This article first appeared in The Edge Malaysia Weekly on November 6, 2023 - November 12, 2023
Last Wednesday, Rapid Synergy Bhd’s external auditor KPMG PLT issued a qualified opinion on the Penang-based precision tool-making company’s financial statements for the 18-month period ended June 30, 2023 (FPE2023).
This was due to insufficient disclosures over a RM4.43 million rental income, a RM2.32 million gain from the disposal of property and deposits paid for the acquisition of properties, that were recognised during the financial period.
In an independent auditor’s report, KPMG said it could not confirm the appropriateness and veracity of Rapid Synergy’s RM4.43 million rental income recognised for FPE2023. The rental income is in relation to the renting of two properties to an entity, that was a former subsidiary of the group.
Moreover, KPMG said it was “unable to obtain sufficient appropriate evidence” on the gain of RM2.32 million from the disposal of an 80,000 sq ft piece of freehold land by Rapid Synergy’s wholly-owned subsidiary Persiaran Eksklusif Sdn Bhd (PESB) for RM4.16 million cash to an entity last year.
Rapid Synergy’s single largest shareholder is its non-executive director Datuk Dr Yu Kuan Chon, who had an equity interest of 22.81% in the company as at Oct 6. A medical doctor, 61-year-old Yu is better known as the executive chairman of YNH Property Bhd.
His elder brother and alternate director Datuk Yu Kuan Huat also owns a 3.9% stake in Rapid Synergy.
Other prominent names among its 30 largest shareholders include Fiamma Holdings Bhd (0.935%) and Datuk Jimmy Doh Jee Ming (0.888%).
Fiamma is an electrical home appliance distributor controlled by Chin Hin Group Bhd founder Datuk Seri Chiau Beng Teik and his son Chiau Haw Choon. Doh is the managing director and major shareholder of Main Market-listed Lagenda Properties Bhd, a Perak-based property developer specialising in affordable housing.
With a share base of 106.896 million, shares of Rapid Synergy have largely been thinly traded until August this year.
According to Bloomberg data, the counter’s 15-day simple moving average trading volume had increased from 35,806 shares in early August to 73,260 shares in early September, before surging further to 0.158 million shares in early October and 0.375 million shares on Nov 3.
It has not gone unnoticed that Rapid Synergy’s stock price had gained 65% year to date, 77% over the past 12 months, and more than fourfold in the last three years.
At the closing of RM26.36 last Friday, the company is valued at RM2.82 billion, giving it a staggering historical price-earnings ratio of more than 1,600 times.
In light of the unrealistic stock valuation, coupled with the multiple red flags raised by KPMG, investors should exercise vigilance when considering any involvement in Rapid Synergy’s shares.
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