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blue whale news, september 13 (reporter wang jianwen): after being suspended for 169 days, novecare healthcare (6606.hk) was once again caught in turmoil.

on september 13, dacheng fund issued an announcement to adjust the valuation of nouva health shares it holds, with a reduction of nearly 75%. a few days ago, haitong fund, everbright asset management, robeco fund and others successively lowered the valuation of nouva health shares they hold.

as the other party in the storm, nouva health once landed on the hong kong stock market with the halo of "china's first cancer early screening stock". however, since then, the company has first been caught up in a financial fraud storm, and has been suspended since it failed to publish its 2023 annual report on schedule.

on september 9, nouva health’s chief financial officer gao yu and auditing firm deloitte announced their resignations on the same day, making the future of nouva health even more confusing.

suspended for 169 days, valuation fell by more than 70%

due to the difficulty in releasing the annual report, novecare health has been suspended for 169 days since march 28.

on the day before the suspension, nouva health's share price closed at hk$14.14 per share. however, as the suspension period lengthened, more and more holding funds began to adjust their valuations of the stock.

since september 10, four funds, including hft, everbright asset management, robeco and dacheng fund, have announced valuation adjustments for novecare, with the adjusted prices being hk$6.06/share, hk$5.70/share, hk$9.00/share and hk$3.54/share respectively. among them, dacheng fund made the largest reduction, down 74.96% from the stock price of hk$14.14/share.

according to the guidance of the china securities regulatory commission on the valuation of securities investment funds, for investment products that do not have an active market, the fair value should be determined using valuation techniques that are applicable in the current circumstances and supported by sufficient available data and other information.

generally speaking, if a suspended stock undergoes major changes during the suspension period, it may affect the stock's market value after it resumes trading. in order to prevent the fund's net value from being too far away from the value of its holdings, thereby creating arbitrage risks, the fund will adjust the valuation of the stock. on the news front, on september 9, gao yu, cfo of nova health, and deloitte, the 2023 audit agency, announced their resignations.

it is worth noting that this is not the first time that nouva health has had its valuation lowered by a fund. on june 28 this year, china universal asset management took the lead in lowering nouva health's valuation. from then until july 17, a total of 20 funds announced a reduction in the valuation of nouva health. at that time, the company was facing the situation of being removed from the hong kong stock connect. on july 10, the shenzhen stock exchange issued an announcement stating that nouva health was removed from the list of securities subject to the hong kong stock connect.

nouva health was founded in 2015 by three peking university school of life sciences alumni: zhu yeqing, chen yiyou and lu ning. in february 2021, the company successfully landed on the hong kong stock exchange with an issue price of hk$26.66 per share. on the first day of listing, the company's stock price closed at hk$84.00 per share, an increase of 215.08%. however, affected by factors such as the cooling of the hong kong stock market's biopharmaceutical sector, nouva health's stock price began to fall back since the second half of 2021. by october 2022, the company's stock price fell to as low as hk$13.34 per share, a drop of more than 80% from its high point.

perhaps because nouva health successfully "delisted" in the first quarter of 2023, by the end of march 2023, the number of funds investing in the company increased significantly, with a total of 14 funds holding a large position in the stock.

but by august 2023, an "investigation report on the fraud of nouva health's financial data" signed by capitalwatch circulated in the market, questioning the company's financial data. since then, the number of funds investing in nouva health has begun to decrease. by the end of june 2024, there were only six funds under china asset management, fullgoal fund, csop asset management, and robeco berman fund that held heavy positions in the stock. among them, china asset management's china xingyang has the largest one-year mixed holdings, holding a total of 3.259 million shares of nouva health, with a market value of approximately hk$42.0584 million.

overall, the downward adjustment of the valuation of several funds that hold a large position in nova health is not high. in a round of valuation cuts in july 2022, the adjusted prices given by the above-mentioned funds were all above hk$9 per share, and robeco even gave a valuation of hk$11.36 per share, which was only reduced by about 19.66%, the lowest reduction in this round of cuts.

although robeco once again lowered the valuation of nouva health, it still offered a price of hk$9 per share, which was lower than that of the other funds. for heavily invested funds, a significant reduction in the valuation of nouva health may have a significant adverse impact on its performance.

