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Magna Prima's auditor flag material uncertainty as group's liabilities exceed assets by RM108m

KUALA LUMPUR (April 17): Magna Prima Bhd’s independent auditor has raised a material uncertainty related to the property developer’s ability to continue as a going concern.

Messrs HLB Ler Lum said the group’s and company’s current liabilities exceeded its current assets by RM108.37 million and RM309.19 million, respectively as of the financial year ended Dec 31, 2020 (FY20).

It also noted that the group and the company incurred a net loss of RM152.20 million and of RM17.78 million respectively for FY20,  according to Magna Prima's filing with Bursa Malaysia.

HLB Ler Lum also noted that three subsidiaries delayed the payment of their borrowing obligations during the financial year.

In addition, the group and the company are involved in several pending litigations, including a claim on unpaid balances over income tax debt due to the Inland Revenue Board, and a claim on liquidated and ascertained damages due to purchasers.

Three winding-up petitions have also been initiated – against a subsidiary for judgment sum in relation to liquidated and ascertained damages due to purchasers, against the company for a sum owing to a former subsidiary, and against a subsidiary for unpaid electricity charges due to Tenaga Nasional Bhd.

To address these issues, Magna Prima said its directors and management team have taken action to turn around the company and improve its performance over the next three years.

“The plan centres around three core components, that is the disposal of prime land, concentrating on niche development which we have obtained the development rights from Kuala Lumpur City Hall (DBKL) and the Selangor State Development Corp (PKNS), and the last area would be project monitoring and cost control," the group said.

For niche development, Magna Prima is targeting to launch three property developments – 266 units of serviced apartments in Metro Prima Kepong, a residential development in Prima Shah Alam Seksyen 16 and another residential project at the Sultan Abdul Aziz Shah Golf and Country Club (KGSAAS).

Group seeks to raise up to RM36.6m via private placement

Separately, Magna Prima has proposed a private placement of up to 20% of its issued shares to raise up to RM36.59 million to be used for debt repayment and working capital.

According to the group, the significant drop in revenue, ongoing liability obligations and the burden of additional tax liabilities have placed a serious crunch on the group’s cash flow position.

Under the proposed placement, Magna Prima will issue up to 66.53 million new shares or 20% of its existing issued shares to independent third-party investors to be identified and at an issue price to be determined later.

Citing an indicative issue price of 55 sen per share, the group said it represents a discount of 7.11% to the five-day volume-weighted average market price of its shares up to April 15 of 59.2 sen.

Magna Prima said RM32 million of the proceeds will be allocated for repayment of borrowings. As of March 31, the group's borrowings to its financiers stood at RM207.7 million.

Another RM3.86 million will be used as working capital to complete the property development of its current phase one project in Kepong comprising seven units of shop offices, and upcoming phase two project in Kepong comprising 266 units of serviced apartments.

Magna Prima shares were last traded at 60.5 sen, giving it a market capitalisation of RM203 million.

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