SINGAPORE (May 4): Waste management and metals trading firm Sen Yue Holdings has asked for a trading suspension, citing a need to resolve the receipt of a letter of demand served on a subsidiary, and internal disagreements over the treatment of account receivables of the same subsidiary.
The suspension took place amid a board rift. Executive chairman Koh Mia Seng had on April 20 indicated his intention to call for an EGM, citing dissatisfaction at the company’s recent performance. With the exception of a newly-appointed independent director, Lau Yan Wai, Koh wants to get rid of five other directors, including CEO and executive director Neo Gim Kiong.
This came on the back of the group's net profit after tax not being "up to expectations in the past three years" - falling from $2.6 million in FY2017 to a mere $21,000 in FY2019.
To top it all off, the group is now bracing itself for 1HFY2020 to be even worse, expecting to book "significant losses" after making provisions for certain doubtful debts.
The company had called for a trading halt on Apr 28 pending an announcement. However, on May 4, Sen Yue decided to convert the trading halt to a voluntary suspension pending the completion of a review by its external auditors, Deloitte & Touche LLP, according to a notice to the SGX filed in the name of CEO Neo.
This decision was purportedly backed by “majority of the board” – which, besides Neo, includes another executive director Liew Nyok Wah, and three independent directors Chim Suan Kit Mark, Yu Lihong, Low Ka Choon Kevin.
Lau, the ID whom chairman Koh isn’t seeking to remove, was appointed only last December.
According to the company's May 4 notice, Koh disagrees with the suspension as he felt that the review could be conducted without the suspension.
Sen Yue was previously called PNE Micron, and renamed Sen Yue on Jan 2016. Koh himself wasn’t in the picture until recent years.
In the 1980s, he founded SMC Industrial, and sold half of that company to Sen Yue back in 2015. Along with the sale, he joined Sen Yue as an executive director on March 15.
Koh then sold the remaining half to Sen Yue. The transaction was completed in Jan 2017, and Koh became the controlling shareholder of Sen Yue, with a stake of 42.71%.
According to Bloomberg data, Yu Lihong and ED Liew are the fifth and fourth largest shareholders in the company with stakes of 0.69% and 7.17% respectively. The third largest shareholder is one Di Lingbin, who holds 11.57%, while Jiangmenshi Changxin Technology - a Chinese entity that took part in the company's share placement exercise - holds a stake of 13.88%. Meanwhile, CEO Neo holds just 4.15 million shares, or, a stake of less than 0.5%.
SGX RegCo swoops in
In the May 4 filing, Sen Yue explained that the decision to suspend its shares was due to the interim review on SMC Industrial, the subsidiary founded by chairman Koh.
On April 27, SMC Industrial received a receipt of a letter of demand from an undisclosed bank for an undisclosed amount. That letter was subsequently retracted on April 28.
In response to queries from SGX RegCo, Sen Yue said that CEO Neo and ED Liew are concerned about the “collectability” of certain long overdue account receivables at SMC Industrial, as well as its cash flow management and SMC's compliance with its loan covenants.
In turn, Koh maintains that “these accounts receivables remain collectable albeit at a slower rate”, and that the delay was because of the Covid-19 outbreak.
Among other things, SGX RegCo queried Sen Yue on things such as the percentage of overdue accounts receivables that were written off, and whether they were material to the group’s financial figures.
In addition, the regulator asked the company about the external auditors’ views on the long overdue accounts receivables, as well as if the auditors would be reviewing the group's upcoming 1HFY2020 results.
Sen Yue’s response to the SGX RegCo queries were made in the name of chairman Koh. He said that the management had proposed a percentage of provision to be made for the overdue accounts receivables.
The decision had taken into consideration factors such as the company’s historical credit loss rate, as well as the impact of the Covid-19 pandemic on the ability of the Sen Yue to collect the account receivables.
“The company will be engaging its external auditors to assist in its review of the group’s accounts receivables (including SMC) to determine the amount of provisions and/or impairment to be made,” says Koh, adding that a further announcement will be released in due course when the results of the review are available.
While Sen Yue did not disclose the exact amount of provisions for doubtful debts, it was revealed that the amount is expected to be material based on the management’s preliminary assessment.
“A further announcement in relation to the percentage of overdue accounts receivables to be provided and/or impaired will be released in due course when the results of the review by the external auditors are available,” said Sen Yue.
Sen Yue also said that Deloitte will disclose its views on the long overdue accounts receivables in the upcoming review.
In addition, Deloitte will also be conducting a review of specific areas of the group’s 1HFY2020 financial results which is expected to include segments such as accounts receivables, inventory and bank facilities (including loan covenants).
Delay in smelting facility
Apart from boardroom dispute that has burst into the open, Sen Yue faces a delay in the completion of its smelting facility, which was meant to be a new earnings driver for the company, and originally slated for completion by end March.
On Apr 1, Sen Yue was forced to admit that the completion of the facility would not be able to meet its original deadline, citing “disruptions to manpower of contractors”.
The group had resultantly pushed back the completion date to end-June.
In an interview on Jan 29, executive chairman Koh had told The Edge Singapore that the facility was “still on track for completion in 1HFY2020” and that the group was “comfortable” with its current position.
See: Sen Yue to delay completion of new smelting facility to end-June on Covid-19 disruption
When asked about when investors can expect to see the new facility’s impact and contribution towards the company’s financial figures and payouts, he had projected an estimate of 5-6 months of contribution in its FY2020 results.
Shares in Sen Yue Holdings last traded at 2.2 cents on Thursday prior to the trading suspension.
