Raffles Infrastructure back in the black

Singapore

RAFFLES Infrastructure Holdings, formerly known as China Fibretech, is back in the black, with a net profit of 32.6 million yuan (S$6.3 million) over 18 months. This is a reversal from a loss of 3.1 million yuan for the 12 months to Dec 31, 2017.

The watch-listed company announced in February that it was changing its financial year from Dec 31 to June 30; its latest financial statements therefore covered a period of 18 months from Jan 1, 2018 to June 30, 2019.

Earnings per share came in at 0.61 yuan, a turnaround from a loss per share of 0.35 yuan previously.

Revenue rose to 208.9 million yuan, compared to 27 million yuan for the period to December 2017. This was mainly due to contributions from its infrastructure segment, owing to the Xingwen County rural road infrastructure project, which was worth some 550 million yuan. As at end June, the local authorities had accepted five out of the 26 parcels of project to be delivered, the company said.

No dividend has been declared as the group believes it is "more beneficial to reinvest the profits for the rapid growth of the business".

Raffles Infrastructure announced this month that KPMG had completed its special audit on the company, and submitted to the Singapore Exchange (SGX) and the audit committee its findings pertaining to the alleged compensation claims made by three customers in 2017. The company said it is seeking legal advice and will consult with the SGX regulatory department on the remedial actions.

The Business Times reported this month that irregularities at Raffles Infrastructure and potential breaches in listing rules were highlighted in an interim independent review report published by KPMG Forensic.

There were, however, limitations to the special auditor's findings, as "a considerable number of documents that were requested as part of the supporting documents have not been available to the review team", KPMG said.

Commenting on the group's results, Eric Choo, chief executive of Raffles Infrastructure, said: "Following the business and management restructuring since 2017, we have successfully diversified into the infrastructure industry, which has contributed to our strong earnings turnaround in FY2019. Looking ahead, we will continue to tap the numerous infrastructure development opportunities in Asia together with our strategic partners to maximise shareholders' returns."

With its profit turnaround in FY2019, the group intends to apply to SGX to be dropped from the bourse's watch list under the financial exit criteria, subject to approval from the regulators.

Raffles Infrastructure was put on the SGX watch list on June 6, 2019. It has 36 months to cure this status or risk being delisted.

According to the listing rules, a company may apply for removal from the watch-list if it records a consolidated pre-tax profit for the most recently completed financial year, and has an average daily market cap of S$40 million or more over the preceding six months.

The company's fifth-quarter unaudited financial results published in May (following the change in its financial year) showed that the group recorded a profit before tax of 49.3 million yuan. As at Aug 30, the company had a market cap of about S$31.6 million.

In a regulatory filing late on Thursday, Raffles Infrastructure said it expects to be able to meet the financial entry criteria as far as pre-tax profits benchmarks are concerned.

As for the market cap criterion, the company is hopeful that when more infrastructure projects developed by the firm and its partners in China are transferred over to the relevant Chinese authority, its shares may gain more traction in the market and climb to a level that meets the S$40 million benchmark at the SGX's next review. The company will also ramp up its investor relations programme to engage stakeholders.

Raffles Infrastructure shares closed at S$0.435 on Friday, down 1.14 per cent or half a cent.