By Khairie Hisyam
ACE market-listed Scan Associates Bhd has filed legal action against Bursa Malaysia over its reclassification as a Guidance Note 3 (GN3) company on May 8, obtaining a temporary court injunction to stay the reclassification pending a court ruling.
In a regulatory filing, Scan Associates said Bursa Malaysia issued a directive on May 8 instructing the company to announce that its latest quarterly results had triggered rules 2.1 (b) and (c) of GN3.
“The company disagrees with the directive and has appointed solicitors to file a legal action against Bursa Malaysia,” said the company. “The suit was filed on May 10, 2015 against Bursa Malaysia to, inter alia, nullify the directive and to seek damages.”
On May 11, the High Court granted the company ad-interim injunction to stay Bursa Malaysia’s reclassification of the company, which will be binding until the High Court decides on the matter at 4pm on May 18, 2015.
The rules in question stipulate the conditions which if triggered would compel affected companies to comply with GN3, essentially a flag for financially distressed companies.
Rule 2.1 (b) outlines a loss in any one full financial year commencing on or after its listing which equals or exceeds its shareholders’ equity by the end of that financial year. Another condition of is that shareholders’ equity is equal to or less than 50% the issued and paid up capital of the company at the end of that financial year.
Rule 2(1) (c) flags companies which has incurred aggregated losses in any two consecutive full financial years beginning on or after its listing:
- which exceed its shareholders’ equity in that financial period;
- where the loss incurred in the second full financial year of that period is 50% or more of the loss incurred in the first full financial year of that period; and
- where shareholders’ equity is equal to or less than 50% of the issued and paid-up capital of the company at the end of that financial period.
Triggering these rules would require a flagged company to immediately announce its GN3 status and to submit a regularisation plan to Bursa Malaysia within 12 months of announcing the status.
According to Bursa Malaysia’s website, there are three GN3 companies at present. They are asiaEP Resources Bhd, Cybertowers Bhd, and R&A Telecommunications Group Bhd.
Scan Associates was suspended from trading for one hour up to 10am today. At 4.49pm, the counter was last traded at 4.5 sen, down 1.5 sen. It had been falling this month from about 12.5 sen in end-April.
‘No means to announce’
Scan Associates also said it had no means to announce Bursa Malaysia’s directive on the GN3 reclassification as its company secretaries had left.
Based on regulatory filings both Scan Associates’ company secretaries, Lim Hui Lee and Wong Keo Rou, resigned from the company on May 8, the date of the Bursa Malaysia directive.
The reclassification was allegedly triggered by the company’s financial results for the fourth quarter ended Dec 31, 2014 (4Q14), which was announced to Bursa Malaysia on Feb 27, 2015.
For that quarter, Scan Associates posted RM4.9 million revenue, a 53% drop compared to RM7.5 million the previous corresponding quarter. Meantime, pre-tax profit of RM230,000 in 4Q13 turned to pre-tax loss of RM1.1 million in 4Q14.
Scan Associates attributed the quarterly pre-tax loss to higher operating expenses and impairment. For 4Q14, its operating expenses rose 13% year-on-year to RM3.7 million
While for FY14, Scan Associates posted a pre-tax loss of RM6.56 million, nearly tripled the pre-tax loss in the previous financial year, while revenue more than halved to RM11.8 million.
The company bills itself as an ICT security solutions provider and has implemented more than RM200 million worth of ICT security projects in Malaysia, said its website.
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