Loan from CEO Chew Hua Seng was for building of campus in China: Raffles Education

RAFFLES Education Corporation (REC) has clarified that a large proportion of the loans from its chairman and chief executive Chew Hua Seng were for the construction of a new campus for the Wanbo Institute of Science and Technology (WIST).

Responding to queries from Singapore Exchange Regulation (SGX RegCo), the private schools operator said in a bourse filing on Tuesday (Oct 26) that Chew's loans in FY2021 ended Jun 30 totalled S$9.5 million. Of that, S$8.3 million went to WIST for a new campus in Hebei, China.

REC also disclosed the loan balance owed to Chew. As at the end of FY2021, Chew was owed S$10.9 million by the group.

SGX RegCo also queried REC on the valuation of its investment properties. The group had recorded a fair value gain of S$13.8 million on its investment properties in FY2021.

These properties are located in Langfang City, China, and comprise both education facilities and commercial spaces such as a shopping mall and a bank. The properties were valued at 1.3 billion yuan as of Jun 30, by independent valuer Cushman & Wakefield.

An income capitalisation approach was used in valuing the properties as most were held for letting and receiving rental income. The market comparison approach was also used as a check. This approach assumes the sale of each property in its existing state by referencing comparable sales evidence in the relevant market.

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"The Langfang investment properties were valued at higher fair value due to the improved long-term income capitalisation profiles, taking into account the generally improved property market profile in Langfang," said REC in the filing.

REC also disclosed that the salary it paid to its former non-executive director, Liu Ying Chun, who retired on Oct 30, 2020, was partially in his capacity as CEO of Oriental University City Hong Kong and partially in his capacity as a Raffles Education employee. No director fees were paid to him.

Finally, SGX RegCo asked the audit committee (AC) to comment on the independence and effectiveness of REC's internal audit. The AC responded by confirming that the internal auditor Baker Tilly Consultancy (Singapore) had unfettered access to REC's documents, records, properties, management and the AC. Baker Tilly also does not provide any other services to the private school operator.

The AC reviews and approves the annual internal audit plans and reviews the scope and results of the auditor. Baker Tilly did not find any material control deficiencies and all minor control deficiencies were rectified, REC said.

Shares of REC ended Tuesday down 6.4 per cent, or S$0.004, at S$0.059.

Read more:

• MAS, CAD investigating disclosure issues at Raffles Education; company refutes claims by Oei Hong Leong

• Oei Hong Leong declares sale of S$2.7m worth of shares in Raffles Education

• Raffles Education shares dive as Oei's letter to board circulates in market