Emerging Towns and Cities (ETC), the under-fire Golden City property developer, may not be able to survive as a business, its auditor has warned.
ETC is behind Golden City, whose skyscrapers house 1,065 luxury apartments as well as the offices of foreign corporations including Huawei and Bank of China.
In late February, ETC was heavily criticised over multi-million dollar lease payments to Myanmar’s military, which owns the land Golden City is built on.
The revelation forced its shares to be suspended on the Singapore stock exchange.
Now ETC’s auditor, Singaporean firm Foo Kon Tan LLP believes that the company is facing significant cash flow problems because of “extremely challenging conditions and events, which have an adverse impact on the property market in Myanmar.”
Foo Kon Tan said the situation means there are “material uncertainties” about whether ETC can survive over the next 12 months.
The auditor’s “disclaimer”—an unusual move—appears in ETC’s annual report for 2020, which was released on Thursday.
It suggests trouble for the company and follows ETC’s own profit warning last week when it said it expects to have made a loss in the first half of 2021, in part due to problems in Myanmar.
According to the company’s annual report, the auditor noted that ETC missed a repayment on a US$54 million bank loan at the end of last year due to its cash flow problems.
But responding to its auditor’s judgement, ETC said that its board of directors believes that the company “will be able to continue as a going concern” and has renegotiated the loan, giving it more time to repay the bank.
Military payments
The campaign group Justice For Myanmar revealed in February that ETC had accrued US$32 million for land lease payments to the military by the end of 2019.
Justice for Myanmar’s revelation led to the suspension of ETC’s shares on the Singapore stock exchange.
ETC says it asked for trading in its own shares to be suspended while independent reviewers assessed its dealings in Myanmar.
That review has yet to be published. Myanmar Now asked ETC when the review would be published but the Singapore incorporated company declined to comment.
ETC is the lead investor in Golden City. Its co-investors include four companies incorporated in the British Virgin Islands whose owners are hidden.
Profit warning
ETC’s latest financial statements show that its problems began before the military coup in February. The company made a loss of SG$5.5 million in 2020, compared to profits of SG$17.9 million in 2019.
The property developer warned last week that it expected to have lost money in the first half of 2021 as well, because of earning lower revenues from selling properties in Yangon and having to write down the value of its developments.
The military coup has created difficulties for some other glossy real-estate developments in Yangon.
Work on Y-Complex, a US$330 million real-estate project with Japanese backing, was suspended after the coup because of concerns about workers’ safety.
Justice for Myanmar has revealed that Y-Complex also pays land rents to the military.
But some luxury real estate developers seem to be thriving despite the military coup.
Last week, Myanmar Now reported that the real estate division of Yoma Strategic Holdings (YSH) saw a 31 percent surge in revenues.
Independent Economists for Myanmar, a group of experts critical of the military regime, wrote last month that “real estate prices have remained relatively steady, despite falling incomes, indicating that people are using land to store their excess savings.”
This is a Myanmar Now story in association with Finance Uncovered.
