The Taiwan Stock Exchange (TSE) announced yesterday that it was banning margin trading of shares of Tsann Kuen Group (燦坤實業) starting tomorrow for failing to complete its auditing on time.
Shares of Tsann Kuen, the nation's largest home appliance and consumer electronics chain, fell by the 7 percent daily limit to close at NT$44.50 (US$1.41) on the exchange yesterday.
Tsann Kuen's certified public accountant (CPA) issued its audit report for last year with a "qualified opinion," indicating some reservations about the submitted figures.
Citing stock exchange rules, the TSE decided to restrict shares of Tsann Kuen to cash transaction only, according to a statement released yesterday.
The ruling will go into effect tomorrow, and will remain valid until the report passes certification. If the company fails to pass certification in three months, its shares will be suspended from trading on the local bourse, the exchange said.
In a filing to the TSE yesterday, Tsann Kuen vice president and spokesman Tien Chu-ying (田竹英) said that the CPA issued a "qualified opinion" on the report because the auditing procedure for its Chinese subsidiary, which was sold to a Chinese firm, has not yet been completed.
Tsann Kuen announced last June that it was selling its money-losing Chinese arm to the Shanghai-based Yongle (
Nine of its Chinese outlets had canceled their registration in China, with the remainder still in the completion stage, Tien said.
To verify that its former Chinese operation still owed some 620 million yuan, one of Tsann Kuen's CPAs in China sent letters to more than 2,000 of its suppliers, Tien said.
However, the accountant received few replies, as the company had closed its operations in China more than 10 months earlier. Tsann Kuen was therefore unable to conclude its financial report, he said.
"We will do our best to wrap up the auditing procedure and submit the audit as soon as possible," Tien said in the statement.
The 62 million yuan only accounted for 1.5 percent of Tsann Kuen's total assets, and has had no major impact on the company's operation, he said.
Aside from the financial report, Tsann Kuen's lackluster quarterly earnings also clouded its share price performance. For the first quarter of the year, Tsann Kuen reported after-tax earnings of NT$163 million, or NT$0.67 per share, a drop of 45 percent from the same period last year.
But the figures have not dampened the company's enthusiasm for expansion in the local electronics retail market. Tsann Kuen obtained a five-year loan of NT$3.3 billion from seven lenders last month to support its plans to boost its number of outlets -- 188 at present -- as well as its product portfolio.