KUALA LUMPUR (June 17): Mudajaya Group Bhd is mulling initiating legal action against a former employee in the recently uncovered irregular transactions involving one of its projects, which had led to additional costs incurred.

This follows the completion of an investigation by audit firm KPMG, which submitted its report to the Mudajaya board of directors today.

In a filing with Bursa Malaysia this evening, Mudajaya said findings by KPMG suggested that the irregular transactions were the conduct of a former employee, but there was no clear evidence of collaborated fraud.
 
“The investigation has found evidence to suggest, on a prima facie basis, that there have been breaches of duties and obligations and inappropriate conduct,” the group said.

However, Mudajaya did not reveal the name of the former employee nor the concerned project.
 
Mudajaya also said its board of directors had earlier lodged reports with the relevant authorities and will assess its option to initiate legal action, where appropriate.
 
“The board has been advised to keep confidential the details of the report and the nature of such proceedings so as not to adversely affect the investigation by the relevant authorities,” it added.
 
The loss-making group also said that the report by KPMG confirmed that it is not required to make additional provision to its financial results for the year ended Dec 31, 2014 (FY14), as “all financial impact had been adequately accounted for.”
 
Mudajaya slipped into the red in FY14, reporting a net loss of RM70.23 million against a net profit of RM151.18 million in FY13 on a 31.6% drop in revenue to RM1.05 billion from RM1.53 billion.
 
Mudajaya said it will continue to take remediation actions, which include realignment of the organisational structure to improve risk management, as well as initiating operational improvements that include improving project bidding processes, tightening of control over project costs and strengthening of project management.

“KPMG in its report has also highlighted areas for improvement in the organisation’s internal control. The group has since initiated improvements to its internal control procedures as well as a review of its organisational and reporting structure with the aim of providing and promoting a culture of ownership and accountability across the group, strengthening the levels of controls and enhancing the board’s oversight of its operations,” it added.
 
To recap, Mudajaya had on March 20, 2015 announced that its internal investigation had uncovered some irregular transactions involving a former employee, which has led to additional costs incurred on a specific project.

Shares of Mudajaya (fundamental: 0.55; valuation: 1.2) are trading at a five-year low. It dropped 2 sen or 1.6% to close at RM1.23 today, giving it a market capitalisation of RM656.8 million.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)