Astaka auditors flag going concern issues amid muted M'sian property market

Singapore

ASTAKA Holdings is the latest among Singapore-listed property developers with projects in Johor to get flagged by its auditors regarding going concern matters.

The group on Monday night said its independent auditors have drawn attention to potential doubts about the company's ability to continue as a going concern, and flagged uncertainties related to the pending outcome of an independent review.

Their audit report was on the company's financial statements for the financial year ended June 30, 2019. The opinion of the independent auditors from KPMG remains unqualified.

Due to Malaysia's property market slowdown which impacted the sale of its development properties, Astaka may not be able to generate sufficient operating cash flows for the next 12 months to cover operating costs and settle current liabilities, the auditors said.

"This indicates that a material uncertainty exists that may cast significant doubt on the ability of the group and the company to continue as a going concern. Our opinion is not modified in respect of this matter," they added.

Astaka had incurred a net loss of RM113.7 million (S$37.4 million) for the year ended June 30. It also recorded RM400.7 million in development properties - completed properties held for sale and future phases of land to be developed.

With this in mind, the group's FY2019 financial statements have been prepared on a going concern basis - which KPMG has deemed appropriate. This was after taking into consideration an undertaking by Astaka's controlling shareholder to provide the necessary financial support for the group to continue its operations and pay any debts which are due.

To ensure there are enough funds to meet obligations and working capital needs, Astaka has also prepared an 18-month consolidated cash flow forecast from July 1, 2019. Assumptions made in the forecast include a settlement agreement with a main contractor over outstanding balances of RM74.4 million; and the group being able to sell its completed properties and launch new projects planned during the forecast period.

KPMG also flagged uncertainties related to the pending outcome of an independent review by an external reviewer regarding the circumstances leading to an adjustment in the prior year. As the review is still ongoing and could provide new information and findings, uncertainties currently exist and may impact the financial statements, KPMG added.

Astaka is the developer for One Bukit Senyum, which includes two residential towers dubbed The Astaka, in the Iskandar region.

Other Singapore listed developers such as Capital World and Pacific Star Development were recently flagged for uncertainties in the two companies' ability to continue as going concerns in relation to their financial statements for the year ended June 30, 2019. Both companies said at the time they can continue as going concerns.

The developers saw their financial performance get dragged by their Johor projects amid a muted property market in Malaysia.