China International Holdings Limited: Independent Review of Disposal Transaction Reveals Critical Details

Executive Summary & Background

China International Holdings Limited (“CIHL”), listed on the Singapore Exchange (SGX-ST), recently underwent an independent review by RSM SG Corporate Advisory Pte Ltd regarding the disposal of its remaining 50% equity interest in Beijing Kaiyuan Wanjia Management Consulting Company Limited (“KYWJ Group”). This review was commissioned in response to queries raised by SGX RegCo concerning the transparency and accuracy of the disposal process, asset transfers, valuations, related party transactions, and other subsequent issues. The findings are significant for shareholders and could have material implications on CIHL’s share price.

Key Transaction History & Shareholding Changes

• CIHL acquired 55% of KYWJ Group in 2013, with the remaining 45% held by China Resources and Transportation Group Limited (CRTG).
• In 2017, Hong Kun acquired CRTG’s 45% stake, and CIHL sold 5% to Hong Kun, resulting in a 50-50 joint venture.
• On 18 December 2022, CIHL disposed of its remaining 50% in KYWJ to Hong Kun for RMB 2 million, as per the Four Party Share Transfer Agreement.
• Legal transfer and resignation of CIHL’s Managing Director, Mr. Zhang, were delayed until 27 March 2023 due to administrative changes.

Investment, Repayment, and Accounting Implications

• CIHL’s initial investment and subsequent fund movements into the KYWJ Group totalled RMB 441.44 million, with RMB 327 million recorded as equity and RMB 112.3 million as debt.
• As at 30 June 2022, CIHL was owed RMB 102.6 million by KYWJ Group, with significant dividend declarations in FY2021 and FY2022 (RMB 105.6 million and RMB 59.5 million respectively).
• Settlements included cash (RMB 11 million), in-kind transfers (six townhouses and one sales office, valued at RMB 48.76 million), RMB 97 million allocated to Exhibition Assets via Huike (CIHL’s 50%-owned SPV), and RMB 10.24 million for 307 carparks and six store units.
• After all repayments and adjustments, CIHL recorded a reversal of impairment loss of RMB 6.95 million in FY2022, reflecting repayments exceeding receivables.
• The review identified inaccuracies in CIHL’s January 2023 SGX-ST announcement—specifically, a RMB 65 million discrepancy in reported fund injections and repayments, which did not affect financial statements but may constitute a breach of SGX listing rules.

Asset Transfers: Status, Risks, and Litigation

• Physical verification confirmed the existence of transferred assets, but legal title transfer of the Exhibition Assets to Huike remains outstanding due to litigation. The Beijing No. 1 Intermediate People’s Court denied Huike’s request for title transfer, and as of April 2025, no revenue or operations were reported from the Exhibition Assets.
• Of the residential/commercial units transferred, only one townhouse title was successfully moved to CIHL’s subsidiary. The rest are encumbered due to freeze orders stemming from tax disputes and litigation over FY2022 dividend distribution.
• Carpark spaces (307) are treated as right-of-use assets with a 20-year renewable term, but two lots were duplicated, reducing the effective number to 305—a minor issue financially.
• Litigation led to the derecognition of six townhouses and one sales office, and RMB 11 million in cash dividends remained as a liability, not refunded as at end-2024. Freeze orders continue to block title transfers.

Valuation Reports: Concerns and Methodology

• The valuation of KYWJ Group by Ravia Global Appraisal Advisory Limited was based solely on an asset-based approach, with no site visits or title verification due to COVID-19 restrictions. The report lacked sufficient evidence and did not fully comply with International Valuation Standards (IVS) and Singapore Practice Note PN 001.
• Ravia’s desktop assessment concluded the fair value of CIHL’s 50% equity in KYWJ was “nominal” due to net liabilities, but the methodology raises concerns about reliability and transparency.
• The Exhibition Assets were valued at RMB 195.64 million by Huarui, later adjusted by an independent reviewer (Beiya) for life consistency, resulting in a minor decrease to RMB 194.72 million. The valuation was found reasonable after adjustment and compliant with PRC standards.

Interested Party & Related Party Transactions

• The review found no evidence of related party transactions (RPT) beyond a previously disclosed “Joint Venture with an Interested Person” involving Mr. Zhang and Zhongxiang Zhengxing (Beijing) Technology Development Company Limited. CIHL’s governance process for RPT/IPT was deemed adequate, though the preparation of Audit Committee meeting minutes was recommended.

Other Material Matters: Litigation and Bank Account Freeze

• Litigation initiated by the Project Company’s Supervisor led to court rulings invalidating the FY2022 profit distribution, derecognising asset transfers, and blocking property title transfers.
• CIHL’s bank account with China Bohai Bank was frozen twice in 2023 due to litigation, impacting liquidity but not operational viability. The freeze order was lifted in October 2023, but a minor balance was refrozen temporarily.
• These legal issues and freezes highlight ongoing risks and potential operational constraints for CIHL.

Disclosure Accuracy and SGX Compliance

• CIHL voluntarily announced the disposal of its 50% interest in KYWJ Group as a “non-disclosable transaction” under SGX Listing Manual Rule 1008, as all relevant ratios computed were below the 5% threshold. The review confirmed the classification was reasonable.
• However, the earlier noted disclosure inaccuracies may constitute a breach of SGX listing rules, which could be price-sensitive and affect investor confidence.

Investor Implications & Price-Sensitive Points

• Litigation and Asset Freezes: Ongoing litigation and freeze orders risk CIHL’s ability to transfer and monetise assets, impacting future cash flows and asset values.
• Disclosure Inaccuracies: Errors in SGX announcements, even if not affecting financial statements, raise concerns about CIHL’s internal controls and compliance.
• Valuation Uncertainties: The asset-based valuation approach used lacked sufficient rigour, raising questions about the true value of the KYWJ Group and transferred assets.
• Liquidity Risks: Temporary freezes of major bank accounts highlight operational vulnerabilities under litigation pressure.
• Title Transfer Delays: Most residential and commercial units transferred as settlement remain encumbered and cannot be used or sold, affecting CIHL’s ability to generate income from these assets.
• Regulatory Scrutiny: SGX RegCo’s repeated queries indicate ongoing regulatory concern, which may affect investor sentiment and the company’s reputation.

Conclusion

This independent review exposes several material and price-sensitive issues for CIHL shareholders: ongoing legal disputes, asset encumbrances, valuation and disclosure weaknesses, and operational risks from frozen accounts. These factors could significantly impact CIHL’s financial position, asset values, and share price. Investors should closely monitor further developments, particularly the resolution of litigation and asset title transfers, and CIHL’s compliance improvements in disclosure and governance.

Disclaimer: The above article summarizes and interprets key findings from an independent review report commissioned by China International Holdings Limited. It is intended for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consider all risks before making investment decisions. The author and publisher accept no liability for any losses arising from reliance on this article.

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