This article first appeared in The Edge Financial Daily on November 13, 2019

KUALA LUMPUR: Prestariang Bhd’s independent auditor Crowe Malaysia PLT has highlighted a material uncertainty on the information technology software distributor’s ability to continue as a going concern, after factoring in Prestariang’s negative operating cash flow and loss after taxation for the financial period ended June 30, 2019.

In a Bursa Malaysia filing yesterday, Prestariang said Crowe Malaysia had included a statement of material uncertainty in its independent auditors’ report dated Sept 19, 2019 on Prestariang.

Crowe Malaysia also highlighted Prestariang’s Sistem Kawalan Imigresen Nasional (SKIN) project termination by the government, and Prestariang’s acceptance of advances from a director and a former director of the company for working capital purposes, as reasons contributing to the material uncertainty.

“These indicate a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern and whether the group and the company have sufficient cash flows to meet their obligations, as and when they fall due.

“In preparing the group’s financial statements, the management made an assessment on its working capital sufficiency and with the support of a cash flow projection. The management has concluded that the group and the company shall have sufficient working capital to finance their operations and to meet their financial obligations, as and when they fall due.

“As at the end of the reporting period and as at the date that these financial statements were authorised for issue, the directors believe there is no material uncertainty over the group and the company’s ability to continue on a going concern basis. Accordingly, the financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that may be necessary, if the group and the company are unable to continue as a going concern,” Crowe Malaysia said.

Shares in Prestariang, which has initiated legal action to seek compensation from the government over the RM3.5 billion SKIN concession agreement’s termination, settled two sen or 3.96% lower at 48.5 sen yesterday, with a market capitalisation of RM233.92 million. The stock has slumped over 30% in the past one year.