ISR sidesteps volley of queries from SGX
ISR Capital declined to reveal the identity of the
subscriber of debt securities recently issued by one of its subsidiaries, and
did not specifically state the names of the individuals and companies related
to its overdue trade receivables $2.382 million as at June 30, despite being
asked to do so by the Singapore Exchange.
Comments
Chan Chao Peh, The Edge
22 August 2016
ISR Capital declined to reveal the identity of the subscriber of debt securities recently issued by one of its subsidiaries, and did not specifically state the names of the individuals and companies related to its overdue trade receivables $2.382 million as at June 30, despite being asked to do so by the Singapore Exchange.
On Aug 17, ISR faced a third round of queries from SGX in less than a week, indicating heightened scrutiny by the bourse operator. On this occasion, SGX asked three questions, all of which were related, directly or indirectly, ISR’s responses to previous queries.
ISR had said in response to earlier queries by SGX that interest income it earned during 1H2016 related to “a total principal amount of approximately $3.67 million [that had] been extended to a subscriber of debt securities issued by a subsidiary of the company.” ISR had also stated the debt securities have a tenor of five years and mature in 2020, and that the securities pay interest of 12% a year. In addition, there was a 5% arrangement fee deducted upfront at each disbursement.
In its latest round of queries on Aug 17, SGX asked ISR to provide details on the identity of the subscriber, how much of the debt securities issued by the company’s subsidiary was purchased by the subscriber. SGX also asked ISR to explain why it had to lend money to the subscriber.
In its response two days later, ISR flatly declined to provide the information. “We are bound by confidentiality obligations and are contractually restricted from providing details on the identity of the subscriber,” it stated on Aug 19.
In its queries on Aug 17, SGX also pointed out that ISR’s revenue in 1H2016 consisted entirely of $182,222 of interest earned from the loan. It then asked ISR to explain why it should not be regarded as a cash company under Listing Rule 1018, which states that “if the assets of an issuer consist wholly or substantially of cash or short-dated securities, its securities will normally be suspended. The suspension will remain in force until the issuer has a business which is able to satisfy the Exchange’s requirements for a new listing, and all relevant information has been announced.”
In its response on Aug 19, ISR pointed out that its stated principal activity is investment holding, and that the issue of debt securities by its subsidiary was done in the “ordinary course of business”. It also said it is actively looking out for investment opportunities, including the proposed acquisition of a 60% stake in Tantalum Holding (Mauritius), which purportedly owns a rare earths concession in Madagascar.
In its final question on Aug 17, SGX noted that ISR had previously disclosed that overdue “trade receivables of $2.382 million comprised management consultancy fee receivables of $2.275 million and interest receivable on debt securities of approximately $107,000” and that “the debtors were not able to repay the company on time”. SGX pointed out that the amount is material in comparison to ISR’s net asset value of $6 million as at June 30, and asked that the company disclose the names of the individuals and companies related to the overdue balances.
In its response, ISR did not name the individuals and companies as SGX asked. Instead, it merely stated that of $2.382 million, $2.275 million were management consultancy fee receivables while $106,726 was interest receivable on debt securities. “The company does not foresee an issue in the recoverability of these receivables and shall review the matter at the end of the financial year,” it added.
Shares in ISR are up more than 1,333% this year. They hit a high of 12.5 cents on May 16. At 2.48pm, was trading at 8.6 cents. The company plans to pay for the 60% stake in Tantalum Holding (Mauritius) by issuing shares at 10 cents each.