Did The Disclaimer Of Audit Opinion On Vibrant Group Impact Investors’ Confidence

Vibrant Group (Vibrant, formerly known a Freight Links Express Holdings Limited) provides logistics, real estate, and financial services worldwide. It specialises in all types of logistics, and freight forwarding services for oil and gas, infrastructure development, power plant, and factory relocation.

Vibrant was recently the subject of the main business news headlines when its auditor, KPMG, issued a “Disclaimer of Opinion” audit report citing the inability to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the financial statements.

Vibrant disclosed saying that the Disclaimer of Opinion report pertaining to its BlackGold Group subsidiary undertook a deliberate act to destroy the company’s records.

Who Is BlackGold?

According to Vibrant’s Group Chairman, Mr. Sebastian Tan Cher Liang, he noted in FY18 Annual Report that Vibrant acquired Blackgold on 13 July 2017 on the premise that it was an opportunistic acquisition and was also at a time that management saw as a change to expand the logistics business into an integrated commodity logistics and trading business.

Vibrant acquired the 91.2 percent stake in the Australian Stock Exchange (ASX) – listed business through a scheme of arrangement approved by the Federal Court of Australia. However, Vibrant’s auditors, KPMG, subsequently discovered accounting discrepancies, and irregularities during the 2018 year-end audit (financial year ending 30 April 2018) in respect of the coal mining and trading receipts and sales invoices of some of the subsidiaries of Blackgold. This news sent the stock price of Vibrant plunging from around $0.30 to as low as $0.11. Vibrant closed 2018 at around $0.14 per share.

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Vibrant share price

Source: Phillip Securities

Following the discovery of discrepancies in Blackgold’s accounting records, a fire broke out in one of their subsidiaries on 09 August 2018, which Vibrant flagged as a potential deliberate act to destroy the accounting records. Subsequently, Vibrant then took the necessary steps to protect the Group’s interests, and decided to write off Blackgold in its entirety so that it can focus on recovery and revised strategy without distraction.

Financial Standing Of Vibrant

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financial standing

Source: FY18 Annual Report

Vibrant recorded a group net loss attributable to shareholders amount of negative $88.7 million in FY18. The revenue of $175.5 million was a decline of 4.9 percent from $184.6 million in FY17. The Company attributed the net loss due to the write-offs of its investment and receivables from Blackgold.

On a proforma basis, if the effects of Blackgold were excluded, the Freight and Logistics business continued to improve but was offset by lower performance at its Real Estate and Financial Services divisions.

The Company’s total cash and cash equivalents stood at $70.5 million. The Company’s short-term and long-term interest-bearing borrowings amounted to $232.9 million, and $18.8 million respectively. This makes the total interest-bearing borrowings to be $251.60 million as at the end of FY18.

Debt Ratios

 

FY18

FY17

Short-Term Borrowings  232,898  130,241
Long-Term Borrowings  18,750  112,136

Total Borrowings

 251,648

 242,377

Total Equity  301,278  464,371

Total Debt/Total Equity

83.5%

52.2%

As a result of the rise in short-term borrowings, the Company’s Debt to Total Equity rose from 52.2 percent in FY17 to 83.5 per cent in FY18.

 

1H18

1H17 (Restated)

Short-Term Borrowings  225,383  232,898
Long-Term Borrowings  18,550  18,750

Total Borrowings

 243,933

 251,648

Total Equity  301,135  301,278

Total Debt/Total Equity

81.0%

83.5%

Source: Company Reports

In the most recent financial statements, the Company recorded a Total Debt Equity ratio of 81.0 per cent as of the half-year ending 31 October 2018. This compares to 83.5 per cent in FY 2017. The Company did note that the HY 2017 financials are restated to take into account the writeoff of its Blackgold subsidiary.

Debt Repayment Schedule

The Company noted that there are about $120.2 million of fixed rate loans due in 2019. This is about 34.9 percent of the $344.09 million worth of total outstanding debts including finance lease liabilities as of end-April 2018.

In addition, Vibrant noted that in 2018, about $160.3 million of the loans and borrowings were reclassified as current liabilities arising from non-compliance with loan covenants.

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Debt repayment

Source: FY 2018 Annual Report

In an updated 31 October 2018 financial statements, management disclosed that the Company continues to be in a net current liability position due to reclassification of non-current to current liabilities of long term loans and borrowings of $90.0 million due between FY20 and FY22 and notes payable of $66 million.

The loans and borrowings remained under current liabilities although waivers have been obtained before 31 October 2018 in respect of the loan covenant breaches, as the waivers will lapse at the earlier of 31 December 2018 or issuance of the Special Audit Report. Hence, it continues to present the long term loans and borrowings under current liabilities.

Valuation Measures

 

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valuation vibrant

  Source: Yahoo! Finance Singapore (28 December 2018)

While the price-to-sales and price-to-book multiples looked relatively reasonable and below one time, the Company’s overall debt and cash positions remain a concern. Other notable concerns include the uncertainties over the extent of the write-off of its Blackgold subsidiary, and should it ensure that its audit reports have ‘Unqualified’ opinions going forward.

With a current market capitalisation of around $102.51 million, and low three-month average trading volume of 119,230 shares, and share float of 210.7 million shares, potential investors seeking to trade the counter might encounter difficulties in selling or buying the counter.

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Source : https://sg.finance.yahoo.com/news/did-disclaimer-audit-opinion-vibrant-082755408.html

Did The Disclaimer Of Audit Opinion On Vibrant Group Impact Investors’ Confidence?
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