Highlight Dufu finds conflict of interest in unauthorised remittance of US$1.01m

by **Cals** Mon 20 Jul 2015, 18:00

Highlight
Dufu finds conflict of interest in unauthorised remittance of US$1.01m

KUALA LUMPUR (July 20): Micro precision machining manufacturer Dufu Technology Corp Bhd ([You must be registered and logged in to see this image.] Financial Dashboard) found an issue of conflict of interest arisen from an unauthorised remittances of US$1.01 million to an United States incorporated company, by one of its key senior management member who appears to be connected to the foreign company.
Dufu engaged in developing and manufacturing of precision machining components for the HDD, industrial safety and sensor, telecommunication, computer and consumer electronics industries.
Dufu (fundamental: 1.4; valuation: 0.9) said for the years 2013 and 2014, approximately US$1.01 million (equivalent to RM3.84 million on 3.8068 against 1USD) was remitted from two subsidiaries of the company — namely Dufu Industries Sdn Bhd and Dufusion Sdn Bhd — to a company incorporated under the laws of United State of America.
These remittances were authorized by key members of the senior managements of the company, Dufu said in a filing to the Bursa Malaysian on July 16.
“It appears that 1 of the key member of the senior management is connected or related to the USA Company, by virtue of his position as a senior management in the USA Company,” Dufu said after it reviewed a report dated July 7, submitted by the Investigation Auditors.
The remittance of USD1.01 million was ostensibly for two purposes, namely the purchase of assets of US$ 0.415 million (RM1.58 million) and purported working capital of US$ 0.595 million (RM2.26 million), including marketing and operating expenses.
“The beneficiary of these remittances appears to be the USA Company,” it said.
On another allegation on unbilled delivery orders issued in 2012 and 2013 discovered by the management during the migration of date to new computer accounting software, the investigation auditors found that the subsidiaries of the company issued a total of 67 delivery orders to a company related to a former director of the company, who was still a director of the company when these transactions occurred.
“Despite the provision of services to that company, the Company did not issue any invoices for payment. The amount involved for both years [is] RM543,781.41,” Dufu said that.
In 2012, the amount involved was RM 362,083.90 and in 2013 was RM 181,697.51, according to Dufu.
“It appears that the none-billing was not an oversight, but was calculated to benefit the company related to the former director of the Dufu,” It said.
In essence, the invoices that were supposed to be issued were not issued, resulting in no payment received in respect of the 67 delivery orders, Dufu noted.
“The unbilled invoices caused understatement of the revenue of Dufu by RM543,781.41, whilst the Board is assessing the potential profit attributable by the unbilled invoice.
“The board has on July 14, 2015, directed the management to issue the said invoices and will take all necessary action to recover the amount accordingly,” Dufu said.
Dufu also said that the Board of Directors was currently seeking legal advice in respect of the contents of the report and will continue to provide the relevant update in due course.
To recap, Dufu received an allegation letter against the senior management of the group, on misappropriation of the Company’s fund of approximately RM3.9 million on Feb 4, 2015.
The company set up an Independent Committee (IC), comprising three independent directors, to coordinate and oversee the investigation process of the case.
As at 10.54am, shares in Dufu rose 2 sen or 5.88% to 36 sen, with some 2 million shares done.
(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.)