* No reason given for director resignation
* LDK named in Moody's, Fitch reports on governance
* Shares slide to year low
(Adds analyst comments, background, valuation, updates share
By Nichola Groom
LOS ANGELES, July 18 China-based solar
equipment maker LDK Solar Co Ltd LDK.N said on Monday the
chairman of its audit committee had resigned, and its shares
fell to their lowest level in a year.
The departure of Louis Tung-jung Hsieh came after LDK was
named in recent reports on weak corporate governance practices
at Chinese companies by ratings agencies Fitch and Moody's
Investors Service. [ID:nL3E7II008]
The company did not give a reason for Hsieh's resignation.
"This could be just a scenario where someone is leaving for
a better opportunity," Kaufman Bros. analyst Jeff Bencik said.
"Most investors are not going to take it that way, but we just
Hsieh will be replaced by Maurice Wai-fung Ngai, who was
appointed to the board of directors for a term that will run
until the annual meeting of the company's shareholders later
this year, when he will be eligible to be elected to a
Numerous allegations of fraud and accounting irregularities
against Chinese companies have emerged recently, with a number
of management changes at Chinese solar companies putting the
sector in the spotlight. [ID:nL3E7IF1J2]
In the last week alone, the audit committee chairman of
Trina Solar Ltd TSL.N and the chief financial officer of JA
Solar Holdings Co Ltd (JASO.O) each resigned.
In its report, released earlier on Monday, Fitch said LDK
showed several weakness indicators, including concentrated
ownership and volatile profit margins.
In 2007, LDK launched an internal investigation following
accusations by a former financial controller that there were
inconsistencies in the company's inventory reporting. The probe
found no material discrepancies. The U.S. Securities and
Exchange Commission questioned LDK about the issue but did not
recommend any action against the company.
Shares of LDK were down 4 percent at $6.26 on the New York
Stock Exchange. They fell to $6.05 earlier in the session,
their lowest since July 20, 2010.
Bencik noted, however, that LDK's decline was in line with
that of other solar stocks on Monday.
"The stock has already been hit so hard," Bencik said,
referring to the 38 percent drop in the company's share price
The stock trades at slightly more than three times
projected 2011 earnings, compared with a median multiple of
just over 13 in the solar industry.
"It's a risk-reward game, and obviously this is one of the
risks, and that's why investors aren't paying as much for it,"
(Additional reporting by Matt Daily in New York; Editing by
Derek Caney and Steve Orlofsky)