KUALA LUMPUR (Oct 31): Software services provider Nova MSC Bhd (KL:NOVAMSC) has received a "qualified opinion" on its FY2025 financial statements, as its external auditor raised doubts about the valuation of the group's new software assets.

In its independent auditor's report, Messrs LTTH PLT cited insufficient evidence to support the Nova MSC's sales or revenue prediction that was used to justify the value of these assets recorded in the group's financial statements for FY2025 ended June 30, 2025.

LTTH said it was unable to verify the value the company placed on these intangible assets or cash-generating unit (CGU) that accounts for RM9.55 million of the group's total RM29 million in capitalised development spending or project investment cost.

“This limitation arose due to the absence of corroborative documentation, such as signed client contracts, binding sales orders, credible market studies, or other reliable evidence to substantiate the forecast revenues,” the auditor said.

Hence, the auditor believes that the projects used by Nova MSC to justify the value of the CGU may be too optimistic. "Our audit procedures, including sensitivity analyses and reviews of historical performance, indicate that the revenue forecasts may overstate the recoverable amount of this CGU, potentially requiring an impairment of the related development expenditure," it added.

But except for the possible impact of this issue, LTTH said the financial statements give a true and fair view of Nova MSC's financial position as at end-June, and of its financial performance and cash flow for the year.

In a filing, Nova MSC’s board and management acknowledged the auditor’s comments but maintained that the impairment assessment “was performed in accordance with applicable accounting standards”.

Nevertheless, the group plans to intensify efforts to secure contracts via engagement with potential customers and partners.

"The company will also evaluate the engagement of an independent accounting or valuation firm to review the impairment model and underlying assumptions", subject to an analysis of the costs and practicality.

"Should such a review be undertaken, the findings will be shared with the group auditors to ensure a consistent and mutually understood approach for subsequent reporting periods," the Nova MSC said.

Nova MSC expects to resolve the issue within the next financial year, emphasising that the qualified opinion "does not have any material impact on its financial position, operations, or going-concern status".

"The group remains financially sound and continues to execute its business strategies to drive sustainable growth and enhance shareholder value," it added.

Nova MSC, which focuses on software and e-government solutions, reported a net loss of RM9.87 million for FY2025, marking its fifth consecutive year in the red.

Shares in Nova MSC closed unchanged at 6.5 sen on Friday, with a market capitalisation of RM139.96 million.