WHILE mainboard-listed Tee International returned to the black in the second quarter, the Singapore Exchange raised queries as to whether the group will be able to fulfil its obligations on S$44 million in loans, given that repayments on them fall due in a year or less.

 

In a bourse filing on Tuesday, Tee International said that it will be able to meet its debt obligations as and when they fall due. The firm' s cash balance stood at S$21.2 million as at Nov 30, 2020.

 

The group elaborated that the S$39.7 million in secured borrowings are related to financing the group' s ongoing engineering projects. This will eventually be repayable from the cash generated through trade receivables of S$29.6 million and contract assets of S$128 million.

 

In addition, the S$4.3 million in unsecured borrowings are general financing lines used mainly for general working capital, said Tee International.

 

Despite the lower revenue, Tee International swung into profitability for the half year ended Nov 30, 2020, recording a profit after tax of S$1.8 million from a loss after tax of S$41.1 million a year ago.

 

This was the result of several cost-cutting initiatives and lower administrative expenses and finance costs following the repayment of borrowings and notes payable in the prior year, it said.

 

The group also pointed out that its outstanding order book as at Nov 30, 2020 amounted to S$251.2 million.

TEE International has redesignated its interim group chief executive Eric Phua Boon Kin to group chief executive, the engineering firm said in a filing to the Singapore Exchange on Sunday.

 

Mr Phua has been with the company since 2008, when he was first designated executive director, and served as deputy group managing director before taking over as interim CEO from his older brother Phua Chian Kin in Sept 2019. Mr Phua Chian Kin was relieved of his role and duties as group chief executive and managing director after a series of unauthorised transactions totalling S$6.55 million were discovered.

TEE International on Monday said independent auditor Foo Kon Tan LLP issued a disclaimer of opinion on the group' s financial statements for the financial year ended May 31, 2020.

 

Foo Kon Tan LLP said in its report that it was not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the financial statements.

 

Although the work of internal and external investigators appointed to investigate the facts and circumstances surrounding the group' s unauthorised remittances made in the previous financial year concluded, there has been no further update on the probe started by the Commercial Affairs Department (CAD) of the Singapore Police Force as at the date of the auditor' s report. The CAD had started an investigation and requested further information.

 

" The outcome of the CAD investigation could provide other information or findings that may have an impact on the financial statements," Foo Kon Tan LLP said. As such, it is not able to determine any adjustments that may be required and whether there will then be an impact on the accompanying financial statements.

 

Unauthorised remittances totalling about S$6.6 million were made in fiscal 2019. Of this amount, about S$3.6 million was repaid in the same year and the remaining S$3 million was repaid in fiscal 2020.

 

Next, the auditor was not able to obtain sufficient appropriate audit evidence on Tee International' s statements of financial position as at June 1, 2019, as well as components making up former subsidiary Tee Land' s contribution of S$30.8 million to losses for the fiscal year.

 

Tee International had disposed of Tee Land during the fiscal 2019 year to a unit of Malaysia' s Amcorp Group for S$50.6 million in cash.

 

Lastly, the outcome of various claims made against Tee International in the engineering segment, as well as counterclaims " cannot be determined with reasonable certainty" .

 

Foo Kon Tan LLP said it was not able to obtain sufficient appropriate audit evidence on the amount of any liability arising, or to quantify if the provision for defects liability, contract assets and cost of sales was appropriately stated in the financial statements.

 

Consequently, it was not able to ascertain whether the going concern basis of preparation of the financial statements was appropriate.

 

Tee International on Monday separately gave notice that it recorded pre-tax losses for three consecutive years. Its six-month average daily market capitalisation is S$19.4 million as at the same day.

 

According to bourse listing rules, mainboard-listed companies will be placed on the watch list under the financial entry criteria if they record pre-tax losses for the three most recently completed consecutive financial years, and fail to maintain an average daily market cap of at least S$40 million over the last six months.

 

TEE International said in a bourse filing on Saturday that MDIS (Malaysia) Sdn Bhd has commenced two sets of arbitration proceedings against its wholly-owned Malaysian subsidiary TEE E& C Malaysia Sdn Bhd and the company in Singapore on March 6, 2020.

 

The arbitration proceedings are in respect of disputes between MDIS (Malaysia) and TEE Malaysia from a construction contract dated June 30, 2014, in which Tee International is the guarantor under the contract.

 

On Sept 26, 2019, prior to the arbitration proceedings filed by MDIS (Malaysia) against TEE Malaysia and the company, TEE Malaysia had filed an adjudication application in Malaysia against MDIS (Malaysia) for outstanding payments. The adjudication determination was issued on March 16, 2020 to both parties.

 

Following the issuance of the adjudication determination, TEE Malaysia had proposed a settlement with MDIS (Malaysia) based on the conditions set out in the adjudication determination. However, it had rejected TEE Malaysia' s proposed settlement and initiated the arbitration proceedings.

 

TEE International has filed an application to stay the Singapore arbitration pending the resolution of the Malaysia arbitration, supported by the company' s undertaking be bound by the outcome of the Malaysia arbitration.

 

The group said that it intends to " vigorously pursue" its defence, and that it will continue to work closely with its legal counsel on the arbitration proceedings.

 

It will provide updates at the appropriate juncture if and when there are material developments on this matter, it added.