KUALA LUMPUR (Nov 22): Bursa Malaysia has directed China Stationery Ltd (CSL) to have its financial report for the third quarter ended Sept 30, 2017 (3QFY17) reviewed by its external auditors prior to its issuance.

In a filing with Bursa Malaysia today, CSL said the directive received from the regulator on Nov 21 states that the scope of the review by the auditors shall cover the assessment and verification of material litigations involving CSL's subsidiaries, namely Sakura (Fujian) Packaging & Stationery Co Ltd, Sakura (Fujian) Plastics Enterprise Co Ltd and Ruiyuan (Fujian) Enterprise Co Ltd, and ascertain its financial impact to the company.

The review should also verify CSL's existing cash and bank balances, as well as its trade and other receivables and revenue.

Bursa also directed CSL to have its advertisement expenses amounting to RMB146.2 million (RM90.8 million) for financial year ended Dec 31, 2016 reviewed by the external auditors.

The regulator has directed CSL's board to announce on Bursa Malaysia by this Friday steps that will be taken by the company to address the issues above.

The group is also to announce on the same date, the confirmation from the auditors that they have been appointed to undertake the review, steps to be taken to appoint new directors pursuant to Paragraph 4A.04(2), 4A.04A, 15.02(1), 15.09 and 15.10 of the listing requirements and confirmation from CSL's lawyers, the Zhi Jun Law Firm, that it has obtained the necessary authority from CSL to undertake the review on the ongoing material litigations.

In the event CSL fails to provide the status updates as set out above, Bursa Securities will suspend the trading of CSL shares from Dec 5 onwards.

Bursa said it had taken this decision in consultation with the Securities Commission Malaysia (SC) and after taking into consideration the lack of cooperation and inability by CSL to provide satisfactory response to Bursa Securities and SC in respect of the outstanding information.

Despite numerous requests by both regulators to the company to verify and clarify in the outstanding information, the company has failed to do so, giving rise to the concern on the accuracy and reliability of the financial statements issued by the company to date.

The regulators also said there was uncertainty as to the management of CSL arising from, among others, various resignations by its directors and chief financial officer as well as the inability by the management of CSL to contact the remaining directors.

Among the directors of CSL who have resigned from company and their respective effective date of resignation are CFO Chin Siew Weng (Jan 12, 2018), executive director Angus Kwan Chun Jut (Dec 18, 2017), as well as independent and non-executive directors Dr Risambessy Izaac (Nov 7, 2017), Lim Kim Huat (Nov 1, 2017), Ang Wei Chuan (Nov 1, 2017) and Herman Widjaja (Nov 2, 2017).

Bursa said in the event CSL fails to provide the status updates as required, the suspension is necessary in the public interest and for the protection of investors.

CSL shares closed down one sen or 22% to hit an all-time low of 3.5 sen today, for a market capitalisation of RM43 million. It was the third most actively traded counter on the exchange today, with 61.5 million shares done.