Zhongmin Baihui Retail Group Ltd. Responds to SGX-ST Queries on FY2025 Annual Report

Key Points for Investors

• Significant Discrepancies Between Unaudited and Audited Financial Statements:
  The Singapore Exchange (SGX-ST) raised concerns over material differences between Zhongmin Baihui Retail Group Ltd.’s unaudited and audited statements of financial position for the year ended 30 June 2025.
• Reclassification of Deferred Tax Items:
  The company clarified that the discrepancy arose from a reclassification between deferred tax assets and deferred tax liabilities amounting to RMB 62.8 million. This adjustment was made to comply with Singapore Financial Reporting Standards (International) [SFRS(I) 1-12] and had no impact on the Group’s profitability or total net asset values.
• Non-Disclosure of Adjustment:
  The adjustment was for presentation purposes only. The company did not disclose the reclassification under Listing Rule 704(6) because it did not affect profit or net asset value, but this lack of immediate disclosure may concern shareholders as it relates to transparency and compliance.
• Internal Controls and Risk Management:
  In response to Listing Rule 1207(10), the Board confirmed that an internal auditor reviews the adequacy and effectiveness of internal controls (including financial, operational, compliance, and IT) annually. The findings are reported to the Audit Committee and Board, and an Enterprise Risk Management (ERM) framework is regularly reviewed and updated as needed.

Details and Potential Impact on Shareholders

1. Material Adjustment Explained:
The company’s reclassification of RMB 62,826,553 between deferred tax assets and liabilities is significant in terms of the statement of financial position, but management asserts it does not affect the bottom line or overall value of the Group. However, the magnitude of this adjustment and the initial lack of disclosure could be viewed as a corporate governance issue by investors, raising questions about the timeliness and transparency of financial reporting practices.

2. Compliance with SGX Listing Rules:
Although the adjustment was technical, SGX-ST’s query highlights the importance of immediate and full disclosure of material changes, regardless of their impact on profit and loss. Investors should be aware that regulators are scrutinizing the company’s reporting practices, which could influence market perceptions and potentially the share price if confidence in management’s transparency is affected.

3. Commitment to Internal Controls and Risk Management:
The Board’s annual engagement of an internal auditor and the ongoing use of an ERM framework provide some assurance that robust controls are in place. Nevertheless, the company’s recent experience with reclassification and disclosure underscores the need for continued vigilance in these areas.

What Shareholders Should Watch

• Transparency and Disclosure: The company’s approach to reporting and disclosure may be under closer scrutiny, both by the market and regulators. Any future lapses or ambiguities could have a material effect on investor confidence.
• Corporate Governance: While the reclassification itself does not affect profitability, the process and communication around such changes are critical for maintaining trust.
• Regulatory Oversight: The engagement by SGX-ST signals active monitoring, which could lead to further requirements or disclosures in the future.

Conclusion

While the financial adjustment detailed in the FY2025 annual report is not expected to impact Zhongmin Baihui Retail Group Ltd.’s profits or net assets directly, the episode highlights the importance of transparency and regulatory compliance. Investors should monitor the company’s future disclosures and internal control enhancements closely, as any perceived weaknesses in these areas could influence market sentiment and share price movement.

Disclaimer: This article is for informational purposes only and does not constitute financial advice or a recommendation to buy or sell any securities. Investors should conduct their own research or consult a professional advisor before making investment decisions.

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