SINGAPORE (April 8): Yet another S-chip, China Haida, has run into trouble.
Jiangyin Litai Ornamental Materials, the China subsidiary of the SGX-listed company, has two bank accounts in China frozen, while another account with a second bank “restricted”.

This was apparently done so on the order of a court in Sichuan province, which approved an application from one Zhang Kun to freeze assets worth up to RMB14 million belonging Xu Youcai, CEO of China Haida, and a dozen other respondents including Jiangyin Litai, as well as several other entities controlled by Xu.
The developments were announced on April 8 by China Haida’s lead independent director Soh Beng Keng, in an SGX filing.
The court order only came to light after external auditors of China Haida received “confirmation” from Bank of Communications that the two Jiangyin Litai accounts with bank had been frozen with effect from March 10 and March 18 respectively. As at Dec 31 2019, the balances at these two accounts were RMB753,725.60 and U$3,001.54 respectively.
In addition, a general deposit account belonging to Jiangyin Lintai with the Agricultural Bank of China, with a balance of RMB913,255.57 as at Dec 31 2019, was “subject to a pledge or other restrictions albeit particulars of which was not provided.”
According to the statement signed in the name of Soh, the lead ID, China Haida is “astounded” to find out what happened, and had “concomitantly” tried to find out from the finance team of Jiangyin Litai what happened.
“Unfortunately, ever since the outbreak of Covid-19 in China, the team has yet to fully resume work and its responses have been slow and intermittent,” the company added.
Upon query, China Haida’s board was provided by the finance team at Jiangyin Lintai a copy of an interim court order dated Nov 28 2019, applied by the supposed creditor Zhang.
China Haida’s board described the content order as “scanty” and there are no details on the dispute between Zhang and China Haida’s CEO Xu.
“The Company is still trying to ascertain, inter alia, what had transpired; under what circumstances and in what manner Jiangyin Litai is involved in the apparent legal dispute; and how much of Jiangyin Litai’s assets are subject to preservation or restrictions (and the period thereof) pursuant to the interim court order,” China Haida said.
China Haida, in its April 8 announcement, said it is now checking with all nine of Jiangyin Litai’s banks if court orders or any forms of restrictions have been put on the accounts the company has with these banks.
“The Company will provide further updates of the above matters as soon as any material information is available,” said China Haida.
Based on available details, what happened at China Haida bears some semblance to what happened to Midas Holdings more than two years ago.
By sheer coincidence, both companies are in aluminium parts – China Haida focuses on making parts for buildings and fixtures while Midas supplies to the railway industry.
Back then, Midas found that its China-based operating subsidiaries companies had taken out loans that the Singapore-listed holding company wasn’t aware of. The matter blew up only after creditors in China went to court to try and claim back their money. 
Midas, a former serial winner of corporate governance awards, has all but dissolved but minority shareholders are nowhere near getting any answers.
Rights blocked
Early this year, there were already signs that something’s afoot at China Haida. 
On Jan 7, SGX RegCo issued a “trade with caution” advisory. The regulator observed that on that on Dec 16 2019, the volume of China Haida shares that changed hands surged to just over four million shares. 
In comparison, there were only three active trading days in the three months prior with total traded volume of 576,000 shares.

Also, on Dec 16 2019, its share price rose by 150% to close at a cent from 0.4 cent. 

Between Dec 16 2019 and Jan 6 2020, the volume traded and price remained higher than usual, at an average daily level of around 1.7 million shares and 1.1 cents respectively.

Furthermore, via its market surveillance, SGX RegCo noted that a small group of market participants accounted for a significant portion of the total volume of China Haida shares traded during the same period.

On Jan 13, less than a week after SGX issued its warning, the company withdrew its planned rights issue, as it was not given the go-ahead by the exchange. 

The rights issue was first mooted back in June 2019. Under an eight-for-one rights issue, China Haida wanted to raise around $4.1 million by issuing around two billion new shares at 0.2 cent each.

A group of existing shareholders holding 46.7% of the company, including CEO Xu, would not be taking up their entitlements due to “regulatory and other constraints”. Instead they were to renounce their rights shares to one Sean Chong Soo Hoon, managing director of Anda Capital Solutions. 

On Dec 17, China Haida said that the rights issue has been revised to seven-for-one instead of eight-for-one. The rights price of 0.2 cents remains. 

A week after SGX blocked the rights issue, Guo Yun, an executive director of China Haida quit, citing “health issue”.

On Aug 8 2019, the company reported 1HFY2019 losses of RMB901,000, down from RMB9.4 million in the year earlier period. Revenue dropped by 4% y-o-y to RMB96.7 million.

Due to the Covid-19 outbreak, companies with significant operations in China have been granted extensions to report their results for the period ended Dec 31 2019. On April 3, the company said it plans to report no later than May 31 2020.