String of SGX queries leaves China Taisan under a cloud

Singapore

THE Singapore Exchange has China Taisan Technology Group Holdings in its cross hairs as evinced by its persistent prodding for more details on the goings-on at the troubled firm, ranging from key boardroom appointments and departures to valuation of certain assets to its financial books.

The queries have cranked up considerably in recent weeks with the company's responses piquing further curiosity over the suitability of some of the newly appointed directors which the regulator itself appears to have reservations over.

The new directors include Thomas Francis Darden II, Steven Hartanto and Ng Eng Ho who were appointed non-executive chairman, executive director and lead independent director respectively effective Aug 29. Notably too, the company's major shareholder Choi Cheung Kong was also redesignated from non-executive chairman to executive director.

Mr Darden, a US resident, and Mr Hartanto are chief executive and senior associate respectively of investment firm Cherokee Investment Partners that was twice sued for alleged breach of contract and fraud, among other things. Cherokee's investments in projects in New Jersey were also the subject of various US state and federal investigations.

The suits were "aggressively defended" and settled while the US probe into its New Jersey project resulted in a former manager being charged and no government charges filed against any Cherokee entities, according to China Taisan.

The SGX had also quizzed the knitted fabric maker, which has been on the distressed watch list since June, on how the board was introduced to the new directors, who nominated them and if they were associated with any shareholder or potential shareholder.

Questions abound, too, on another appointment, that of Sri Tjintawati Hartanto - Mr Hartanto is her nephew - as chief financial officer, who resigned less than a month later, sometime mid-last month.

Her resignation followed SGX's query over her suitability, given doubts over whether she had carried out her fiduciary duties in another company, Next Generation Satellite Communications (NGSC), which is the subject of an ongoing investigation by Ernst & Young.

Ernst & Young had earlier noted widespread internal control failures and "significant questionable transactions and cash transactions" in NGSC during the time Ms Hartanto was responsible for the financial functions at the firm. The NGSC investigation was requested by the company and not by any regulatory authority, said the company.

The most recent query by the SGX (on Oct 3) has to do with China Taisan's valuation of its assets and the certification of its valuers. This would be at least the second time that the regulator has demanded further details on the matter. SGX has also asked the company to make available the valuation report to shareholders for their inspection for three months.

According to China Taisan, the value of its machinery stood at 154.1 million yuan (S$31.65 million) in 2016, down from a 316.4 million yuan valuation in 2015.

In response to another query by SGX, it also clarified that the two professional firms hired to perform valuation on the assets are certified by the China Assets Appraisal Board and the Ministry of Finance PRC, but not the China Securities Regulatory Commission (CSRC), as the CSRC is not responsible for issuing qualifications to valuers.

There have been other red flags for the watch-list firm. In June, China Taisan's independent auditors RT LLP cast significant doubts over the firm's ability to continue as a going concern with respect to its audited financial statements for the year ended December 2016.

They noted that the group posted a net loss of over 128.7 million yuan (S$26 million), had net operating cash outflows in excess of 13.6 million yuan and had just over two million yuan of cash and cash equivalents compared to over 76.2 million yuan of current liabilities.