Auditor casts going concern doubts on Damansara Realty

KUALA LUMPUR (May 31): Damansara Realty Bhd’s external auditor has issued a statement regarding a material uncertainty in the financial statements of Damansara Realty that may cast significant doubt on the company’s ability to continue as a going concern.

The auditor, Messrs Jamal Amin and Partners, drew attention to Damansara Realty’s financial statements for the year ended Dec 31, 2016 (FY16), when it incurred a net loss of RM27 million.

“... and as of that date, the group’s current liabilities exceeded its current assets by RM155 million. As stated in Note 2.1, these events or conditions, along with other matters as set forth in Note 2.1, indicate that a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter,” read Jamal Amin and Partners’ statement, as cited in a Damansara Realty bourse filing yesterday.

In Note 2.1, when noting that the group’s current liabilities exceeded its current assets, the auditor said this mainly arose from “due and payable payments from a development rights agreement, [which were] payable to Johor City Development Sdn Bhd (JCDSB) on Dec 31, 2016”.

Nevertheless, the auditor has expressed its unqualified opinion on Damansara Realty’s FY16 financial statements, said Damansara Realty.

Further, Damansara Realty said it had commenced the process of addressing its current liabilities position which had exceeded current assets, which it said came about because JCDSB had agreed to appoint Damansara Realty Johor Sdn Bhd, a subsidiary of the company, as the developer for Taman Damansara Aliff.

“On Oct 14, 2016, Damansara Realty had entered into a settlement agreement with JCorp (Johor Corp), JCDSB, and Johor Land Bhd for the proposed settlement of [the] amount owing to JCDSB. On April 11 this year, Damansara Realty obtained shareholders’ approval on the proposed settlement of [the] amount owing to JCDSB. The finalisation of the settlement agreement is pending approval from the Economic Planning Unit,” it added.

The group expects the settlement agreement to be finalised by the end of 2017’s third quarter.

Meanwhile, it said it is exploring options of fundraising to improve its net current liabilities position.

In FY16, Damansara Realty’s net loss expanded to RM27 million from RM4.38 million in FY15, as revenue fell 12% to RM183.2 million from RM207.22 million.

The weaker earnings were largely due to a reduction in gross profit margin as its property development and property services segments recorded losses, and higher operating expenses due to provision of doubtful debts and receivables written off.

Damansara Realty’s share price closed unchanged at 66 sen yesterday, bringing a market capitalisation of RM204.2 million.

This article first appeared in The Edge Financial Daily, on May 31, 2017.

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