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Dec.25 (NBD) -- Hengan International Group, China's largest sanitary towels and baby nappy producer, is under spotlight again as new findings unfold after the company was shorted by Austin, Texas-based short-selling institution Bonitas Research earlier this month.

The stock shorter previously said Hengan International has sold Xiamen Hengan Property Co., Ltd. ("Hengan Property") to a claimed independent third party Xiamen Aosheng Huanqiao Commercial Management Co., Ltd. ("Aosheng Huanqiao") for a total consideration of 1.2 million yuan (174,117.4 U.S. dollars) last year, a bargain basement price at 70 percent of 2016 net income.

An insider with property businesses told NBD that as the management fees of high-end business complex increases by the day, it is unreasonable to sell such a property company at discount.

After checking the website of Chinese business regulators, NBD is shocked to find that the name of a senior executive of the buyer in the deal is identical with that of the son of the founder of Hengan International.

It is noticed that Hengan International indirectly holds a 100 percent stake in Hengan (China) Investment Co., Ltd. ("Hengan China"), which sold Hengan Property to Aosheng Huanqiao on May 4, 2017.

A year later, Aosheng Huanqiao's ownership was transferred to Anteng Group Co., Ltd. ("Anteng Group"), whose executive director, Mr. Hui Ching Shui, has an identical name with the son of Hengan International's CEO.

If they are the same person, the buyer will not constitute an independent third party, which greatly undermines investors' interests. However, there is still a chance that they happen to have the same name as there are quite a few "Hui Ching Shui" on the website of Chinese business regulators.

It's also worth noting that Chen Xiuyun, legal representative of Hengan Property, also serves as legal representative of Aosheng Huanqiu, and senoir staff and stakeholder of Anteng Group.

Bearing the "third-party" question in mind, NBD reached out Hengan International, but only to be shown a research report of the investment bank China International Capital Corporation Limited (CICC). Hengan claims there is no sufficient evidence for Bonitas Research's allegation and the bad effects will be gone in the short term.

So far, a couple of securities companies have released new rating reports for Hengan International after Bonitas Research announced a short-selling report against it. Guotai Junan Securities' HK unit maintained a "BUY" rating and a target price of 79 Hong Kong dollars (10.1 U.S. dollars) for it.

CICC said in a report that there is no inside trading that should have been disclosed and gave a target price of 85.33 Hong Kong dollars (10.9 U.S. dollars).

Macquarie Capital stated that Hengan International has refuted the accusation and held two meetings concerning the accusation. The remarkable profit-earning ability of Hengan International is worth noting but its balance sheet is reasonable. However, setting aside the effect of the short-selling report, Macquarie holds a weak outlook for Hengan International and gave a target price of 51 Hong Kong dollars (6.5 U.S. dollars).

Email: tanyuhan@nbd.com.cn