Xiangeqing halts trading

Shares of Beijing Xiangeqing Group Co, a high-end catering firm, suspended trading Wednesday after recent media reports about its potential investment in an environmental company.

"Recent media reports may further affect the company's stock prices, so we will resume trading after releasing a statement clarifying the issue," Xiangeqing said in a statement posted on the Shenzhen Stock Exchange Wednesday.

Calls to the company's investor relations office went unanswered by press time.

The catering company's share price rose by the 10 percent daily limit on both Monday and Tuesday, after it announced Friday a plan to buy a 51 percent stake in Yixing Zhongyu Environmental Protection Science & Technology Co for 200 million yuan ($32.6 million).

Zhongyu, a Jiangsu-based pollution treatment company, posted a net profit of 10.62 million yuan in the first half of 2013, nearly 12 times its profit last year of 880,000 yuan.

"The deal is still in the primary negotiation stage and there are a lot of uncertainties. As we have no experience in investing or operating in the environmental industry, the deal has potential risks," Xiangeqing told investors in a statement Tuesday.

Xiangeqing closed eight restaurants in the first half of this year, and it also expects a loss of 160-240 million yuan in the first half of 2013 compared to a profit of 76.5 million yuan over the same period last year, mainly due to the country's crackdown on officials' extravagant dining.

The firm said the deal would help it enter a fast-growing industry with good prospects.

"The deal will help Xiangeqing turn to profit for the whole year of 2013, and even beat last year's profit," company chair Meng Kai was quoted by the Beijing News as saying in a report published Wednesday.

But some analysts expressed concerns.

"Xiangeqing just wants to use the deal to make up for losses in the catering industry, but it lacks a long-term business strategy," Li Ying, an analyst with stock information portal aastocks.com, told the Xinhua News Agency Monday.

China's high-end catering industry has slowed recently. In the second quarter of this year, consumption per capita in the country's major high-end restaurants fell by over 15 percent from a year earlier, and revenues also dropped by 22.57 percent year-on-year, data from the China Cuisine Association showed.

"High-end restaurants' customers are mainly business people and officials, so their businesses have been affected by China's economic slowdown and the central government's ban on spending public funds on banquets," Tian Guangli, an expert at Beijing-based catering consultancy Longce Think Tank, told the Global Times.

The China Cuisine Association predicts that the high-end catering industry will still face downturn pressure in the second half. It suggested high-end restaurants reduce their dependence on official consumption and explore the mass market.