KUALA LUMPUR (May 17): China Automobile Parts Holdings Bhd has scrapped plans to inject property development business into the China-based automobile parts manufacturing company, as part of a plan to regularise its Practice Note 17 (PN17) condition and maintain its listing status on the Main Market of Bursa Malaysia.

China Automobile had on Feb 22 entered into a memorandum of understanding (MoU) with Gan Kah Siong, the controlling shareholder of Idaman Sejiwa Development Sdn Bhd (ISD), for the proposed acquisition of the entire equity interest of ISD. The latter's development projects are primarily residential properties located in the Klang Valley.

In a bourse filing today, China Automobile said it has received a termination letter from Gan following no progress after the execution of the MoU. As such, the MoU will be "terminated and lapsed automatically".

China Automobile noted that the termination of the MoU is not expected to have any financial impact on the company and it is currently deliberating on its next course of action and will make the necessary announcements in due course.

The proposed acquisition was supposed to be part of China Automobile’s regularisation plan, which would have involved the set-up of a new company (Newco), proposed acquisition of ISD and other related companies by Newco via issuance of shares, proposed shares exchange of China Automobile shares with Newco shares, proposed shares placement by Newco and proposed transfer of listing status from China Automobile to Newco.

This is the second time China Automobile's attempt to regularise its financial condition has fallen through. In December 2019, China Automobile's plan to acquire Local Assembly Sdn Bhd — a subcontractor assembler of electrical appliances and equipment, and manufacturer of plastic injection moulded components — hit a snag after the MoU between both companies was terminated.

China Automobile shares have been suspended from trading since June 8, 2017 after it failed to release its financial reports within the stipulated time frame. To date, the company still has not issued its outstanding 2017 and 2018 annual reports, after it last reported a net loss of RM77.12 million in its financial year ended Dec 31, 2016.

It slipped into PN17 status in January 2018 after its external auditor Messrs PFK expressed an audit disclaimer of opinion in the company’s audited financial statements for FY15 on undisclosed material liabilities.