Spindex Industries

[wj1984]

I think the acceptance would be based on the top 20 shareholders vote. I don't think the MIs here have much say...

Hi wj1984,

I disagree with your comment above. This is because for SOA to be approved by shareholders, there are two parts which needs to be carried:

1. a majority in the number of shareholders present and voting at the meeting; and
2. such majority representing at least 75% in value of shares held by the shareholders present and voting at the meeting.

Yes, you are correct to say that top 20 shareholders vote might determine the outcome of 2., but certainly not 1. For 1. to be carried, it requires a majority of headcount at the SOA. Yes, your uncle might have a lot of shares in Spindex, but if he voted at the SOA, he is only considered as a headcount of one. Therefore, many MIs holding a small number of shares might be able to defeat 1. and therefore reject the SOA.

Wow I didn't know the SOA is based on number of shareholders instead of no. of shares (devil in the details) when the voting takes place once the requirement is met...

Thanks for this info gh! I would very much like to vote against it since i think a fair value would be 1.2x NAV at least...

[weijian]

Full year results were out yesterday.

My eyebrows are raised at the 5.5 million SGD within Administrative expenses, pertaining to impairment of "property plant and equipment at Nantong to reflect the economic slowdown" (page 20 of the report)

To me, an economic slowdown is a different thing from impairment of property plant and equipment. Impairment of property plant and equipment should usually be due to damage, obsolescence, etc. These are not directly related to a general economic slowdown (which I know we could be experiencing).

So is this a valid accounting entry grounded in concrete reality? Or is it a suppression of profits and valuation?

hi julianbream,

I refer to the accounting principles under note 2.8 of Spindex AR25, I quote the below (in italics with emphasis in bold):

All items of property, plant and equipment are initially recorded at cost. Subsequent to recognition, property, plant and equipment other than freehold land are measured at cost less accumulated depreciation and accumulated impairment losses. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

From the bold portion, it does suggest that impairments to PPE does happen in theory. However, I do agree that large PPE impairment is relatively rare in practice  but that doesn't mean it wouldn't or shouldn't happen. In FY25 results, Mgt has provided the valuation assumptions (page15) to determine the recoverable amount for Spindex Nantong. Unfortunately, prior valuation assumptions for Spindex Nantong is not available in FY24/AR24 and therefore, the outsider does not have a comparison. While the current results are not audited by an external auditor but OPMIs will have a bigger problem if the external auditor eventually disagrees.

For Spindex OPMIs, there are probably some questions one have to clarify in the coming AGM.

I am not a practising accountant and therefore unable to effectively separate between theory and practice. Since I am not a shareholder too, I wouldn't be at the AGM but I would imagine the E&Y auditor partner would have been at the meeting and vouched for me.

(emphasis mine)

MINUTES OF ANNUAL GENERAL MEETING

The impairment was recognised in accordance with accounting standards and reflects the difference between the carrying value and recoverable amount of the cost of investment. While the value of impairment appeared significant at the Company level (approximately $22 million), the actual impairment at the Group level is only approximately $5 million. The Nantong plant remains operational and the impairment reflects current business conditions rather than a permanent loss. There may be potential for a reversal if conditions improve.

The impairment was determined based on a five-year cash flow projections and terminal value prepared by management. The auditors reviewed these assumptions and conducted checks, including sensitivity tests, to assess and validate their reasonableness. The recoverable amount was based on projected future cash flows, adjusted for debt. The higher impairment at Company level is mainly due to debt-related adjustments. The valuation was reviewed by management, and the auditors concluded that it was reasonable given the current business conditions.

https://links.sgx.com/FileOpen/Spindex_M...eID=866483