Singapore Exchange Securities Trading (SGX-ST) has rejected New Silkroutes Group BMT &rsquo s proposal for it to resume trading. 

 

In a Sept 12 bourse filing, the company said it received a letter of rejection from SGX-ST on Sept 11. New Silkroutes Group had submitted its resumption proposal on June 10. 

 

SGX-ST stated several reasons for rejecting the proposal, which include a disclaimer opinion released on Aug 20 by the group&rsquo s external auditors, Baker Tilly TFW, on the group&rsquo s financial statements for the financial year ended June 30, 2023.

 

SGX-ST also notes that the group will remain in a net current liability position as at Dec 31, 2023,   based on the group&rsquo s pro-forma financial statements within the same period which took into account the acquisition of Hequ Yuanyang Industrial Co., Ltd (HYI). 

 

SGX-ST notes that the group&rsquo s 12-month cash flow forecast projects that the group would generate $3.3 million from May to April 2025.

 

However, SGX-ST also notes that the group had failed to submit an independent review report by its auditors on the group' s pro-forma financial statements, cash flow projections and financial projections of HYI. 

 

Based on HYI&rsquo s unaudited financial statement for the financial year ended Dec 31, 2023, SGX-ST notes that HYI only turned profitable in FY2023 due to annual renewable contracts with two customers. HYI&rsquo s continued profitability, as projected, is dependent on the completion of upgrade works over the next three years. 

 

Moving forward, SGX-ST says the group also &ldquo has not adequately demonstrated&rdquo how it will be able to fund the upgrade works amounting to approximately $15.4 million to $19.2 million, given that only $2.67 million remained unutilised under the debtor-in-possession (DIP) facility. 

 

Finally, SGX-ST also noted that the company had submitted its resumption proposal after the stipulated deadline. 

 

In response, SGX-ST has requested that the group resubmit a revised trading resumption proposal by Dec 31. 

 

According to SGX-ST, the revised proposal should include audited financial statements for the financial year ended June 30 and all outstanding unaudited financial statements.

 

The group must also convene its annual general meeting (AGM) for the financial year ended June 30 by Dec 31. 

 

The revised proposal must also convince SGX-ST that the group has obtained all the requisite approvals from the various national agencies for the upgrades planned for HYI, and that it has secured sufficient financing to fund the upgrades. 

 

​ ​ In the event of a failure to meet any of the above milestones by Dec 31, the SGX-ST will proceed to delist New Silkroutes Group. 

 

Shares in New Silkroutes Group last traded at 7.5 cents in November 2021, when it was suspended. 

 

 

BOURSE regulator Singapore Exchange Regulation (SGX RegCo) on Friday (Dec 1) said the actions of mainboard-listed New Silkroutes&rsquo former directors and executive officers led to the &ldquo circumvention of rules&rdquo . 

 

In a regulatory announcement, SGX RegCo made reference to findings from the company&rsquo s independent reviewer KPMG.

 

KPMG was appointed to review certain transactions that were highlighted by the company&rsquo s statutory auditor during its review of the group&rsquo s financial statements for the year ended June 2020. KPMG reported directly to SGX RegCo and the company&rsquo s audit committee. 

 

KPMG had found that in May 2011, New Silkroutes signed a sale and purchase agreement with Tianjin General Nice Coke & Chemicals Co (Tianjin GNCC) to buy a 15 per cent stake in Thai General Nice Coal and Coke Co (Thai GNCC). 

 

After six extensions of the completion date and two amendments to reduce the company&rsquo s acquisition stake to just over 2.8 per cent, the acquisition was completed in May 2017 and New Silkroutes paid US$14.1 million for the stake. 

 

However, Thai GNCC has not had commercial operations since 2011, and New Silkroutes eventually deconsolidated its investment in Thai GNCC in 2021.

 

This acquisition was funded by the New Silkroutes&rsquo fundraising exercises &ndash a placement of 16.7 per cent of the enlarged share capital to two investors in 2011, and a rights issue in 2012. 

 

In both fundraising exercises, the company confirmed to SGX RegCo that the two investors, Fortune Woods Global Investment and Smartful Global, were unrelated and not acting in concert. These two companies were respectively owned by the company&rsquo s former executive chairman Cai Sui Xin and an individual named Xiao De. 

 

For the placement exercise in 2011, the company further confirmed to SGX RegCo that the two investors had no connection or business relationship directly or indirectly with each other, and that they would not have any board or management representation as a result of the placement.

 

However, KPMG found that Cai and Xiao had an existing business relationship with each other through Tianjin GNCC prior to the placement. 

 

The company also knew that the intended investor for the placement was Cai, and was also aware of Cai&rsquo s request to control the board upon completion of the placement. It facilitated the sequence of appointments that was calculated to achieve this without attracting regulatory attention.

 

SGX RegCo said if not for the company&rsquo s false confirmations to the regulator regarding the investors&rsquo relationship and board representation, the placement would have constituted a transfer of controlling interest and prior shareholders&rsquo approval would have been required. 

 

It also noted that Cai, Frank Yu and Jaffe Lau had, in their capacities as directors of New Silkroutes, entered into various agreements to purchase goods and services that were not delivered. 

 

Despite being dormant companies, Top Post Enterprises and Baling (China) Investment entered into various agreements to purchase iron ore fines and procure consultancy services worth US$4.99 million between February 2016 and March 2016. 

