This article first appeared in The Edge Malaysia Weekly on May 6, 2024 - May 12, 2024

Moneylending is a high-margin, high-risk business. Margins can easily go up to 50% or more, depending on the clientele. However, the risk is extremely high, especially for non-bank firms.

Apex Equity Bhd, a company that has had more than its fair share of boardroom battles, reactivated its moneylending business in the third quarter of 2022. The business contributed 50% of its profit of RM10.7 million for the financial year ended Dec 31, 2023.

Last week, its moneylending activities were put under scrutiny after the company’s external auditor questioned the recoverability of a loan amounting to RM23.8 million. The external auditor cited changes in circumstances leading to a significant deterioration of the credit quality of the loan and wants Apex to fully impair the amount. The change in the auditor’s view was prompted by events subsequent to the reporting period.

The directors disagree as they believe the loan is recoverable. Had Apex fully provided for the loan, the brokerage would probably be in the red for the financial year ended Dec 31, 2023.

Based on Apex’s segmental results for the full year, total assets channelled to the moneylending business amounted to RM70 million.

The brokerage had slightly more than RM190 million in cash some three years ago, before a number of boardroom and two controlling shareholder changes were made.

But at the end of last year, its cash position had fallen to RM43 million.

The new management’s strategy is to put the cash to work for better returns. But then the risk of losing the cash is also higher, a point that shareholders opposing the current management will probably raise at Apex’s annual general meeting scheduled for the end of next month.

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