Silverlake Axis

Silverlake Axis: (S$0.63) Questions linger post-review; sell into strength?
Silverlake Axis spiked 5% in morning trade to $0.63, after an independent report by Deloitte found no wrongdoings by the group on the recently-alleged issues on irregular accounting and improper interested party transactions (IPT).

However, there still remains certain unresolved allegations over Silverlake's founder Goh Peng Ooi's share transfer agreement with HNA Group in return for contracts, as well as Silverlake's use of special purpose entities (SPEs) as a dumping ground for expenses, as some documents were not released for review due to confidentiality obligations.

While Deloitte offered no clear conclusion on the share arrangement with HNA Group, the financial services firm cited that Silverlake may have contravened with proper accounting treatment as it was unable to conclude if the rates used by Silverlake to charge the SPEs in the IPT were commercial or arbitrary, as supporting documentation was insufficient.

Silverlake intends to hold an investor meeting on 25 Jan with its board and management, to help elucidate the review’s report.

With many questions unanswered on corporate governance issues, risk averse investors are likely to offload their stakes on the relief rally following the report’s release.

Maybank-KE’s last rating on the stock was a Hold with TP of $0.61, Overall, the street has 1 Buy and 3 Hold ratings with an average TP of $0.65.

The stock currently trades at 15.6x forward P/E.