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Capital World sinks into the red in Q2, proposes scheme of arrangement

HAVING assessed its ability to continue as a going concern, Capital World will be applying to the Singapore High Court to propose a scheme of arrangement to restructure its debt.

The Catalist-listed property developer said in a filing on Thursday night that this decision was made in view of its current net liability position.

As a result of a reclassification of RM92.5 million (S$31 million) mainly relating to an amount that was due to its main contractor, the group had a net current liability of about RM53.5 million as at Dec 31.

In its going-concern assessment, Capital World considered that "there is no visibility of cash flow" to repay its creditors within the next 12 months.

The group has also been unable to sell any units in Capital City Mall - its newly completed shopping centre in Johor Bahru - during the second quarter ended Dec 31, amid oversupply in Malaysia's property market.

Moreover, efforts to raise further financing have been unsuccessful, in view of the current negative business environment, Capital World said.

It added that the fall in the company's share price makes it unlikely that a proposed share subscription by two private investors will take place.

Capital World first announced last July that it was looking to raise some S$18 million by issuing some 916 million new ordinary shares to the two investors, Yuan Zhiwei and Chng Chor Tong, at S$0.02 per share. The issue price represents a 13.04 per cent discount to the volume-weighted average price of 2.3 Singapore cents, based on trades done on July 5, 2019.

On Friday before the market opened, Capital World requested for an immediate voluntary suspension of trading in its shares. The counter had closed at 0.5 Singapore cent on Thursday, up 0.1 Singapore cent, or 25 per cent.

For its second quarter ended Dec 31, Capital World sank into the red with a net loss of RM14.8 million, versus a net profit of RM14.9 million in the year-ago period. This translated to a loss per share of 0.81 sen for Q2, versus earnings per share of 1.13 sens previously, according to its results released on Thursday night.

Revenue plunged 98 per cent to RM986,000 from RM53.7 million a year ago, mainly due to the absence of new sales of property units in Capital City Mall during the quarter.

The group thus derived its revenue mainly from renting its investment properties, providing theme park services and selling marble products.