Quick take: Zecon slips 11% after auditor casts going concern doubts

  • Stock on the Move
  • Monday, 11 Nov 2019

KUALA LUMPUR: Shares in ZECON BHD fell 10.96% in early trade Monday after its auditor Messrs Crowe Horwath casts highlight potential going concern issues.

The engineering services company fell 10.96%, or four sen to 32.5 sen with 781,900.

Zecon’s auditor Messrs Crowe Horwath has highlighted a material uncertainty in the group’s financial statements for the financial year ended June 30,2019 (FY19).

As a result, this has cast doubt on the company’s ability to continue as a going concern.

Crowe Horwath said the group recorded revenue and cost from construction contracts of RM221.46mil and RM236.90mil respectively for FY19.

The auditor said construction activities represent the largest revenue stream for Zecon.

“Significant management judgements and estimation are involved in the recognition of the revenue and its associated costs.

“Significant judgement and estimation are also required in determining the stage of completion, gross profit margin, provision for foreseeable losses and liquidated ascertained damages, if any, ” it said.

“These estimations are subject to uncertainties that depend on the outcome of future events. We determined this to be a key audit matter due to the complexity and judgemental nature of these activities, ” it added.

The auditor also raises questions on the valuation of the company’s investment properties due to the complexities in determining the fair value of the investment properties.

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