KUALA LUMPUR (February 15): Independent investigative accountant Ferrier Hodgson MH Sdn Bhd (FHMH) has found that the allegation of the purported inflation of revenue and profit after taxation (PAT) or overstatement of sales for Asia Media Group Bhd's financial statements appears to be remote.

The findings report issued by FHMH was received by Asia Media on Tuesday (February 14) following the appointment of FHMH as the company's independent accountant in December last year, the transit television network provider said in a stock exchange filing.  

The appointment of FHMH came after Asia Media received queries from Bursa Securities pertaining to a complaint against the company concerning the company's financial result for the full-year ended March 31, 2022 (FY2022) and the subsequent quarterly results for the first quarter ended June 30, 2022 (1QFY2023) and the second quarter ended September 30, 2022 (2QFY2023) (in a total duration of 18 months).

FHMH was responsible for conducting a thorough review of the complaints against Asia Media concerning the company's financial results mentioned above.

During the period under review, Asia Media recorded cumulative revenue of RM18.73 million and a PAT of RM8.5 million.

"The aforesaid PAT included a one-off other income of RM3,338,635.09, being an accounting gain due to the deconsolidation (deemed disposal) of Asia Media Sdn Bhd (AMSB) from the Asia Media Group as AMSB was wound-up on April 9, 2021 with control passing to the official receiver (Jabatan Insolvensi Malaysia).

"As such, in essence, the net profits generated by Asia Media Group from its operating activities during the period (under review) were approximately RM5.162 million," FHMH said in a report.

FHMH also added that most of the company's revenue recorded during the period under review was contributed by MMM Creative Sdn Bhd (MMMC), whose principal activity is the production of digital marketing and advertising content.  

Meanwhile, FHMH revealed that all of Asia Media's billings to its major customers had been collected. The proceeds collected were utilised for transactions that could be independently verified with no material misstatement observed and accounted for by Asia Media.

The group's major customers, except for two, of AMSM and MMMC have confirmed in writing that the services provided by AMSM and MMMC had been completed. AMSM is involved in the sales and marketing of digital marketing and advertising products and services.

The aforesaid collections were mainly utilised to fund Asia Media's working capital. Of which, some RM3.443 million was used for the company's capital expenditure for plant, property and equipment mainly for the purchase of advertising standee and elevator projectors.

Another RM5.5 million has been paid to Setia Media Sdn Bhd for the collaboration agreement to erect, construct and operate four identified gantries, while RM500,000 has been paid as sponsorship fees for the sponsorship agreement with KH Worldwide Sdn Bhd for the "Jejak Juara" project.

Apart from that, FHMH explained that Asia Media's negative cashflow was mainly due to the company having to utilise most of its available internal funds to discharge its payment obligation under the collaboration agreement, which was originally intended to be funded via the proceeds from the proposed private placement and proposed rights Issue with warrants (that is still pending Bursa approval).

Meanwhile, FHMH said the low trade payable recorded by Asia Media during the periods were mainly due to the nature of the business activities of AMSM and MMMC, where the placement of online advertisements and creation of digital advertisement contents to outsource parties were mostly on cash terms, and most of the revenue recorded by MMMC during the periods were advisory in nature (mostly staff costs).

Asia Media slipped into Practice Note company (PN17) status in October 2019 after its shareholders' equity fell to less than 25% of its issued capital.  

Shares in Asia Media settled unchanged at 15.5 sen, giving the company a market capitalisation of RM48 million.