Auditor casts going concern doubts on Karambunai

KUALA LUMPUR (July 31): Karambunai Corp Bhd's external auditor has highlighted a material uncertainty in the group's financial statements that may cast significant doubt on its ability to continue as a going concern.

Messrs UHY referred to Karambunai's accounts for the year ended March 31, 2017 (FY17) where the group incurred negative cash flows from operating activities of RM53.42 million, and saw current liabilities exceeding current assets by RM98.3 million despite having a net profit of RM18.89 million.

"These conditions indicate the existence of material uncertainties which may cast significant doubt on the ability of the group to continue as going concern and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business," UHY said in its report on Karambunai forwarded to Bursa Malaysia.

The auditor said the validity of the going concern assumption is dependent upon the ability of Karambunai to generate sufficient cash flow from its operation as well as the continuing financing support from its major shareholder.

Consequently, the major shareholder has given Karambunai RM29 million in borrowings to enable the group to continue as a going concern.

"Subsequent to the financial year end, the group has obtained advances from the major shareholder of approximately RM29 million for working capital purposes," noted UHY.

Nevertheless, the auditor has expressed its unqualified opinion on Karambunai's FY17 financial statements.

Karambunai said in the Bursa filing that it has started the process of addressing the material uncertainty, whereby the financial performance of Nexus Resort & Spa Karambunai, the group's principal operating unit, has started showing positive results and generating positive operating cash flow.

"The better financial performance is as a result of our continuous efforts to update the resort with a phased refurbishment exercise to drive revenue," the group said.

Meanwhile, the group said it is exploring options of fundraising to improve its net current liabilities position, noting that it expects a timeline of 24 months to address the issue.

In FY17, Karambunai's unaudited revenue expanded by 55.6% to RM81.051 million from RM52.094 million in FY16, translating to a net profit of RM19.005 million compared to a net loss of RM23.376 million in the previous year.

The better performance was in line with the higher revenue for the year, corresponding to an increased contribution by both the leisure and tourism, and property development and construction segments, the group reported.

At 4pm, Karambunai's share price was down 0.5 sen or 7.69 % at 6 sen, giving it a market capitalisation of RM375.48 million. — theedgemarkets.com

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