Construction firm Chip Eng Seng Corporation, which in recent years has diversified into education, has warned it might have to make an impairment on its investments in China.
Over the past week, the Chinese government has introduced new regulatory measures targeting the tuition industry, which has been a lucrative one attracting overseas capital.
Among others, the tuition providers are to be made non-profit organisations.
Chip Eng Seng holds a 34.97% stake in Guangzhou Yuanda Information Development Co, which will “likely be affected” by the new measures.
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As at June 30, Chip Eng Seng’s carrying value of Yuanda is $11.7 million and if its other China education businesses are included, $17.6 million. They contribute just 0.1% of the company’s total revenue.
“As the new measures are currently couched in general terms, the group is not able to assess the full impact of these measures at this point in time.
“When there is clarity on the actual impact, the group will, if required, make the appropriate impairment for its investments in the later part of the year,” says Chip Eng Seng.
In addition, Chip Eng Seng also notes that the planned investment of $4.9 million in tuition company Dongguan Duowei Education Technology Co, announced on March 17, did not take place.
The investment was to be in the form of a loan and the money wasn’t disbursed as “certain conditions precedent” were not met.
Chip Eng Seng shares closed July 27 at 45 cents, up 1.12%
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