Dukang Distillers slapped with 'trade with caution' after price surge
Stock falls as much as 6.8% on Thursday after a 20.9% rise the day before
Singapore
BELEAGUERED Chinese spirits producer Dukang Distillers Holdings is experiencing a hangover after a tipsy rise in its share price. On Thursday, the stock was slapped with a "trade with caution" notice by the Singapore Exchange (SGX), following a spectacular surge in its share price the day before.
The sharp 20.9 per cent rise in the counter's share price - despite the fact that no material announcements were made - prompted a query from the SGX on Wednesday with regard to unusual trading activity. In response, Dukang Distillers said it was "not aware of any other possible explanation for the trading".
The counter fell as much as 1.3 Singapore cents, or 6.8 per cent, on Thursday, before closing down 0.8 cent or 4.2 per cent at 18.1 cents. A total of 2.3 million shares switched hands.
The market is now abound with speculation about potential corporate activity. Dukang Distillers, which manufactures and distributes "baijiu" products in China, has been hit hard by the Chinese government's anti-corruption campaign since November 2012. Despite Wednesday's boost, the stock price was still down 11.7 per cent on Thursday from a year ago.
Earlier this month, the group posted its third-quarter results, which showed that net profit for the quarter ended March 31, 2015, had plunged 76.2 per cent to 1.78 million yuan (S$387,400), and revenue was down 28.9 per cent at 250.33 million yuan. In addition, the group's gross profit margin had narrowed by 4.8 percentage points to 29 per cent.
"The price of high-end baijiu has plunged significantly, and the competition among mid-to-low end products became more intense," Dukang Distillers said in its results announcement. "Nonetheless, the baijiu market is expected to stabilise in 2015."
The company's executive chairman and CEO Zhou Tao added in the announcement: "Although there might be a slight turnaround in the baijiu market according to some reports, China's baijiu market has yet to indicate a clear trend."
Last week, substantial shareholder FIL raised its deemed interest in Dukang Distillers to 7.01 per cent, from 6.98 per cent, through the purchase of 239,100 shares.
