SINGAPORE (Aug 21): A 42-page report which placed a 29 cents target price and a “short” recommendation on Silverlake Axis could have caused the stock to fall by as much as 27% to an intra-day low of 61.5 cents.

Authored by someone with the moniker “razor99”, the report which was released last night claimed that the Malaysian-based software solutions provider “will prove instead to be an investor’s worst nightmare”, comparing it to other fraudulent IT service companies such as Longtop Financial of China and Satyam Computer Services of India.

“When we first reported our findings on Longtop in February 2011, it was a market darling. Three months later the auditor, Deloitte & Touche, resigned and the stock was delisted soon after. We think there are a number of striking similarities between Silverlake Axis and Longtop,” says the report.

The report further claimed that Silverlake Axis reported “supernormal profitability driven by dramatically higher revenue per employee compared to peers”, which was the exact same red flag that existed at Longtop Financial.

“Silverlake Axis also has loss-making related-parties which employ a large number of Silverlake Group employees. These hidden entities are undisclosed contingent liabilities to Silverlake Axis,” it adds.

The report said this is reminiscent of Longtop’s use of a related party to employ most of its employees.

By inflating Silverlake Axis's financial results, the report alleged that "founder and Chairman Goh Peng Ooi has been able to pocket more than RM 1.0 billion ($422.5 million) through stock sales and dividends, while minority shareholders have contributed more than RM 550 million of net capital into Silverlake Axis".

Earlier at 1.20pm, Silverlake Axis called for a trading halt "with immediate effect" pending an announcement.

Prior to that, the Singapore Exchange had queried its "unusual price movements" and asked the company if it was aware of any information not previously announced that might explain its trading.

The counter closed 24.4% or 20.5 cents lower at 63.5 cents just before the trading halt was called. About 22.9 million shares were traded.