[Flashback] Muddy Waters alleges fraud at Superb Summit

Muddy Waters alleges reported revenues came from non-existent unit

Hong Kong shares of Superb Summit International Group were suspended at 11.19am yesterday, after US short-seller Muddy Waters released a report alleging fraud at the loss-making company.

Superb Summit’s share price fell 5.8 per cent to HK$1.46 in trading before the suspension.

The company reported revenue of HK$773.3 million last year, but “its real revenue was likely close to zero”, Muddy Waters said.

Almost all of the revenue Superb Summit reported in 2013 and 2012 was likely attributed to its purported subsidiary, Tianjin Libao Coal Trading Company, it said.

“The problem is that Superb Summit has never owned any stake in Tianjin Libao. Superb Summit falsely claims to have acquired 80 per cent of Tianjin Libao in 2012. It is hard to think of an explanation other than fraud to explain why Superb Summit claims to own a company that it does not own,” Muddy Waters said.

In May, Superb Summit purchased 40.8 per cent of Beijing Jinfeite Energy Technology for HK$600 million, valuing the mainland firm at HK$1.55 billion. Jinfeite’s main business is coal liquefaction.

Muddy Waters questioned the acquisition.

“Jinfeite is barely a business, its technology has little value, and purchase of the Jinfeite stake highly likely was not an arms length transaction. Jinfeite is a tiny, obscure chemical engineering consulting business with few long-term assets, no in-house R&D team, and only a single engineer (its founder),” it said.

Two employees of Superb Summit approached by the South China Morning Post declined to comment and emails sent to the company bounced back.

Previously, timber was Superb Summit’s core business, but it is no longer a focus according to its 2014 interim report. It posted a net loss of HK$116.55 million in the first half, on revenue of HK$315.78 million. The firm posted consecutive losses from 2011 to last year.

Superb Summit’s turnover was HK$16.8 million in 2009, HK$53.68 million in 2010 and HK$36.91 million in 2011. The turnover rose sharply to HK$773.3 million last year from HK$119.47 million in 2012.

On November 3, a mainland state-owned investment firm, Central Huijin Investment, sold its entire 5.17 per cent stake in Superb Summit, according to the Hong Kong Stock Exchange website.

Superb Summit executive director Wu Tao resigned on September 15 while remaining a lawyer with the firm. On July 16, its chairman, Lee Chi Kong, and its independent non-executive director, Cheung Wai Tak, resigned.

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