* Gotham City Research says AAC has overstated profits since
* AAC one of three acoustic component suppliers to Apple
* AAC shares plunge as much as 14 pct
(Adds AAC comment, analysts' reaction, details)
By Sijia Jiang
HONG KONG, May 11 China's AAC Technologies
on Thursday denied accusations of "dubious accounting"
practices from short-seller Gotham City Research that sent
shares in the Apple Inc supplier sharply lower.
Gotham City Research, which has a short position in the
stock, said the acoustic parts maker used more than 20
undisclosed related parties to overstate its profits and to
evade Apple's labour standards. It said its report, published on
Gotham City's website, was based on publicly available
information and field research.
"The Board vigorously denies the allegations in the report
and considers the information contained therein to be inaccurate
and misleading," AAC Chairman Koh Boon Hwee said in a filing to
the Hong Kong Stock Exchange.
AAC said it has released all necessary information to the
market and was seeking legal advice on the matter.
Citi analyst Dennis Chan said the Gotham City report did not
change its positive view on AAC, adding that it was one of only
three acoustic component suppliers to Apple and had much better
pricing power than other suppliers to the U.S. tech giant.
"Our first take is there doesn't appear to be enough
evidence for these allegations," said Jefferies analyst Rex Wu.
The company's stock fell by as much as 14 percent to an
intraday low of HK$96. The benchmark Hang Seng Index,
Shenzhen-based AAC is a maker of miniaturised acoustic
components including speaker boxes, speakers, receivers and
microphones. Apple is one of its main clients.
AAC is expected to report first quarter earnings on Friday
after market close.
Nine analysts, polled by Thomson Reuters before the Gotham
City report, gave a median forecast for AAC's net profit of 1
billion yuan ($144.88 million) on revenue of 4.1 billion yuan.
AAC in March reported a net profit of 4.03 billion yuan in
2016, up 29.6 percent from the previous year. It had a net
profit margin of 26 percent.
The group was founded in Shenzhen in 1993 by current CEO
Benjamin Zhengming Pan and his wife Ingrid Chunyuan Wu, a
non-executive director, who together own 40.34 percent of the
stock, according to AAC's annual report.
($1 = 6.9047 Chinese yuan)
(Reporting by Twinnie Siu and Sijia Jiang; Editing by Randy