Transcorp says $6m deposit for cancelled China project MOU 'fully guaranteed'

SINGAPORE - Transcorp Holdings has said the $6 million deposit it paid to Dongshan Dibao Property for a China project it has pulled out of is "fully guaranteed", after being pressed by the Singapore Exchange (SGX) for additional assurances.

"The refundable deposit is fully guaranteed. We are not sure what additional assurance we can obtain above a full guarantee," the company said in a bourse filing on Friday (March 22) in response to SGX queries.

The company had earlier this month announced it had cancelled a memorandum of understanding (MOU) with Dongshan to develop residential apartments, recreational facilities and retail units in Fujian, China, and asked for the full refund of the $6 million it had paid in a good faith deposit by March 31, 2019.

SGX in its queries had also asked if any third-party confirmations like bank statements were obtained from Dongshan's sole owner Cheng Ming Ming to confirm the continued existence of the $6 million deposit.

In response, Transcorp said it was appropriate to just have the written confirmation as the transaction had yet to complete hence it was still "legally not part of the project". Along with its refundable deposit structure, it felt the written confirmation sufficed.

Transcorp also said a guarantee was given by SG Royal to pay the refundable deposit should Dongshan Dibao Property be unable to. Transcorp said it was not informed of any relation between SG Royal and Dongshan Dibao Property, or that of its sole owners Chu Wan Zhen and Mr Cheng respectively.

However, both Mdm Chu and Mr Cheng have been existing shareholders in Transcorp for a few years and it "had been ascertained that there was no direct relationship" between them.

Also in its response to SGX, the company defended its decision to make the deposit "despite it being just an MOU". It said its entry into the property business had looked to provide some profitability to the company, which has been "suffering from the downturn in the automobile sales business".

"This was a commercial decision that the board at that point in time felt was viable and in the best interest of the company and its shareholders. This was a commercial decision made by management then. In commercial terms, it is willing buyer willing seller," the company's statement added.

The company has undergone a series of board changes in the past year, with three out of four directors appointed after the fiscal year. This was along with a vacant chief financial officer position from Nov 6 to Dec 2 and from Dec 7 onwards last year. Its only executive director was only appointed after FY2018.

Transcorp shares closed on Thursday up 0.5 cent at $0.01