SINGAPORE - The stock of mainboard-listed Raffles Education (REC) was hammered to new lows on Monday (Oct 18) as the market got hold of a letter by tycoon Oei Hong Leong to the company's board.
The stock dived 26 per cent, or 2.1 cents, to close at 6.1 cents in the wake of a letter from Mr Oei asking why REC's chief executive and founder Chew Hua Seng had caused the company to hire all "adult members of his family at high salaries".
In fact, the stock had already been under pressure last week after independent auditor BDO LLP cited financial statements for financial year ended June 30 for material uncertainty over whether the company can continue as a going concern.
The auditor noted that as of end-June, the company’s current liabilities stood at S$196.4 million, versus current assets of S$96.8 million.
Meanwhile, the company was already facing a writ issued by Affin Bank amounting to some RM$410 million (S$132.9 million) on an unpaid loan.
But responding to queries from the Singapore Exchange, the company said it was negotiating to settle the issue amicably with the bank, and was raising funds via sale of various properties in China and Singapore.
But brokers said the selldown was particularly vicious and came ahead of the company's annual general meeting (AGM) on Oct 30.
As a result, the company's market cap was shaved by a hefty $29 million to $84 million on Monday. It was $113 million last Friday.
The stock is now down 37 per cent this month, with almost $50 million wiped off its market cap.
In the letter dated Oct 16, circulated widely through the market on Monday, Mr Oei referred to disclosures in the company's latest annual report.
He asked about the varying amounts of cash that Mr Chew’s second wife, Ms Doris Chung Gim Lian, as well as his two sons from his two marriages and Mr Chew’s first wife’s daughter-in-law, had received from the company.
“These are just official family members,” the letter said, adding that these sums are in addition to the amount that Mr Chew paid himself for his salary, bonuses and profit-sharing.
Mr Oei, who owns just over 10 per cent of REC, has been a vocal critic of Mr Chew and REC over the past three years following a dispute over an alleged share buyback agreement with Mr Chew that went sour.
In a statement to the Singapore Exchange late on Monday, REC said it viewed Mr Oei’s letter as containing "bare allegations and material innacuracies which are not substantiated". The company said it was taking legal advice and would respond to the letter in due course.
Mr Oei is expected to ask more questions pertaining to the company’s less than stellar performance and perceived corporate governance issues in the lead up to the AGM.