Shares in Asia Plastics Recycling Holding Ltd (APR, 亞塑再生), which recycles used plastic bags and other scrap to make ethylene-vinyl acetate foam in China, fell by the daily maximum of 7 percent in Taipei yesterday as the company faces accusations of overstating its earnings and assets.
The company rebutted the accusations made by Glaucus Research Group California LLC, saying it would prepare a detailed clarification report and is considering a share buyback scheme to support the company’s shares.
The company’s shares ended at NT$80.5 yesterday on the Taiwan Stock Exchange, down 6.94 percent from the previous session and underperforming the broader market’s 0.13 percent decline.
“Although we might not have any advantage in an international lawsuit, we will still take every action to protect our rights after all the documents are ready,” APR senior manager Gary Wang (王維民) told reporters yesterday.
Glaucus Research Group had not contacted Asia Plastic Recycling for confirmation of its allegations before the report was issued, Wang said.
APR chairman Ting Chin-tsao (丁金造) and accounting firm Deloitte Taiwan will hold another press conference over the weekend, at which Asia Plastics will show detailed figures and records to help clarify the public’s doubts, Wang said.
Wang also said the alleged NT$3.6 billion (US$118.8 million) loan APR took out in China was fabricated by the research group, adding that the company has not borrowed any money in the country.
In a report released yesterday, Glaucus said the Taiwanese company, which has factories in Fujian Province, China, has made “material misrepresentations” of its earnings and assets to investors and regulators in Taiwan.
By using publicly available tax records and land reports, the renowned US short seller accused Asia Plastics Recycling of overstating its capital expenditures and net income over the past three years.
Glaucus also said that APR’s lucrative commodity business looks “too good to be true,” saying its earnings before interest and tax margin, which averaged 33 percent from 2010 to 2012, was too high compared with the 7 percent average for its rivals, while its average revenue growth of 19 percent between 2010 and 2012 appear suspicious and sales per employee of 1.44 million yuan (US$230,500) in 2012 was way too high.
As a result, the report said the company’s actual earnings should be 90 percent lower than the figures it reported to the Taiwan Stock Exchange.
Last year, Asia Plastics Recycling posted NT$1.29 billion in net profit, down 14.2 percent from NT$1.5 billion the previous year. Earnings per share were NT$6.44 last year, compared with NT$8.03 in 2012.
Revenue increased 19.33 percent to NT$7.18 billion from NT$6.01 billion in 2012.
“Because of APR’s significant indebtedness we put the value of APR’s equity at NT$0 per share,” the report said.
Glaucus Research Group was established in 2011. Some of its previous targets include China Metal Recycling (Holdings) Ltd (中金再生), West China Cement Ltd (西部水泥), Shougang Fushan Resources Group Ltd (首鋼資源) and Prince Frog International Holdings Ltd (青蛙王子).
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