Going concern issue raised at China Enersave and Sino Environment, they join the ranks of Celestial Nutrifoods, so are S-Chips a complete avoid now?
25 March 2009
The independent auditors of China Enersave and Sino Environment have raised going concern issues on these two S-Chips - they join the ranks of Celestial Nutrifoods which announced a similar concern by its auditors a few days ago? Their share prices tell all - they were market darlings but have fallen or should I say collapsed from grace.
Fortunately, this is not fraud but the questions that should be asked were the directors both executive and independent aware of the potential risks of these instruments when they decided to embark on them. Isn’t it the duty of independent directors as part of encompassed in their statement of corporate governance to review and evaluate business and financial risks of the company?
As these problems continue to surface, especially for S-Chips, their ability to use the Singapore capital market will diminish significantly as investors will have to accord a very high and large risk premium to such companies because of the perceived uncertainty in the area of risk management and corporate fraud - in lay mans terms low PER. I remember a seasoned investor telling me that he will avoid any China stock because he has no confidence in the management and the financial numbers – his comments are proving to be correct.
I believe that the authorities need to arrest this problem quickly by investigating for any possible breaches of duty by directors and professionals (financial advisers, auditors, etc.) and taking the necessary action to avoid a recurrence in the future.
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Kevin Scully on S-Chips listed in Singapore
Going concern issue raised at China Enersave and Sino Environment, they join the ranks of Celestial Nutrifoods, so are S-Chips a complete avoid now?
25 March 2009
The independent auditors of China Enersave and Sino Environment have raised going concern issues on these two S-Chips - they join the ranks of Celestial Nutrifoods which announced a similar concern by its auditors a few days ago? Their share prices tell all - they were market darlings but have fallen or should I say collapsed from grace.
Fortunately, this is not fraud but the questions that should be asked were the directors both executive and independent aware of the potential risks of these instruments when they decided to embark on them. Isn’t it the duty of independent directors as part of encompassed in their statement of corporate governance to review and evaluate business and financial risks of the company?
As these problems continue to surface, especially for S-Chips, their ability to use the Singapore capital market will diminish significantly as investors will have to accord a very high and large risk premium to such companies because of the perceived uncertainty in the area of risk management and corporate fraud - in lay mans terms low PER. I remember a seasoned investor telling me that he will avoid any China stock because he has no confidence in the management and the financial numbers – his comments are proving to be correct.
I believe that the authorities need to arrest this problem quickly by investigating for any possible breaches of duty by directors and professionals (financial advisers, auditors, etc.) and taking the necessary action to avoid a recurrence in the future.
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