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Silverlake Axis said its board of directors and management are of the view that the adverse allegations raised in an anonymous report that recommended shorting the stock as "clearly baseless and without merit".
"The company is seeking legal advice and wishes to highlight that it views this matter most seriously and will be strenuously investigating the source of the report with a view to taking all such action as may be necessary to fully protect and defend its interests," Silverlake said in response to an SGX query.
To provide additional comfort to shareholders, the group will be engaging Deloitte Singapore to undertake an independent review of the allegations raised in the anonymous report and to provide its findings and conclusions, which the group will publish in due course.
A 42-page short-seller report that was circulated on Thursday night triggered a sell-off in the stock on Friday before a trading halt was imposed that afternoon. That unusual trading activity prompted a query from SGX to Silverlake Axis.
The anonymous report took issue with certain related party transactions entered by the group with private companies where Silverlake's founder and chairman, Goh Peng Ooi, is said to own stakes in. These included the acquisition of Silverlake Adaptive Applications & Continuous Improvement Services Ltd (SAACIS) in 2006, as well as the structured services business (SSB) and the QR Group in 2010, and suggests possible impropriety in connection with these transactions.
Silverlake pointed out that "the related party transactions involving the acquisition of SAACIS, SSB and the QR Group, together with the group's other acquisitions, have all served to synergistically broaden and deepen the group's available suite of software and services, resulting in significant improvements to the group's overall financial performance and cash flow, with the group's net profit rising from RM63.5 million in FY2010 to RM282.7 million in FY2015".
As at end-June, the group had minimal borrowings of RM2.4 million (S$800,00), while its cash and bank balances stood at RM320.5 million. Contrary to what is alleged in the report, the group has no undisclosed contingent liabilities, it said.
"Over this period, substantial value has further been created for all shareholders, with earnings per share rising from 3.04 Malaysian sen in FY2010 to 12.6 Malaysian sen in FY2015, at a compounded annual growth rate (CAGR) of 32.9 per cent," the group said.
"The dividend per share, in turn, has grown from 1.7 Singapore cents in FY2010 to 4.44 Singapore cents (adjusted for the recent bonus issue) in FY2015, at a CAGR of 21.2 per cent. In addition, the market capitalisation of the company has increased from S$564.8 million, as at end June 2010, to S$2.2 billion, as at end June 2015. The board believes that the aforesaid results speak for themselves."