SUNMOON Food Company's shares tumbled on Monday after the mainboard-listed fruit and seafood distributor announced its parent had been placed under bankruptcy reorganisation in China more than two months ago. (see amendment note)
The board also flagged a going concern issue in view of the parent's reorganisation, and said SunMoon might raise funds from investors.
The counter lost 0.7 Singapore cent or 17.5 per cent to trade at 3.3 cents as at the midday break. About 10.3 million shares changed hands, making it one of the most actively traded stocks for the morning. SunMoon called for a trading halt at 1.41pm. Its shares fell further to 3.1 cents by then, down 22.5 per cent, on nearly 16 million shares traded.
In a bourse filing at 12.33am on Monday, SunMoon said four of its board members became aware last Friday that three entities - Shanghai Yiguo E-Commerce, Shanghai Winchain Supply Chain Management and Shanghai Exfresh Logistic - were placed under voluntary bankruptcy reorganisation under Chinese law on July 30. Shanghai Yiguo E-Commerce is the ultimate holding company of Yiguo General Food Pte Ltd, which in turn holds a 59.9 per cent stake in SunMoon as at Monday.
SunMoon's total accounts receivable, including advances or prepayments net of accounts payable owing from Yiguo-related entities, amounted to about S$13.2 million, based on SunMoon's latest financial statements for the period ended June 30. This amount includes some S$12.4 million of accounts receivable from the three Yiguo entities.
Advance payments to interested parties from April 1, 2019 to March 31, 2020 included about S$2.1 million for little lobsters and S$1.7 million for French fries and seafood, when a SunMoon subsidiary had purchased these products from two of the three Yiguo entities.
The deadline to file the creditors' proof of debt in respect of the bankruptcy reorganisation is Oct 19.
SunMoon's board has formed an executive committee, which will appoint professionals to advise the company on the matter including the filing of the proof of debt. This committee comprises the four board members who were made aware of the bankruptcy reorganisation: chairman and lead independent director James Prideaux; deputy chairman, non-independent and non-executive director Gary Loh; independent director Ng Bie Tjin alias Djuniarti Intan; and independent director Yang Guang.
With immediate effect, the committee has taken over the day-to-day management and operations of SunMoon and its subsidiaries from the management team. The SunMoon management team will take direct instructions from the executive committee.
Three of SunMoon's other board members - non-independent directors Zhang Ye, Jin Guanglei and Liu Yuanyuan - have links to Yiguo, a fresh food e-commerce retailer in China. Mr Zhang and Mr Jin are co-founders of Yiguo, while Ms Liu is the associate director of the Yiguo group's executive office, according to SunMoon's website and its annual report published on Sept 7. Mr Zhang is also SunMoon's chief executive officer. The group financial controller of SunMoon is Wang Hui Zhen.
The Singapore-listed agri-food firm noted on Monday that there is no certainty as to the collectability of the trade receivables or debts owing from the Yiguo-related entities.
Although its board is of the view that there will be a material impact on the SunMoon group's ability to continue as a going concern, it is unable to assess the impact of the Yiguo entities' reorganisation as the board does not have access to the court papers filed in the Chinese courts.
The board said its current information was derived from information available in the public domain, which did not state details of the plans and grounds of the reorganisation application to the courts. "The board has been and intends to continue to explore various possible options to address the issue of going concern, including seeking to raise funds from investors," it added.
Given that the newly formed executive committee has taken over the group's management and operations, the board is of the view that the trading in SunMoon shares should not be suspended, it said on Monday in response to the Singapore Exchange's queries. SunMoon distributes fresh fruits, vegetables, seafood and meat. It focuses on the South-east Asian and Greater China markets.
Amendment note: An earlier version of this article stated that the three Yiguo entities had filed for bankruptcy, when they were in fact only placed under bankruptcy reorganisation. On Oct 17, SunMoon clarified that the entities were put into involuntary - instead of voluntary as it previously announced - bankruptcy reorganisation.