value will eventually be zero.

Hengan International's 2018 mid-year report shows that in the first half of this year, Hengan International's revenue was 10.1 billion, up 16.3% year-on-year, net profit was 1.947 billion, up 5% year-on-year; among which paper towel business revenue was 5.08 billion, accounting for the whole Revenue exceeded 50%; sanitary napkin business revenue was 3.23 billion, up 5% year-on-year. By the end of June this year, Hengan International had total assets of 38.4 billion and total liabilities of 21.4 billion.

Since December, major institutions have different opinions on Hengan International's ratings. On December 4, UBS lowered its target price of Hengan to HK$55.18 to its “sell” rating; Credit Suisse lowered its target price to HK$62 to maintain “Neutral” rating; on December 10, Nomura maintained Hengan “Buy” Into the "rated, target price of 90.2 Hong Kong dollars; on December 11, Dahe lowered its target price to 74.5 Hong Kong dollars, the rating is "buy"; on December 12, Guotai Junan maintained a "buy" rating on Hengan, the target price is lowered 79 Hong Kong dollars.