SGX orders Innopac to engage valuer on businesses it plans to sell

The Singapore Exchange (SGX) has ordered Innopac Holdings' audit committee to engage a reputable valuer to assess businesses that the company plans to sell at a sharp discount to their potential net tangible value.

In October, Innopac, an investment holding company, said that it would dispose of its stakes in a number of businesses to Innopac chief executive Wong Chin Yong for S$100,000. On Nov 5, Innopac said in response to SGX queries that it would not engage a valuer due to costs.

But in a fresh round of queries, SGX raised concerns about how Innopac was valuing the businesses being sold. Two of those businesses, Wang Da Investents and Heritage Corp, have a net tangible liability (NTL) of S$11.45 million. The rest of the businesses that are being sold, including a microalgae joint venture, have a total net tangible asset (NTA) value of S$9.16 million. If Innopac liquidated Wang Da and Heritage instead of selling them with the other businesses, it would not have to offset the other businesses' positive net tangible value against Wang Da and Heritage's net liability, SGX said.

"As the value at risk for the disposal assets have a potential NTA of $9.16 million versus a disposal consideration of only $100,000, SGX is of the view that a reputable valuer should perform a valuation for this interested person transaction," Innopac reported in an announcement.

Innopac responded in an SGX filing on Thursday night that its audit committee will source for a suitable valuer.

The company said that because the two named businesses are the subject of an ongoing claim for about S$15 million by its lender Saxo Bank, liquidation might be met with objections from Saxo Bank and be unsuccessful. It was also unfeasible to find buyers for the other entities within the timeframe for its proposed share placement.

In response to a query about why it considers recovery its investments in Primeforth Renewable Energy Pte Ltd as nil and has chosen to dispose it to the CEO as such when the recoverable amount under the contract is S$6 million, Innopac said Primeforth is held by an off-shore company, and the location of its assets are unknown, making it difficult and costly to enforce any action to recover the investments. Primeforth has also contested Innopac's claims and reserved its rights to pursue legal action against the investment holding company.

Earlier on Thursday, Innopac reported a net loss of S$741,000 for the first quarter of fiscal year 2019 ended Sept 30, compared with a net loss of S$436,000 a year ago. Revenue was down 63 per cent to S$10,000 from S$27,000 in Q1 FY18.

Innopac shares have been suspended on the SGX since June 7.

Leila Lai

16 November 2018