Maxwells Mysterious Marketing (2)

I wrote before about this matter.

On February 5, 2016 the company announced the resignation of an independent non-executive director, with the following comment (emphasis mine):


Whether there are any matters that need to be brought to the attention of shareholders:

There is concern on the advertisement expenditure which was disclosed in the Third Quarter 2015 results which management has yet to provide satisfactory justification.


Kudos to Mr. Lee, he could have simply resigned without any comment, but did chose to take a stand, something not often seen in Malaysia. The resignation itself and the above comment are both very clear red flags.

On February 11, 2016 the company announced (emphasis mine):


Further to the Company’s announcement to Bursa dated 30 November 2015 which reported significant net losses for the amount of RM46.253 million for the third quarter ended 30 September 2015 as compared to the net profit reported in the preceding year corresponding quarter of RM12.180 million  was mainly due to the advertisement expenses incurred in the retail business, the disclosure made in the announcement in relation to the resignation by Mr Lee Chong Hoe which stated that there was concern over the advertisement expenditure that was disclosed in the third quarter 2015 results which management has yet to provide satisfactory justification on 10 February 2016, the Board wishes to announce that the Company, upon the recommendation of the Audit Committee had on 18 December 2015 engaged Messrs. Ferrier Hodgson MH Sdn Bhd (“FHMH”) to commission an extended scope of audit on the advertisement expenditure in addition to the normal audit.

FHMH is finalising their report with respect to this particular issue and the Company shall make further announcements on the findings in due course.

Further to this, Messrs. Baker Tilly Monteiro Heng, the Statutory Auditors had on 5 February 2016 also highlighted additional issues relating to the annual audit for the year ended 2015 which require further clarification. They have also recommended that an investigative audit to be carried out on these issues. The Independent Directors had on 5 February 2016 and 11 February 2016 also recommended to the management of the Company that an investigative audit to be carried out on the issues raised by Messrs. Baker Tilly Monteiro Heng and are now seeking further clarification and response from the Executive Director of the Company in China.