KUALA LUMPUR: DIS Technology Holdings Bhd (DIST) will face “difficulties in meeting payments to its creditors and borrowers” if its suspicion of a massive RM131 million fraud case impacting the company is proven true.

In a statement yesterday, DIST said it would result in “no cash flow from this major transaction,” which “would have a major impact on the daily operations of the company”.

“Due to the loss of cash flow, the company would have difficulties in meeting payments to its creditors and borrowers,” it said.

DIST announced on Monday that it had uncovered a possible misstatement of sales to the tune of RM131.33 million spread over two financial years 2008 (FY08) and 2009 (FY09) due to fraudulent activities. DIST said the alleged fraud was reported by a major customer, Starlight Marketing Ltd, involving one of the latter’s staff. It said the sales totalled RM131.33 million over six quarters starting July 1, 2008 and the total owing as at Dec 31, 2009 to the group was RM82.07 million.

Pursuant to a query for additional information by Bursa Malaysia Securities, DIST said yesterday it had immediately frozen all transactions with Starlight and had engaged a law firm, Khor, Ong & Company, to obtain legal advice and opinion in this matter.

It said the lawyer was currently in Hong Kong to carry out further investigations on the case and to seek the assistance of the Hong Kong police. DIST said it was also looking into nominating a firm of accountants for an investigative audit.

DIST, which is in the business of manufacturing and selling consumer electronics, has been incurring losses for the past two years.

For FY09, despite revenue increasing to RM181.5 million from RM139.3 million in FY08, the group remained in the red to the tune of RM578,000, though it was an improvement from a loss of RM815,000 in FY08.

According to the notes accompanying its fourth-quarter announcement, DIST said the losses were due to provision for impairment of goodwill, allowance for doubtful debts and inventories written off. The stock was traded at 4.5 sen prior to its suspension on Monday.


This article appeared in The Edge Financial Daily, March 10, 2010.