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Sen Yue independent review may have found ties between group chairman and customers
BOURSE watchdog Singapore Exchange Regulation (SGX RegCo) has slapped Catalist-listed waste-management group Sen Yue Holdings with a notice of compliance, after an independent review suggested links between the chairman and some customers.
Foo Kon Tan Advisory Services has flagged “uncertainty as to the validity of certain sales to these identified targets, and whether the sales were conducted at arm’s length”, Sen Yue’s board disclosed in an announcement on Thursday night.
Foo Kon Tan noted factors such as long credit repayment periods and sales with low or negative margins; it also queried the collectability of the debts due from some of these companies.
Under the independent review, Foo Kon Tan supposedly found that customers of Sen Yue's wholly-owned subsidiary SMC Industrial had ties to executive chairman Koh Mia Seng.
Given the latest findings, the audit committee of Sen Yue Holdings now has to determine whether these ties breached Catalist listing rules, SGX RegCo said in its notice of compliance.
The audit committee must ascertain that the transactions between SMC Industrial and its customers were valid and done on normal commercial terms and on an arm’s-length basis.
It also has to establish the recoverability of its subsidiary’s long-outstanding accounts receivables, as well as whether Sen Yue is able to operate as a going concern.
Meanwhile, the committee has been told to expand the scope of the review and/or appoint another reviewer, if necessary, to examine the relationships between the parties highlighted by Foo Kon Tan, as well as transactions involving these people.
For example, an SMC Industrial employee was also a shareholder of Chinese customer Foshan City Nanhai District Sea Sheng Waste Materials Recycling Co.
A former legal representative of customer Tai Zhou Yi Ze Metal Co worked for SMC Industrial at the same time, while a Tai Zhou Yi Ze Metal Co manager and one of Sen Yue’s substantial shareholders “might be the same person as they share the same name”.
Mr Koh’s nephew, Xu Yi Rui, was listed as the assistant manager of Thai company Matrade Co, which is both a customer and supplier to SMC Industrial.
The audit committee has thus recommended that all trades with these customers “should be halted until all investigations are completed satisfactorily”, the Sen Yue board said in its update.
It added that the independent review was still ongoing and that the audit committee was working to verify Foo Kon Tan’s findings. The review of SMC Industrial’s accounts receivables, inventory and bank facilities also await the completion of the independent review.
Meanwhile, the board will call a meeting to let Mr Koh discuss, review and respond to the findings. More updates will be given to shareholders when they are available, the directors said.
Foo Kon Tan must now report its findings to both SGX RegCo and the Sen Yue audit committee; the regulator has the right to make the firm report solely to SGX RegCo.
SGX RegCo also mandated that board membership not be changed until the review is completed and findings resolved. The regulator “is concerned that changes to the board could compromise the continuing independent oversight and completion” of the review, said the notice of compliance from head of listing compliance June Sim.
That’s as Mr Koh, who is controlling shareholder of the company, moved in April to remove all directors except independent director Lau Yan Wai, who joined the board in December 2019, and appoint two new independent non-executive directors.
Catalist-listed Sen Yue called a trading halt - later converted into a suspension - on April 28.