caught in rumors of fraud, cfo and audit firm resigned on the same day

as the "first stock in china's early cancer screening", nouva health mainly targets colorectal cancer and gastric cancer, and has launched three commercial products: changweiqing, pupupu tube and youyou tube. among them, changweiqing was launched in november 2020 and was the only digestive tract cancer screening product approved by the national medical products administration in china at that time.

according to the 2023 interim report of nouva health, in the first half of 2023, the company's performance increased significantly, with operating income of 823 million yuan, a year-on-year increase of 264.58%; gross profit margin was 90.9%, an increase of 8.9 percentage points from 82.0% in the same period of 2022; adjusted net profit was 61 million yuan, turning losses into profits year-on-year. among the three products of nouva health, changweiqing has the fastest growth rate. in the first half of 2023, the product's revenue reached 491 million yuan, a year-on-year increase of 566.2%, contributing nearly 60% of the company's revenue.

however, capitalwatch stated in its "investigation report on the falsification of financial data of nova health" that nova health created 90% of false sales revenue by continuously suppressing goods. according to the agency's calculations, nova health's annual sales in 2022 were approximately 76.95 million yuan, which is only one-tenth of the 765 million yuan revenue disclosed in its financial report in 2022.

in addition, in the report, capitalwatch also mentioned the sales expense problem of nouva health. according to the company's financial report, from 2020 to 2022, the company's sales and marketing expenses were 65 million yuan, 271 million yuan and 555 million yuan respectively, and 571 million yuan in the first half of 2023, accounting for 69.4% of the total revenue for the period. after going public, nouva health's sales expenses surged, swallowing up most of its profits.

in response to the above allegations, nova health issued a statement accusing the report of being blatantly false. the statement stated that a so-called short-selling institution published a report containing numerous false, unfounded and misleading allegations against the company, aiming to have a negative impact on the company's stock price and thus satisfy the short-selling institution's private interests.

regarding sales expenses and anti-corruption in the medical field, nova health said that, taking 2022 as an example, one-third of sales expenses will be used for sales personnel, and one-half of sales expenses will be used for marketing, which includes advertising, academic conferences, course meetings, etc. by 2025, the company's sales expense ratio will be reduced to 40%. the company also believes that anti-corruption in the medical field will have almost no impact on our company's existing business, including the business in the next 6-12 months.

zhu yeqing, chairman and ceo of novahealth, also emphasized that the company's auditing agency is deloitte, and the most stringent system is used to confirm revenue, so nova's financial data is true and accurate.

however, deloitte, which zhu yeqing "had high hopes for", "changed sides" before the release of novecare health's 2023 annual report.

in january 2024, nova health released its performance forecast, predicting that it would achieve operating income of 1.979 billion yuan to 2.050 billion yuan in 2023, an increase of 158.9% to 168.2%. among them, changweiqing's sales were 1.177 billion yuan to 1.210 billion yuan, an increase of 230.6% to 239.9%.

but in the end, nouva health issued its 2023 annual report as scheduled. on march 27, 2024, nouva health issued an announcement stating that the company's 2023 annual report originally scheduled to be released on march 28, 2024 will be postponed and the company's stock will be suspended.

in addition, the nova health announcement also showed that deloitte also raised several concerns about the company, requiring the company to explain the effectiveness of the sale of changweiqing, the effectiveness of the sale of pupu tube and youyou tube, the effectiveness of sales and marketing expenses, etc. in addition, deloitte also asked the company's audit committee to hire a third-party expert to conduct an independent investigation.

according to several subsequent reports on the resumption of trading by nouva health, the company's independent investigation is still ongoing. however, on september 9, 2024, nouva health suddenly announced that deloitte had resigned as the company's 2023 annual auditor.

nouva health believes that the company has been in contact with deloitte, asking it to commit to a tentative timetable for completing the 2023 audit, but deloitte has not made a commitment. therefore, nouva health's 2023 annual report has not been published. deloitte believes that it can only evaluate the completion time of the 2023 audit after the aforementioned "independent investigation" is completed.

one party requested that the audit be completed as soon as possible in order to publish the annual report, while the other party requested that the audit be completed only after the results of the independent investigation were released. the two parties disagreed, and deloitte eventually chose to resign as the audit agency.

on the same day, gao yu, the joint company secretary and chief financial officer of nouva health, and mo minghui, the joint company secretary, announced their resignations. gao yu has served as the company's cfo since june 2020.

the cfo and the auditing agency resigned on the same day, and the true situation of nouva health has become increasingly confusing. the truth may only be known after the results of an independent investigation are released.