KUALA LUMPUR (Aug 30): Talam Transform Bhd's external auditor Messrs Baker Tilly Monteiro Heng PLT has issued a qualified audit opinion on the audit of the property developer's financial statements for the financial year ended March 31, 2021 (FY21).

In its independent auditors' report filed by Talam with Bursa Malaysia today, the auditor said it was unable to determine whether any expected credit loss was necessary in respect of an amount owing by Talam's associate Good Debut Sdn Bhd amounting to RM29.46 million as at March 31, 2021, in relation to an advance for a property development project.

"This matter remained unresolved since the preceding financial year and formed the basis for qualified opinion on the financial statements of the group and the company for FY20," said Baker Tilly.

It also pointed to another receivable amounting to RM67.63 million as at March 31, 2021 in relation to an advance given to Talam's subsidiary Jilin Province Maxcourt Hotel Ltd (JPMHL), which is under liquidation.

"The assessment of impairment loss on this balance requires significant judgment to be made by the directors on the expected credit losses. The group is of the view that no impairment was required for the amount owing by an associate and JPMHL.

"We were unable to obtain sufficient appropriate audit evidence in relation to their assessment that no expected credit loss was required for the amount owing by this associate and JPMHL. Therefore, we could not determine whether any expected credit loss was necessary in accordance to MFRS 9 financial instruments," added Baker Tilly.

On its part, Talam said it will continuously engage with its directors on the activities and monitor the progress of the property development project, while constantly assessing the possibility of a credit loss arising and need for impairment.

"Barring any unforeseen circumstances, the board expects the amount (RM29.46 million) to be repaid throughout the property development project and fully settled by March 2026," it said.

The board also pointed to the fact that Good Debut has a joint venture project with Talam to develop 100 units of superlink houses in Ulu Kelang, Selangor and therefore, the group is confident that the debt will be fully recoverable from the associate once the project is implemented, "to coincide with when the country’s economic recovery from the Covid-19 pandemic and property prices having better value, especially since the development land is located in a choice location".

"As a result of the pandemic, there was minimal work progress at the site during FY21 due to multiple lockdowns, frequent site closures, workers infection and vaccination requirements and other compliance with government-issued standard operating procedures. The board of the associate had presented the feasibility study and the group has assessed the recoverability based on the feasibility study and timeline presented," it said.

As for the RM67.63 million amount owing by JPMHL, Talam expects to fully recover it in FY22. "Consequently, the group is of the view that no impairment was required for this receivable."
                  
Talam shares closed down 0.5 sen or 16.67% at 2.5 sen today, bringing a market capitalisation of RM107.38 million.