SGX RegCo to refer Camsing Healthcare's special audit report to relevant authorities

THE frontline market regulator said on Tuesday that it will report the findings of a special audit into various concerning sales and purchases made by mainboard-listed Camsing Healthcare to the relevant authorities, while furthering its own investigations into the potential listing rule breaches highlighted in the report.

In March last year, Singapore Exchange Regulation (SGX RegCo) had directed Camsing to undertake the special audit after company's auditors, Deloitte, raised concerns about certain sales and purchases by the company in FY2017 to FY2019 (the financial year ended Jan 31, 2019) and whether they were entered into with related parties.

Shortly after these audit matters were raised, the former independent directors (IDs) of Camsing resigned and stated "unresolved differences with the board" as reasons for their resignation. The FY2019 audit was put on hold pending resolution of the audit matters.

SGX RegCo has also required the company to obtain detailed explanations from the former IDs on whether it was proper and appropriate to resign with the unresolved audit matters pending.

On Tuesday, Camsing published a 29-page summary of the special audit report that was prepared by independent reviewer RSM Corporate Advisory.

RSM's key findings centred on the company's transactions with three entities - Global Biotech Medical Inc, Caring Global Health Management (Beijing) Co, and I-Nitra Consulting Limited.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Among other things, RSM flagged "circular sales" between Camsing's principal subsidiary, Nature's Farm, Global Biotech and I-Nitra.

Sales of health supplements by Nature's Farm to Global Biotech (an exclusive distributor for the Nature's Farm brand of health supplements in Hong Kong and China) in FY2017 and FY2018 was S$9.4 million. About 47 per cent of these sales were subsequently consigned to Nature's Farm by I-Nitra (purportedly Global Biotech's distributor) in FY2019 for which Nature's Farm would earn a commission upon sales, RSM said. Sales of honey products by Nature's Farm to Global Biotech in FY2018 was S$600,000, of which 90 per cent were repurchased back from I-Nitra in FY2019.

RSM did not find conclusive evidence of round-tripping as there was evidence of shipment and receipt of sale proceeds, but noted that Nature's Farm appeared to have profited from these transactions.

Separately, in FY2021, Nature's Farm repurchased health supplements from Global Biotech at a cost of about S$47,000. These health supplements were previously sold to Global Biotech in FY2018 at a price of about S$1.23 million. In aggregate, about 60 per cent of the health supplements previously sold to Global Biotech in FY2017 and FY2018 were "returned" to Nature's Farm in FY2019 and FY2021.

Nature's Farm also purchased wearable technology devices from Global Biotech in FY2019 for a total sum of S$2.8 million (of which, S$2.4 million had been refunded to the company pursuant to a supplemental agreement). The purchase was approved by Hua Min, the chief executive of Nature's Farm, but board's approval was not obtained. Full payment was made before devices were received. None of the devices had been sold as at March 30, 2020 as the device was not customised for the Singapore market. The payment of S$2.8 million was approved by Jiang Shao Yang, who was the sole signatory to some of the company's bank accounts and not an employee of the group.

Jiang was taken into criminal custody, together with the company's executive chairman and controlling shareholder, Lo Ching, by the Yangpu Branch of the Shanghai Public Security Bureau in China in June 2019.

RSM also noted that there was circumstantial evidence to suggest that the three entities and the group's key personnel were connected. The key personnel of the group includes Lo, Mr Hua and Jennifer Wang Yu, the former chief operating officer of Nature's Farm.

These findings were reported directly to SGX RegCo. SGX RegCo issued a Notice of Compliance to Camsing on Tuesday, requiring the company to notify SGX RegCo in advance in relation to any future transaction with the aforementioned entities and to undertake an independent review of internal controls and governance practices.

The regulator added in a statement: "SGX RegCo expects all directors to discharge their fiduciary duties and responsibilities as set out in the written term of reference of the respective board committees they sit on. It is not acceptable for the directors to resign when material issues that have a bearing on the company's state of affairs have not been resolved.

"SGX RegCo will take this into account in assessing the suitability of such appointees as directors or executive officers of SGX-listed issuers and will also require the Nominating Committee to consider if their past conduct has a bearing on their suitability."