Goh: Company’s cashflow proves profit is real
KUALA LUMPUR: Malaysian billionaire Goh Peng Ooi said the board of Silverlake Axis Ltd has deliberated over the issues raised in an anonymous blog and found no issue with the tech company’s accounts.
He said Silverlake has engaged the Singapore Stock Exchange (SGX) to explain its side of the story and will hire a third-party consultant to go through the data again.
“Everything is in order. The company has been growing since the assets were injected,” he told StarBiz yesterday. Goh, with a 67% stake in Silverlake, is the founder and group executive chairman of the company.
Silverlake shares, listed on SGX, tumbled 24% on Friday to 63.5 cents after a 42-page report entitled “The Unbelievable Financial Alchemy of Silverlake Axis” and authored by “razor99” was released on Thursday night. Silverlake’s stock has been voluntarily suspended from trading as of yesterday.
The report placed a 29-cent target on Silverlake shares, as it alleges that Goh operated a large group of companies, collectively known as the Silverlake group, which encompassed a complex web of murky, private companies connected to the listed entity.
It said the listed company engaged in extensive related-party transactions with Goh through these private companies, while disclosure of these transactions lacked clarity.
The report added that there were numerous red flags and ample evidence suggesting that Goh has used these related-party transactions to inflate Silverlake’s reported results.
It said the listed company also has loss-making related parties, which employ a large number of Silverlake group employees.
“These hidden entities are undisclosed contingent liabilities to the listed company.”
The report said there were large related-party Silverlake-group private companies that were loss-making with negative shareholder equity.
These companies only continue to operate with an explicit guarantee of financial support from Goh.
The report noted that these entities were known to have ongoing related-party transactions with the listed company and they have a combined cost base almost as large as the listed company, with almost as many employees.
The report noted that these entities were being used to flatter the listed company’s profitability, whereas in reality, they were contingent liabilities that should be disclosed in the annual report.
Goh disputed the allegations and said the structure of Silverlake group was complex, owing to the nature of its business and the history of the company.
He said rules and regulations were followed and that the group has made proper disclosure in the corporate exercises it undertakes.
He said that as a MSC-status company, Silverlake had to ensure that its accounts were proper and in order.
Failure to do so would have meant a big penalty being levied on the company, as it benefits from tax breaks as a MSC-status company.
“If you want the tax exemption, you must have good accounting,” he said.
Silverlake released its full-year financial results on Monday.
In its latest financial year ended June 30, 2015, Silverlake posted a net profit of RM282.7mil.
Goh pointed out that for the year, Silverlake recorded an operating cashflow of RM305.5mil, out of which it paid RM285.8mil as dividends.
He said if Silverlake had posted just a paper or inflated profit, the company would not be able to pay out such a quantum of dividends in cash.
“We dividend out most of our profits,” he said.
Goh said he took the criticism in his stride, as the lines of responsibility were clear within the company.
He said the board of directors had control over the running of the company and his passion and interest were skewed towards research.
“My character is more academic and I don’t care what others think about me. But I do take people’s criticism as an education process,” he said.
“It’s my responsibility as a supplier and majority shareholder to develop software. The listing side of the business is left to the board.”
Penang-born Goh, 61, made it to the Forbes Malaysia rich list at number nine this year, with an estimated net worth of US$1.6bil (RM6.7bil). Although listed on the Main Board of the SGX, Silverlake is headquartered in Petaling Jaya.