CEO Morning Brief

YNH Property Appoints UHY for Independent Review of JV, Turnkey Contracts

Publish date: Thu, 13 Jun 2024, 10:36 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (June 12): Property developer YNH Property Bhd (KL:YNHPROP) has appointed UHY as a special independent reviewer to assess certain joint venture (JV) and turnkey contracts entered into by its unit, Kar Sin Bhd.

The independent assessment was initiated after its former statutory auditor, Baker Tilly Monteiro Heng PLT, issued a qualified opinion on a sum totalling RM1.1 billion paid in respect of JV and turnkey contracts entered into between JV parties or landowners for property development work, said YNH Property in a bourse filing on Wednesday.

UHY will conduct the independent assessment by obtaining background understanding of the JVs’ transactions, performing background searches on relevant parties, and reviewing the transactions, according to YNH Property.

It will also state their impact on the group's financial statements, where relevant; identify potential breaches or non-performance with securities laws, stock exchange rules or corporate governance practices; and propose remedial actions to be taken by the management.

YNH Property said UHY will start its work immediately, and will complete the assessment within three months.

YNH was in the spotlight in May last year, after the group announced that Kar Sin was disposing of a piece of land measuring 5.09 acres (2.06ha) in Desa Sri Hartamas to Sunway Bhd’s (KL:SUNWAY) unit Sunway Living Space Sdn Bhd for RM170 million cash.

Subsequently, it made a couple of belated announcements related to the land in January — after Bursa Securities raised questions about the deal — that revealed oversights on its part regarding these transactions.

In its belated announcements, YNH said Kar Sin had inked a sale and purchase agreement and a supplemental agreement with Great Wall Park Sdn Bhd (GWP) back in April 2022 to acquire the Desa Seri Hartamas land.

Under the supplemental agreement, both parties agreed to terminate a prior 2016 turnkey construction agreement for a mixed residential and commercial development on the land, for which Kar Sin paid a RM239.5 million security deposit.

With the cancellation of the turnkey agreement, RM150 million of the deposit that Kar Sin paid would be recognised as payment to acquire the land, while GWP would refund the remaining RM89.5 million back to Kar Sin.

At present, the deadline for conditions to be met for the disposal of the Desa Sri Hartamas land to Sunway's unit has been extended for a fifth time until May 12, 2025, following the discovery of a registered caveat lodged over the property.

The extension is for YNH Property to, among others, obtain a new development order for the land, and to have the caveat, also known as a registrar's caveat, removed or cancelled. A registrar’s caveat is normally put in place to protect the state’s interest or to prevent erroneous transactions or fraud.

Shares of YNH closed 2.5 sen or 3.1% lower at 77 sen, valuing the group at RM407 million. Year-to-date, the stock had tumbled 82%.

Source: TheEdge - 13 Jun 2024

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