CFA Society Singapore
SINGAPORE (Dec 21): SGX RegCo is compelling SBI Offshore to appoint a special auditor to probe the recently completed sale of a property in China, where the transacted value was less than half of a recently appraised value.
Mirzan Mahathir, who is also the eldest son of Malaysia's Prime Minister Mahathir Mohamad, is the executive chairman of SBI Offshore. He became a substantial shareholder back in Sept 2014 after buying 10.8% of the company via a private placement at 26.05 cents per share.
He has increased his stake since then. On Dec 7, Mirzan bought 19,000 shares at 6 cents each, lifting his stake marginally to 46.7 million shares, or 18.72%.
Two separate valuations of the property, 28 Beihuan Road, of Jiangyin City, had resulted in drastically different numbers. The first, done by Wuxi Dsinfor Real Estate & Land Appraisal Consulting Co for the period between 2014 and 2016, valued the property at RMB40 million. The valuation method was based on an adjusted market comparable transaction approach.
However, a second valuation done by Suzhou Welsen Assets Appraisal Co, for 2017, accorded the same property with a valuation of just RMB19 million. The second valuer used an income approach to value the property.
“The valuation of the property had dropped significantly between 2014 and 2017 notwithstanding that the property had been vacant and that there were no apparent significant changes to the state of the property since 2014,” states SGX RegCo’s head of listing compliance June Sim, in a notice of compliance on Dec 21.
SGX RegCo also notes that the purchaser of the property, an entity called Jiangyin HF Investment Consultant Co, was incorporated on Nov 30 2017, just one month before the sale and purchase agreement was inked. The purchaser’s registered address is the same as the property, 28 Beihuan Road.
By asking SBI Offshore to appoint the special auditor, SGX RegCo wants the company to explain the facts and circumstances that caused the property’s value to drop by more than half.
SGX RegCo also wants SBI Offshore to do background checks on the second valuer, Suzhou Welsen Assets Appraisal; SBI Offshore’s internal process in evaluating the appointment of professional advisers, including valuer.
SGX RegCo also wants the special auditor to report directly to itself and SBI Offshore’s Sponsor, ZICO Capital.
On Dec 20, SBI Offshore, in response to SGX RegCo’s queries, said that Jiangyin HF Investment Consultant, the buyer of the 28 Beihuan property, has two shareholders, Miao Xiaofeng and Jiang Yilong.
“To the best of knowledge of the Directors, neither of them is related to any substantial shareholder of the Company,” the company stated.
However, David Tan Woo Thian, a former director of SBI Offshore, is a friend of buyer Miao.
For the 1HFY2018 ended June 30, SBI Offshore narrowed its losses by 65.8% y-o-y to US$313 million. During that period, the company enjoyed a higher interest income of US$108,000, compared to US$77,000 in the year-earlier period. However, there was no revenue generated during those six months.