CHINA / Taiwan, HK, Macao |
Probe clouds Gome's Q3 'profit rise'(China Daily HK Edition)Updated: 2006-11-18 15:49 Gome Electrical Appliances Holding Ltd, the mainland's top electronics retailer, should post a sharply higher quarterly profit on Monday, but the outlook for its stock is overshadowed by fraud allegations against its billionaire chairman. Gome, which is merging with rival China Paradise Electronics Retail Ltd in a US$680-million deal, has denied media reports that Huang Guangyu and his brother were under scrutiny over allegations that funds of 1.3 billion yuan (US$165.2 million) had been improperly obtained from Bank of China. But uncertainties linger, analysts said. "We are focusing on what the company is going to say regarding these allegations - they'll have to clear the clouds in the market," said Sun Hung Kai Financial analyst Jenny Chan. Most analysts do not make quarterly forecasts for Gome, but Sun Hung Kai Financial predicted the company would double its net profit in the third quarter to 255 million yuan (US$32.4 million). Annual net profit is seen rising 55 per cent to 772 million yuan, according to 10 analysts polled by Reuters Estimates. In late October, Gome denied the allegation report in the influential Beijing-based Caijing magazine, but said Huang's privately held Eagle Property Group had been assisting a Chinese authority in its investigation into a mortgage guaranteed by Eagle. Investors reacted quickly to the report. Shares in Gome, valued around US$1.8 billion, have dropped nearly 13 per cent since the allegations surfaced. The stock had fallen 3.5 per cent in the July-September quarter, lagging a 4.6 per cent gain in the index for Chinese companies listed in Hong Kong. Merrill Lynch warned of share price volatility until the issue was cleared up. CLSA, which initiated coverage of Gome with an "underperform" rating, said the investigation could impact Gome's recent merger with China Paradise. "Given a series of recent high-profile investigations in China and the probe's potential impact on the merger, Gome will find it difficult to perform until the issue is fully resolved," CLSA said in a report. |
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