This article first appeared in The Edge Malaysia Weekly on January 15, 2024 - January 21, 2024

THE collective market value of three counters — Rapid Synergy Bhd, YNH Property Bhd and Imaspro Corp Bhd — plunged by RM2.66 billion last week. That effectively is the paper loss of investors in these highly illiquid companies where the major shareholder is low-profile Datuk Dr Yu Kuan Chon.

These three companies topped Bursa Malaysia’s losers list for three consecutive days and were issued notices of unusual market activity (UMA).

The sell-off last week was an extension of the slide in the share prices of the three companies that started late last year. Should the decline in the share price over the last three months be taken into consideration, a total of RM3.73 billion in market value has been lost.

The company that saw the sharpest drop in share price among the three is Rapid Synergy, which fell 64.4% in just a week. YNH and Imaspro declined by 31.7% and 55.4% respectively.

Yu, a medical doctor turned prominent investor, saw his paper wealth shrink by RM1.03 billion due to the crash in the share prices of the three companies, which left many market observers puzzled.

Responding to questions from The Edge, Yu says it is business as usual for the group. “In relation to the reason behind the sell-off of YNH shares and the movement of its share price, we are not able to speculate as the trading of shares and share price movements are determined by market forces.”

He declined to comment on Rapid Synergy and Imaspro as he has no management role in these companies.  Yu is currently the chairman and executive director of YNH.

It is worth noting that Yu is the single largest shareholder of Rapid Synergy and YNH, controlling 22.8% and 32.6%, respectively of the companies. Meanwhile, in agrochemicals group Imaspro, he is the second largest shareholder with 14.6% equity interest.

Yu stresses that the recent sell-off of YNH shares does not impact the business operations and strategic direction of the company.

“It is business as usual and YNH will continue to be focused on delivering tangible value creation to its shareholders and stakeholders in a sustainable manner.

“YNH remains cautiously optimistic about the property market moving forward. We are pleased to note that our current project, Solasta Dutamas, is doing well as the first two towers are now fully sold while the final tower has garnered a positive response from prospective homebuyers,” he says.

The development, he adds, has an estimated gross development value (GDV) of RM771 million, which will contribute positively to the company in its financial years 2024 and 2025.

In addition, he says, YNH is in the process of preparing to launch several property developments, including the first phase of a project in Genting Highlands, Pahang, which has a GDV of RM700 million.

The group is also planning to venture into property projects in Negeri Sembilan after securing a development order from the Kuala Pilah District Council for a 2,200-unit mixed-use township with an estimated GDV of RM600 million.

“We are also in the planning stage to develop about 300 acres of land in Tanjung Malim [Perak] into a township of more than 3,000 mixed-use units. In view of these developments, YNH is well poised to enhance value for our shareholders in the foreseeable future,” Yu says.

In a reply to Bursa Malaysia after being slapped with UMA queries, industrial mould manufacturer Rapid Synergy said its management is currently considering proposals to sell certain landed properties owned by the company and its subsidiaries. However, it said these proposals are still in the discussion stage.

Meanwhile, agrochemicals and pest control-related products manufacturer Imaspro says there is no corporate development in the company that has not been previously announced that may account for the sharp drop in its share price.

The companies are also unaware of any rumour or report concerning their business and affairs as well as any possible explanation regarding the groups that may account for the UMA, according to both companies.

A source says the issues in these companies emerged after several postings on Facebook and unverified blogspot  were circulated alleging that these companies were involved in scams.

“This has made a lot of people uncomfortable, especially over insufficient disclosures that were also highlighted by their external auditors,” the source says, adding that changes in the financial year ends have also raised concerns about these companies.

Recall that in November last year, KPMG flagged certain items in Rapid Synergy’s financial statement for the period of Jan 1, 2022, to June 30, 2023 (FPE2023), namely, insufficient disclosures and evidence of RM4.43 million in rental income, a RM2.32 million gain from the disposal of property and deposits paid for the acquisition of properties.

