Shanghai Turbo Enterprises Issues Detailed Response to SGX Queries: Key Developments Investors Should Note

Shanghai Turbo Enterprises Ltd., a Cayman Islands-incorporated company listed on the SGX, has issued a comprehensive response to several queries from the Singapore Exchange. The company’s disclosure covers audit matters, internal audit changes, material financial adjustments, and dividend policy—all of which are critical for shareholders and may influence share price movements.

1. Correction on Non-Audit Service Fees

A noteworthy correction was made regarding the non-audit service fees paid to external auditors in FY2023. While the audited financial statements initially disclosed RMB 0 for non-audit services, management has clarified that RMB 6,000 was actually paid for such services. This correction reflects a lapse in the original financial reporting and signals the company’s commitment to transparency. Investors should be aware of this type of reporting error, as it may impact confidence in the accuracy of financial disclosures.

2. Internal Audit Function: Key Changes and Experience Gaps

Shanghai Turbo previously engaged Changzhou Xinhuarui United Certified Public Accountants as its internal auditor (IA), which had six employees and over 20 years of audit experience. However, the IA partner had no prior experience providing IA services to SGX-listed companies or companies of similar industry and scale. Furthermore, the IA firm was voluntarily wound up in February 2025 due to the expiration of its operating term, leaving detailed information unavailable.

For 2024, the company has appointed Changzhou Hengxin Certified Public Accountants Co., Ltd. as its new internal audit institution. The firm, established in 1999, has 25 staff members and extensive audit experience, but similarly lacks experience with SGX-listed entities or companies of comparable operational size. This change represents a potential risk, as the new auditor is not yet proven in the requirements specific to SGX listings. Investors should monitor this transition closely, as internal audit quality is essential for governance and financial integrity.

3. Material Financial Adjustments: Impact on FY2023 Results

Shanghai Turbo has disclosed several material variances between its unaudited and audited FY2023 financial statements, including:

• Non-current liabilities: Adjusted from RMB 222k to RMB 668k after audit corrections for prior period errors.
• Net cash from operating activities: Shifted from RMB 650k to (RMB 801k), primarily due to account reclassification and clerical errors. A significant sum (RMB 2,130k) was incorrectly classified in the unaudited report.
• Net cash from investing activities: Changed from 0 to (RMB 2,426k), as equipment purchases were reclassified from operating to investing activities.
• Net cash from financing activities: Moved from (RMB 1,292k) to RMB 67k. RMB 1,415k was related to bank acceptance draft margin, adjusted as the company did not have substantive ownership. Interest income and expense adjustments were also made.
• Profit/(loss) before tax: Swung dramatically from a loss of RMB 3,844k to a profit of RMB 7,149k, mainly due to the write-back of Expected Credit Losses (ECL) amounting to RMB 5,256k following recovery.

These material adjustments highlight issues with internal controls, classification, and audit communication. Shareholders should note that such errors and corrections can significantly affect the perceived financial health of the company and may influence share price volatility.

4. Dividend Policy: No Dividend Declared Amid Ongoing Losses

The company has not declared a dividend for the second quarter of FY2025, citing continuous losses since 2017. Shanghai Turbo’s management emphasizes its commitment to shareholder interests, pledging to monitor operations, market conditions, and investment progress, and to adjust its dividend policy as circumstances improve. The absence of dividends and a prolonged loss-making status may impact investor sentiment and valuation.

Management signals that dividends may be considered once operating results improve and financial stability is restored, which could be a future catalyst if the company turns profitable.

5. Forward-Looking Measures

Shanghai Turbo has pledged to enhance internal control rectification, improve pre-audit communication, and elevate the quality of financial reporting. These steps are crucial for restoring investor confidence following the reporting errors and audit adjustments.

Investor Takeaways

• Reporting corrections and audit adjustments highlight governance and financial integrity risks.
• Changes in internal audit providers with unproven SGX experience may require close monitoring.
• Significant swings in financial results due to audit corrections could affect share price sentiment.
• Prolonged lack of dividends reflects ongoing losses, which may weigh on investor returns and share price.
• Management’s commitment to improvement offers hope for future stabilization and potential dividend resumption.

Disclaimer: This article is based on company disclosures and responses to SGX queries. It does not constitute investment advice. Investors should perform their own due diligence and consult professional advisors before making investment decisions.

View Shanghai Turbo Historical chart here