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30 December 1899

During our ongoing investigation into the group companies of China Huarong Asset Management Co Ltd (Huarong, 2799) and others, we note that according to a disclosure of interest, on 6-Dec-2017, Huarong International Financial Holdings Ltd (HIF, 0993), via its 100% BVI subsidiary Beyond Steady Limited (BS) purchased 67.064m shares (8.04%) of China Singyes Solar Technologies Holdings Ltd (CSST, 0750). The filing failed to disclose the price paid, or whether it was on-market or off-market. No other substantial shareholders disclosed any decrease in their holdings on that date, so the vendor is unknown.

Jump forward to the 2017 HIF annual report and we see in note 19(iv) that on 6-Dec-2017, the group "purchased listed securities together with a put option at an aggregated consideration of approximately HK$181,073,000". That is almost certainly the investment in CSST, at a price of HK$2.70 per share, which works out to HK$181,072,800.

Since then, HIF and BS have each made 7 more filings as at 29-Dec-2017 to 9-Jul-2018, disclosing an increasing number of CSST shares which have been pledged to BS, with the last filing showing a security interest of 58.785m shares (7.05%), taking HIF's total interest in CSST to 15.09%. The pledged shares are presumably security for the obligations of the issuer of the put option.

Yet, if you check the 30-Jun-2018 interim report of CSST, or the preceding 2017 annual report, you would have no idea that any of this had happened. Page 18 shows only 1 substantial shareholder, Strong Eagle Holdings Ltd, with 38.1%, which is 53% owned by CSST Chairman Liu Hongwei. There is no disclosure of the interests of HIF and BS, and nobody has disclosed any obligations as the writer of a put option.

The reason for the increasing amount of collateral posted for the put option is probably that the share price of CSST has been sliding, having closed at $2.15 last Friday 12-Oct-2018. It has been suspended since then, "pending the publication of an announcement about the latest financial position of the Company".

Before suspension, CSST was in the middle of a proposed issue of HK$230m convertible bonds and a placing of up to 17.8m shares at $2.20 to raise HK$165m net. Don't hold your breath waiting for those to complete.

Before allowing resumption of trading, the regulators had better get CSST to tell the public anything it knows about the purchase of shares by HIF, the put option, the pledge of shares and any dealings CSST has had with HIF or other members of the Huarong group.

© Webb-site.com, 1899


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