YNH says auditor’s qualified opinion limited only to JV, turnkey contracts for property development

• The independent review was carried out at the request of Baker Tilly to determine the possibility of related party transactions concerning JV and turnkey contracts entered into by YNH. YNH said it has “openly and willingly” agreed to carry out the independent review in order to resolve this “compliance matter” to the satisfaction of its auditors.

KUALA LUMPUR (Oct 29): YNH Property Bhd has come out to say that the qualified opinion issued by its external auditor last Friday (Oct 27) is only limited to its joint venture (JV) and turnkey contracts for property development work.

In a statement to The Edge Malaysia on Sunday, YNH said it was important to note that the external auditor, Baker Tilly Monteiro Heng PLT, had given a “true and fair” view of the group’s financial position as well as its financial performance and cash flow for the 18-month financial period ended June 30, 2023.

“As such, YNH wishes to highlight that its filing to Bursa Malaysia on Oct 27... should be read as a modified opinion and not material uncertainty related to going concern. The distinction is critical to allay any possible misperception from our concerned shareholders,” it said.

In a bid to provide some clarity, YNH went on to say that the qualified opinion issued by Baker Tilly was due to the lack of time for YNH to complete an independent review of the JV and turnkey contracts.

The independent review was carried out at the request of Baker Tilly to determine the possibility of related party transactions concerning JV and turnkey contracts entered into by YNH. YNH said it has “openly and willingly” agreed to carry out the independent review in order to resolve this “compliance matter” to the satisfaction of its auditors.

Baker Tilly had requested the independent review following queries by regulatory authorities over the sale of its landbank in Desa Sri Hartamas, Kuala Lumpur. According to YNH, it has already responded to all these queries and said it will continue to give its full cooperation to the authorities if there were any further inquiries to be made.

“The disposal exercise of the said landbank in Desa Sri Hartamas is still ongoing as all parties have agreed to extend the conditional period for three months, and the exercise is subject to approval from YNH’s shareholders at an extraordinary general meeting that is to be convened on a later date,” it said.

In its statement, YNH also pointed out that the recent resignation of two of its independent and non-executive directors — Ching Nye Mi @ Chieng Ngie Chay and Ding Ming Hea — was in line with the mandatory 12-year tenure limit for independent directors, as per Bursa Malaysia’s Main Market listing requirements. It said both directors had served the board for more than 12 years.

YNH came under the spotlight in May, after the group announced that its wholly-owned unit Kar Sin Bhd was disposing of a piece of land measuring 5.09 acres (2.06 hectares) in Desa Sri Hartamas to Sunway’s wholly-owned subsidiary Sunway Living Space Sdn Bhd for RM170 million cash.

The deal ran into issues as Bursa Securities raised questions over the transaction. Bursa had issued its first query on May 22, to which YNH replied on May 19. Bursa again issued another query on May 25, and YNH was required to provide its response within 24 hours. In its reply to the query, YNH acknowledged that the group had overlooked a few details, and would seek advice from the adviser to rectify the oversight.

theedgemalaysia had reported last Friday that Baker Tilly had expressed a “basis for qualified opinion” saying that an amount of RM1.1 billion had been included in YNH’s inventories regarding the contracts entered into with the JV parties or landowners.

An additional amount of RM97.5 million was paid to the landowners during the financial period. The land cost is subject to the agreed entitlement provided in the contract with the JV partners or landowners, according to the auditor's report as reproduced by YNH in a bourse filing that Friday.

“At the date of authorisation of these financial statements, the outcomes of the regulatory authorities’ investigation remain unknown, and the special review undertaken by the group has not been completed.

“Therefore, given the prevailing ongoing regulatory authorities’ investigations and the group’s special review which have not been completed, we could not obtain sufficient appropriate audit evidence that the JV and turnkey contracts entered into with the respective JV parties or landowners are not related party transactions, and on the value of these inventories as at June 30, 2023 and the related disclosures. Consequently, we were unable to determine whether any adjustments to the financial statements were necessary," said Baker Tilly.

“We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion,” it added.

YNH’s group chairman and executive director Datuk Dr Yu Kuan Chon is the largest shareholder with a 24.41% stake, followed by Kenanga Investors Bhd (8.24%) and CGS-CIMB Securities Singapore (4.77%), Bloomberg data showed last Friday.

YNH’s share price settled unchanged at RM5.10 on Friday, with a market capitalisation of RM2.7 billion.

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