Later that month, Rapid Synergy’s shareholders voted against the reappointment of KPMG as the group’s auditor. Last Monday, Rapid Synergy announced Morison LC PLT as its new external auditor.

As for YNH, in October last year, its external auditor Baker Tilly Monteiro Heng issued a qualified opinion on the company’s financial statement for its 18 months ended June 30, 2023 (FPE2023) in relation to its joint venture (JV) and turnkey contracts for property development works.

Then, on Nov 6, YNH’s three-member audit committee expressed its intention to appoint a professional firm for an independent review of the company’s JV and turnkey construction agreements entered into between wholly-owned subsidiary Kar Sin Bhd and various landowners.

This was revealed after Bursa Malaysia queried the company on the reason for appointing a professional firm to conduct an independent review when YNH had already appointed law firms Benjamin Dawson (BD) and Samir Sumathi Fernando & Co (SSF & Co) on April 3 and April 27 last year respectively, to provide a legal opinion on the matter.

“In view of a series of articles published on news portals or websites containing serious allegations, accusations and inferences against the company and its directors, the external auditors have requested the management to conduct an independent legal opinion in regard to the joint venture and turnkey construction agreements entered into by YNH Group,” it said in an exchange filing.

YNH stated that BD and SSF & Co were appointed by the management, and as the inventories related to the JV and turnkey construction contracts qualified by the external auditor amounting to RM1.1 billion “were substantial”, the audit committee deemed it appropriate to appoint a professional firm to conduct an independent review and report directly to them.

The findings of the law firms seem inconclusive, with one saying the agreements do not appear to be scams as alleged on the web. But less than a month later, the audit committee’s chairman Oon Seow Ling and Baker Tilly informed the board that they would not be seeking re-election at the annual general meeting in December.

Prior to the plunge in Rapid Synergy and YNH’s share prices, their sharp rise over the last three years had drawn scrutiny.

From early 2021, Rapid Synergy’s share price rose more than fourfold to as high as RM29.50 apiece on Dec 12, 2022, giving it a staggering historical price-earnings ratio (PER) of more than 215.8 times, prior to realising gains from asset disposal for the first quarter ended Sept 30, 2023. 

Sometime in September last year, Rapid Synergy’s PER stood at a whopping 2,600 times. Even with its pummelled share price, Rapid Synergy’s valuation stood at 70 times last Friday.

As for YNH, the counter doubled in value in the last three years to hit RM5.20 on May 5, 2023, while Imaspro more than tripled to RM6.20 on Dec 10, 2022, from early 2021.

Earnings-wise, Rapid Synergy’s net profit has been trending downwards over the last three years. It made a net profit of RM1.74 million in FPE2023, much lower than the annual net profit of RM3.46 million in FY2021 and RM5.2 million in FY2020 despite the expanded financial period due to the group’s change in financial year-end to June 30 from Dec 31. It kicked off FY2024 with a net profit of RM13.85 million for the three months ended Sept 30, 2023, boosted by a gain from the disposal of investment properties.

Similarly, YNH changed its financial year-end from Dec 31 to June 30. The loss-making company posted an annual net loss of RM2.79 million in FY2021, which swelled to RM14.59 million in FY2022 and further to RM18.23 million in FPE2023.

In the first quarter of FY2024, YNH remained in the red with a net loss for the July-September period widening to RM10.22 million from RM2.22 million a year before, despite revenue rising 19% to RM62.74 million from RM52.84 million. The quarterly performance was dragged down by higher cost of sales, expenses and lower other income.

In contrast, Imaspro’s earnings have been relatively stable over the years. It made an annual net profit of RM1.82 million in FY2021, RM2.19 million in FY2022 and RM1.81 million in FY2023. In its first quarter ended Sept 30, 2023 (1QFY2024), Imaspro posted a net profit of RM2.08 million, up 34% from RM1.55 million previously as revenue grew 13% to RM14.41 million from RM12.78 million.

While Yu has been trying to assure investors that the fundamentals of YNH remain intact, the market is likely to be cautious for the immediate term on all three stocks. 

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