SGX RegCo orders special audit of SBI Offshore over property disposal

SINGAPORE - Singapore Exchange Regulation (SGX RegCo) has ordered SBI Offshore to appoint a special auditor to investigate its disposal of a factory in China earlier this year.

SBI sold the factory in Jiangsu Province for 18 million yuan ($3.6 million) on March 15, with the property valued at 17.8 million yuan by Suzhou Welsen Assets Appraisal Co Ltd in August 2017. The figure was a sharp decline from the property's valuations in previous years, which ranged from 38 million to 40 million yuan between 2014 and 2016.

In a notice sent to SBI on Friday (Dec 21), SGX RegCo asked SBI to investigate several aspects of the disposal, including whether the disposal price of the property was marked to comparable market transactions, and reasons for the significant drop in the property's value in the valuation report. The audit is to also review the company's internal processes for appointing professional advisers and acquisitions and disposals, make recommendations on improvements to any control lapses identified, and determine if there is any potential breach of listing rules, laws or regulations.

The appointment of the special auditor and scope of the special audit are to be cleared with SGX RegCo, and the special auditor should report their findings directly and strictly to SGX RegCo and the sponsor of SBI.

SGX RegCo, the autonomous regulatory arm of the market operator, noted that SBI engaged a new appraiser to value the property for the disposal, rather than engaging Wuxi Dsinfor Real Estate & Land Appraisal Co Ltd, the appraiser that had valued the company in the previous three years for financial reporting purposes. The two appraisers used different valuation approaches that resulted in significantly different values for the property.

SGX RegCo also noted that the purchaser, Jiangyin HF Investment Consultant Co Ltd, had been incorporated about one month before the sale and purchase agreement for the factory was executed, and its registered address since the date of incorporation was the same as that of the property.

The special audit is to conduct background checks on both appraisers as well as to obtain a chronology of events and details surrounding the new appraiser's appointment, the negotiation for the disposal, and the scope of due diligence performed on the purchaser and disposal.

Shares of SBI last traded at s$0.06 before the announcement.