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China Ouhua Winery gets sixth qualified opinion on recoverability of deposit

TheEdge Mon, Apr 29, 2019 10:59pm - 1 year ago

KUALA LUMPUR (April 29): For the sixth straight year, China Ouhua Winery Holdings’ external auditor has given a qualified opinion with regards to the group’s financial statements.

In a filing with Bursa Malaysia today, the group said the latest qualified opinion, from Messrs UHY Lee Seng Chan & Co, was in reference to its accounts for the financial year ended Dec 31, 2018 (FY18).

It was over the same issue as in the previous years — the inability to obtain sufficient appropriate audit evidence on the extent of recoverability of a deposit of 118.8 million yuan that was used for a contract to purchase land and property in China.

That was 90% of the deposit of 132 million yuan which China Ouhua made to the Huangwu Subdistrict Office in Yantai City for buying a 40-acre piece of land owned by the local authority.

On Dec 18, 2013, the group announced that its subsidiary, Yantai Fazenda Ouhua Winery Co Ltd, had proposed to acquire from Huangwu Subdistrict Office a piece of land located at Yantai city — that Yantai Fazenda had been renting since 1997, plus all buildings and ancillaries on it, for about 132 million yuan.

Last November, China Ouhua said it expected the land title transfer to be done in six months, meaning by April 2019.

Today, China Ouhua made another six-month commitment to complete the land title transfer again.

Meanwhile, UHY said its qualified opinion was also due to the uncertainties over China Ouhua’s going concern.

UHY pointed out that the group incurred a net loss of 18.62 million yuan while generating negative operating cash flows of 14.95 million yuan for FY18.

China Ouhua’s total and current liabilities have also exceeded its total and current assets for FY18.

“These conditions indicate the existence of a material uncertainty which may cast significant doubt about the group’s and company’s ability to continue as a going concern,” UHY noted.

“The ability of the group and company to continue as a going concern is dependent upon the continuing financial support from a director and shareholder of the company,” it added.

China Ouhua’s share price rose 0.5 sen or 12.5% to 4.5 sen today, giving it a market capitalisation of RM30.06 million.

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