Yet another stock hitting the headlines for the wrong reason.
- Xian Leng to conduct special audit
Xian Leng Holdings Bhd said there might be some financial irregularities involving some RM17.36 million in capital expenditure.
The company plans to hire an independent party to carry out a special audit.
The amount is significant because for the past two financial years, Xian Leng's group revenue came in just under RM20 million.
Xian Leng has suffered three straight years of losses. For the second quarter of the current financial year ending January 31 2012, it posted a net loss of RM1.3 million, up from RM1.21 million in the same period a year ago.
Hmmm.... well this is one area to be cautious. For example, money spend on capital expenditure could be overstated. Or remember the case of Megan Media where millions were borrowed and spend on new plants and machinery. Upon audit the plants and machinery were no where to be seen!
Now I am not saying this is what's happening in Xian Leng, in fact I simply have no idea what's happening but I am certainly anxious to discover what happens next.
Oh yeah, we had seen recently that many companies had spend millions and millions on capital expenditure. Perhaps the prudent investor should be cautious against such companies who have the nasty habit of making millions and millions in capital expenditures each year.