This article first appeared in The Edge Malaysia Weekly on January 22, 2024 - January 28, 2024

Last week, property developer YNH Property Bhd provided details on the two oversights related to transactions undertaken and terminated as recently as April 2022 and in 2016 that it had failed to disclose to the public at the material time.

The subject of the transactions is a piece of freehold land measuring 5.098 acres (2.06ha) in Desa Seri Hartamas, Kuala Lumpur, which YNH had planned to sell to the Sunway group for RM170 million cash and an additional RM50 million cash if a new development order is obtained within a year from the date of the signing of the sales and purchase agreement (SPA) in May 2023.

The deal set off a series of queries by the stock exchange and last week culminated in the two announcements related to the Desa Seri Hartamas land.

The first oversight announced on Jan 17 relates to an SPA entered into between YNH’s wholly-owned subsidiary Kar Sin Bhd (KSB) and Great Wall Park Sdn Bhd (GWP) for the said piece of land on April 18, 2022.

The second oversight announced on Jan 19 pertains to a turnkey construction agreement (TCA) entered between KSB and GWP for the purpose of developing the Desa Seri Hartamas piece of land in June 2016. A security deposit of RM41.5 million was paid.

Subsequent variations to the TCA resulted in the payment of a total of RM239.5 million as security deposit by KSB to GWP.

However, the TCA and the related supplemental agreements were terminated on April 1, 2022.

Then on April 18, 2022, both parties entered into an SPA whereby KSB would acquire the land from GWP for RM150 million. On the same day, in a supplemental agreement, both parties agreed that RM150 million from the security deposit shall be used as the purchase consideration while the remaining RM89.5 million shall be refunded within six months from the termination of the TCA.

It is not clear if the balance remains outstanding although the Jan 19 announcement stated that on Sept 1, 2022, GWP and KSB had extended the due date of the refund to June 30, 2024.

Many questions arise from these two delayed disclosures, namely what caused the oversights and whether the company and its board will be penalised for these lapse in governance.

According to listing rules, a listed company must make immediate public disclosure of any material information. Failure to do so could lead to queries by the listing authority and could result in a fine or administrative actions.

With investor confidence already shaken by the recent sell-down in its shares that saw 80% of its market value wiped off, will there be more bad news for YNH?

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