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Following MEMS' announcement that its auditors raised concerns over certain transactions, analysts have either downgraded or terminated coverage on the stock
By Adeline Paul Raj and Chong Pooi Koon Published: 2007/11/28
MEMS Technology Bhd, which lost almost half its market value yesterday, is being probed by the Securities Commission (SC) for possible accounting irregularities.
Analysts downgraded or terminated coverage on the stock yesterday after auditors, KPMG, raised concerns over the technology firm's accounts.
"The SC is investigating MEMS for possible irregularities in their financial statements," an SC spokesperson told Business Times yesterday.
Shares of the Mesdaq-listed firm nosedived yesterday, letting off 16 sen (or 44 per cent) to close at an all-time low of 20 sen. The stock fell by as much as 17.5 sen (47 per cent) earlier in the day.
It was the day's most active counter, with some 63 million shares traded, almost 13 times more than the previous day's volume.
Credit Suisse, which previously had an "outperform" recommendation on the shares with a target price of RM1.06, dropped coverage on the stock yesterday.
OSK Investment Research downgraded the stock to "sell" from "neutral" before, with a target of 29 sen while Kenanga Investment Research cut it to a "hold".
MEMS announced late on Tuesday that its external auditors were concerned about certain transactions relating to revenue and property, plan and equipment.
As a result, the company - which had been seeking a listing transfer to the main board - resolved not to recognise RM19.72 million of its revenue, leading to a 27 per cent lower unaudited revenue and a 37 per cent lower net profit for 2007.
This means that compared to a year ago, its revenue grew by only seven per cent to RM53.7 million and its net profit fell by 3.7 per cent to RM13.5 million.
MEMS appointed a committee comprising independent directors to consider matters highlighted by the external auditors, including the mandate to hire a professional firm to carry out a special audit.
OSK believes there will be further selling pressureon the stock until its audited financial statements for 2007 are out.
MEMS has already said that it will not be able to meet the November 20 deadline for release of its audited results.
KPMG, when contacted, confirmed that it was MEMS' appointed auditors, but declined to comment due to client confidentiality.
1. The Board of Directors of MEMS wishes to announce that Bursa Malaysia Securities Berhad has, via its letter dated 4 December 2007, rejected the Company’s application for an extension of time of 45 days from 30 November 2007 to submit its’ Audited Financial Statements for the financial year ended 31 July 2007.
2. The Board of Directors of MEMS (“Board”) wishes to announce that CIMB Investment Bank Berhad (“CIMB”) has on 5 December 2007 given the Company 2 months’ notice in writing of CIMB’s intention to resign as Sponsor. The reasons for resigning as Sponsor is because the Company did not accept the letter of appointment from CIMB within the stipulated timeframe as indicated in CIMB’s offer letter and following thereto, CIMB did not make another offer to the Company. The Board will endeavour to appoint a replacement Sponsor within the above notice period and make the relevant announcement upon appointment of the new Sponsor.
14-12-2007: Major MEMS Tech shareholder disposes of 1.8m shares
By Surin Murugiah
AKN Equity Ventures Sdn Bhd, a substantial shareholder of MEMS Technology Bhd which is being investigated by the Securities Commission for possible irregularities in its financial statements, has reduced its direct shareholding by selling 1.8 million shares or a 0.27% stake in the open market.
A filing with Bursa Malaysia on Dec 12 showed that after the disposals on Dec 7, 10 and 11, AKN Equity’s direct interest in the Mesdaq company was reduced to 126.9 million shares or 19.35%. The share price closed at 21, 20.5 and 20 sen respectively on the three days.
MEMS share price tumbled 16 sen or almost 45% on Nov 28 after the company told Bursa Malaysia it could not issue the audited accounts due to concerns over certain transactions.
Subsequently, the counter has been hovering between 19.5 sen and 21.5 sen with an average of 5.64 million shares traded daily.
On Nov 30, the company said it was not able to issue its audited financial statements for the financial year ended July 31, 2007 for public release, within the four months from close of the financial year, which falls on Nov 30.
”The board of directors of MEMS wishes to announce that the company is not able to issue its audited financial statements by Nov 30, 2007, as the company’s external auditors have expressed concerns over certain transactions relating to revenue and property plant and equipment.
”In light of the above, and after due deliberation, the board has resolved not to recognise revenue of RM19.72 million. As a result of this, the unaudited consolidated revenue for the financial year ended July 31, 2007 will be revised to RM53.7 million.
This will consequently result in the unaudited profit after tax for the financial year ended July 31, 2007 to be reduced from RM21.47 million as announced on Sept 27, 2007 to RM13.45 million,” it said.
Bursa Malaysia Securities on Dec 4 rejected the company’s application for an extension of 45 days from Nov 30, 2007 to submit its audited financial statements for the financial year ended July 31, 2007 (FY07).
Late last month, a SC spokesperson confirmed that the company was being investigated for possible irregularities in its financial statements.
27-12-2007: Bursa rejects MEMS Tech’s application for extension
KUALA LUMPUR: MEMS Technology Bhd said yesterday its application for an extension of 45 days from Dec 31, 2007 to finalise and issue its unaudited quarterly results for the financial period ended Oct 31, 2007 has been rejected by Bursa Malaysia Securities Bhd.
The company gave no other details. MEMS Tech had requested the extension as the special audit of its accounts was in the process of being finalised. Its independent audit committee had appointed external auditors Atarek Kamil Ibrahim & Co to conduct the audit.
MEMS TEch had previously applied for an extension of 45 days from Nov 30 to submit its accounts for the financial year ended July 31, 2007. However, that was also rejected by Bursa Securities.
The company has been unable to issue its audited financial statements for the 2007 financial year within four months from the close of the financial year. MEMS Tech has said its auditors had expressed concerns over certain transactions concerning revenue and property plant and equipment.
Following its board’s decision not to recognise revenue of RM19.72 million, its unaudited revenue for its 2007 financial year has been revised to RM53.7 million, leading to its unaudited net profit for the year being reduced from RM21.47 million to RM13.45 million.
The Securities Commission has started a probe into the company for possible irregularities in its financial statements.
