Spotlight on Bursa-listed China firms, first delisting looms

PETALING JAYA: Over the last eight years, Bursa Malaysia has seen the influx of China-based companies into the stock exchange, due to more relaxed listing rules imposed by the Securities Commission on foreign-owned companies.
However, this year, the local stock exchange may well see the first delisting of a China-based company.
Currently, there are 12 China-based companies listed on Bursa Malaysia. The majority of them are operating at a loss, with most of the stocks trading below their initial public offering (IPO) prices. There are two companies classified under Practice Note 17 (PN17) status, indicating they are in financial distress. They are Maxwell International Holdings Bhd and HB Global Ltd.
Of late, China-based companies on Bursa Malaysia have come under the spotlight.
Late last month, China Automobile Parts Holdings Ltd’s (CAP) auditor PKF retracted its report on the company’s 2015 audited accounts since its financial statements for financial year ended Dec 31, 2015 (FY15) does not give a true and fair view of its financial position.
The auto chassis components manufacturer separately announced that it was unable to release its first quarterly report ended March 31, 2017 by May 31, 2017, as it was unable to finalise it within the stipulated time frame.
CAP said trading in the securities of the company will be suspended from Thursday if it fails to issue its first quarter financial report by Wednesday. Its share price has dropped 60% since then.
Under listing requirements, delisting procedures will be commenced against a company if it fails to issue the quarterly report within six months from the expiry of the time frame, in addition to any enforcement action that Bursa Securities may take.
As recently as last week, loss-making XingQuan International Sports Holdings Ltd, the first China-based firm to be listed on Bursa Malaysia in July 2009, announced that it is unable to submit its third quarter results and faces a suspension of trading, if it fails to do so on/or before Wednesday. It posted a net loss of RM8 million in the second quarter ended Dec 31, 2016, due to lower shoe and apparel sales.
XingQuan said the group is aware that it has three market days left to submit its outstanding financial statement, or face suspension of trading from Thursday, in addition to any enforcement action taken by Bursa – in the event it fails to do so.
PN17 company Maxwell posted a net loss of RM1.7 million in the first quarter ended March 31, 2017, from a net profit of RM22.9 million in the same period last year.
Maxwell said in its filing with Bursa, due to challenging manufacturing business environment in China, its main subsidiary company Jinjiang Zhenxing Shoes & Plastics Co Ltd ceased its factory operations last year.
There is no revenue registered for the group during the quarter, compared with revenue of RM8.4 million recorded a year ago.
XingQuan and Maxwell are both involved in the design and manufacturing of shoes and sportswear.
“Generally, I don’t think these companies can be considered successful,” Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew told SunBiz.
“They were all doing quite badly, maybe one or two (companies) are doing fairly okay, in the sense of not that bad, but not great either,” he said.
Pong noted that local analysts and research houses generally lack confidence in initiating coverage on China-based firms.
“The (companies’) results performance have been quite so patchy and sometimes defies explanation, so kind of confirms the view early on that let to analysts deciding not to cover these companies,” he said.
Earlier this month, shoe maker Multi Sports Holdings Ltd announced that it aims to issue its outstanding financial statements for the quarters ended June 30, 2016, Sept 30, 2016 and Dec 31, 2016 and annual report for 2015, by June 30, 2017.
It was reported that the release of the annual report for the year ended Dec 31, 2015 was delayed due to certain matters highlighted by its auditors Messrs RT LLP.