 

KPMG did not find any evidence that the iron ore fines were delivered or consultancy services rendered, nor could it identify the shareholders and directors of the iron ore fines vendor and the consultancy provider. 

 

Lau and Yu resigned from the company on Oct 31, 2016, while Cai stepped down on Dec 8, 2016. 

 

SGX RegCo said it does not condone actions by the issuers and directors to circumvent the requirements under the bourse&rsquo s listing rules. 

 

The regulator said it will be looking into the potential breaches pertaining to the placement and the acquisition of Thai GNCC, and will refer the potential contravention of the companies act and the securities and futures act highlighted in KPMG&rsquo s report to the relevant authorities. 

 

THE indirect subsidiaries of mainboard-listed New Silkroutes Group : BMT 0%, Healthsciences International (HSI) and HSI Dental, will be placed into creditors&rsquo voluntary liquidation, said the company on Friday (Sep 29).

 

The two subsidiaries were placed into voluntary liquidation following the passing of resolutions at HSI&rsquo s extraordinary general meeting on Thursday. The move also followed HSI Dental&rsquo s written resolutions and confirmations by the subsidiaries&rsquo creditors at their meetings on Friday.

 

In February, New Silkroutes sold three of its The Dental Hub-branded clinics to Catalist-listed Quantum Healthcare for a consideration of S$1.7 million.

 

The vendors of the three clinics are private companies which, before the sale, were 70 per cent owned by HSI Dental, which is in turn owned by HSI.

 

Shares of New Silkroutes have been suspended from trading since Nov 15, 2021.

 

Dr Goh Jin Hian, the former CEO of New Silkroutes Group BMT 0.00% has been charged with false trading offences along with three other men who were also previously from the group.

 

According to ChannelNewsAsia, Goh, who is also the son of former Prime Minister Goh Chok Tong, was slapped with 39 charges under the Securities and Futures Act (SFA).

 

The other three men charged, Kelvyn Oo Cheong Kwan, William Teo Thiam Chuan and Huang Yiwen, received 31 similar charges each.

 

Oo was the executive director and chief corporate officer at New Silkroutes while Teo was the group&rsquo s finance director previously. Huang was a commercial market maker that was engaged by the group.

 

Under the SFA, Goh was charged for conspiring with Oo, Teo and Huang to create a &ldquo misleading appearance&rdquo in the price of shares in New Silkroutes Group on 31 trading days between February 2018 and August 2018.

 

This was done via share buybacks done through the group&rsquo s corporate trading account as well as orders and trades made via Goh&rsquo s own investment account with DBS Private Bank.

 

Between February 2018 to August 2018, Goh had increased his stake in the company, buying 850,200 shares for $256,454 &ndash or 30.16 cents per share &ndash on 12 occasions.

 

Goh was CEO of the group from June 2015 and became its chairman in October 2020. He had, however, resigned from his position on Oct 15, 2020, &ldquo to devote more time to his personal affairs&rdquo .

 

Teo had also stepped down from his role on Oct 15, 2020, ostensibly to &ldquo focus on personal matters and to pursue other interests&rdquo .

 

That said, Goh and Teo&rsquo s resignation came after the group was asked to aid in investigations by the Commercial Affairs Department (CAD) on Sept 24, 2020.

 

If convicted, all four men face a jail term of up to seven years, a fine of $250,000, or both per charge.

 

NEW Silkroutes Group has proposed investing in a Chinese company in the business of coal and cargo by acquiring its parent, Tianjin Zhoushun, for 11 million yuan (S$2.1 million).

 

Following completion of the proposed acquisition, New Silkroutes Group will be the sole shareholder of Tianjin Zhoushun through its indirect subsidiary, Beijing Lunan Technology. The group will indirectly own 59 per cent of the equity of Tianjin Zhoushun&rsquo s subsidiary, Hequ Yuanyang Industrial (HYI).

 

HYI is primarily engaged in the business of coal storage and sales, as well as general cargo loading and unloading. Its shareholder equity is valued at 19.6 million yuan.

 

New Silkroutes said it intends to finance the acquisition with internal operation funds.

 

On Monday (Sep 18), the group said the deal will allow it to acquire assets such as the Hequ Operation Railway Dispatching Station through HYI, thus presenting an investment opportunity in China&rsquo s transportation industry.

 

&ldquo The proposed acquisition will allow the company to turn around its loss-making position. This may allow the potential for growth in the market capitalisation of the company, an overall increase in investor interest and consequently, improve the liquidity of the group,&rdquo it added.

 

Assuming that the acquisition had been completed on Jul 1, 2021, the group&rsquo s FY2022 loss would have stood at S$50.2 million as opposed to S$48.9 million.

 

Loss per share would also have increased to 24.1 Singapore cents, compared to 23.5 cents originally.

 

Had the acquisition been completed at end-June 2022, New Silkroutes&rsquo net tangible liabilities per share would have been at 13.3 cents instead of 14.1 cents.

 

As Kelvin Chong is a controlling shareholder of both New Silkroutes and Tianjin Zhoushun&rsquo s vendor, Beijing Luoke Business Management, this constitutes an interested person transaction and is subject to approval at an extraordinary general meeting to be convened.

 

Shares of New Silkroutes have been suspended since Nov 15, 2021.