The capacity of KOP to continue as a going concern is questioned by the auditor due to considerable doubt

Sep 09, 2022

The real estate, hotel, and entertainment conglomerate KOP has been identified as having a substantial uncertainty, which may place serious doubt on the company's capacity to continue operating as a going concern. The matter was brought to the attention of KOP's independent auditor.

Separately, the company announced that it is considering making a proposal to sell two apartments in a condominium development located on Dalvey Road to members of the immediate family of businessman Sam Goi, who is the controlling shareholder of the company. The proposed sale price is 11.7 million Singapore dollars.

The board of directors of KOP stated, in a bourse filing that was made public on Wednesday (September 7), that the group's independent auditor, UHY Lee Seng Chan & Co, has provided a qualified opinion on the group's financial statements for the year that ended on March 31, 2022. In addition to that, it included in its report what it called a "emphasis of substance" highlighting a significant doubt surrounding the going concern.

Inability to determine whether any adjustments to the group's opening balances were needed for its FY2022 statements because it was unable to ascertain if the group's opening balances as of Apr 1, 2021, were fairly stated is one of the problems that has been brought to light. Other problems include the inability to determine whether any adjustments to the group's opening balances were needed for its FY2022 statements.

The auditor also had trouble getting the financial information necessary to audit Shanghai Snow Star Properties, which is a joint venture owned by KOP and in which KOP maintains a thirty percent interest. The dispute over the joint venture is the subject of the arbitration procedures that the group is now participating in at the Shanghai International Arbitration Centre with its partners.

According to the findings of UHY Lee Seng Chan & Co, there are a number of elements that point to a material uncertainty and may raise serious doubts about the ability of the group and business to continue operating as a going concern.

In addition to reporting a net loss for the fiscal year that ended on March 31, 2022, the auditor pointed out that the majority of the group's current assets consisted of properties that were still in the process of being developed and non-current assets that were being kept for future sale.

In addition, as of the 31st of March in 2022, KOP had a net current liability position of 51.3 million Singapore dollars. Its current liabilities incorporate two loans from a shareholder totaling S$37 million, as well as debts from its ultimate holding company amounting to S$11.1 million.

According to the auditor, the Covid-19 epidemic has had a negative influence on KOP's hotel sector over the previous two years.

In light of the auditor's report, the board of directors has reached the conclusion that it is in the best interest of the company to prepare its financial statements for the fiscal year 2022 using a going concern basis. This is because the board anticipates that the hospitality division of the group will begin to improve in the following fiscal year. They are also sure that the organisation will be able to produce sufficient cash flows from operating operations throughout the course of the following twelve months.

In addition to this, the controlling owners of KOP, Ong Chih Ching and Leny Suparman, have stipulated that they will purchase up to ten million Singapore dollars' worth of fresh shares in the event that the firm is unable to fulfil its financial commitments. In addition, the repayment of the S$11.1 million loan has been postponed until such time as KOP's cash flow is improved, according to the board.

In addition, throughout the next twelve months, the group is expected to receive profits from the sale of a non-current asset that it owned.

In the event that this does not take place in a timely manner, the shareholder who extended the S$37 million loan with a due date of November 9 has agreed not to seek repayment for the principal amount and the S$5.5 million interest that has accrued until either KOP receives the proceeds or September 7, 2023, whichever comes first. The loan was due on November 9.

In a second statement made late on Wednesday, KOP stated that its indirect wholly-owned subsidiary had planned to sell two units in a condominium construction situated on Dalvey Road to individuals named Goi Lang Ling, Judith Goi Lang Peng, and Goi Kok Min.

These people are members of Sam Goi Seng Hui's direct family. Sam Goi Seng Hui is a Singaporean businessman and is known as the "Popiah King." Sam Goi Seng Hui is also the majority stakeholder of KOP. As of the 24th of August, Goh owns a direct stake in the firm equal to 21.17 percent of its total value.

Due to the absence of an agent commission, the properties are being offered for sale at a 7.4 percent reduction from their appraised market price, which results in a selling price of S$11.7 million. In addition to that, a discount for bulk purchases was made available to the customers.

The fact that the planned sale involves an interested individual means that it must receive approval from shareholders who are not involved in the transaction, the organisation pointed out.

Before either news was made, the stock of Catalist-listed KOP ended the day on Wednesday trading $0.002 or 2.9 percent lower than it had been earlier in the day.