Rapid Synergy manufactures precision tools and invests in property and shares, and was listed on the Malaysian Stock Exchange in 1997. Its auditors, KPMG, issued a qualified audit report in November 2023 in connection with rental income and property disposal gains. However, the shares rose another 10% in the two months after the publication. From January 2024, the share price rapidly fell, declining about 97% over the next 5 months. As evident from the audit report, the company had problematic accounting. However, it’s unclear what caused the share price collapse two months after the audit report was published.

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Rapid Synergy Bhd. manufactures precision tools and invests in property and shares. The precision tooling segment manufactures precision tools, dies and moulds for the semiconductor electrical and electronics industries. The company was founded in 1994 and is headquartered in Penang, Malaysia.

It listed on Bursa Malaysia, the Malaysian Stock Exchange (MYX), on 13 March 1997 and raised MYR11.66m in its IPO. The manager of the offering was Ammerchant Bank Bhd.

On 1 November 2023, Rapid Synergy released its 2023 Annual report for the extended 18 month financial year, ending 30 June 2023. In the independent auditors report, KPMG issued a qualified opinion. The basis for the qualified opinion given was:

• KPMG had issues with rental income from Investment properties. MYR4.43m of the MYR21.68m total was for two properties rented to a subsidiary. During its audit KPMG noted some rental for these two properties were paid to a related law firm. Some of these payments were not paid to the group on time. The documentary communications/instructions between the Group and the Related Law Firm concerning the collection of rentals were lacking. KPMG were unable to obtain sufficient appropriate evidence to determine the appropriateness and veracity of the MYR4.43m rental income recognised during the financial period ended 30 June 2023.
• Persiaran Eksklusif Sdn. Bhd., a subsidiary of Rapid Synergy disposed land for MYR4.16m recognising a gain of MYR2.32m. KPMG, at the date of the audit, noted that the land had not yet been registered to the purchased. Also from documentation it received it could not be sure that the funds had been received from the purchaser and therefore could not confirm the gain on the disposal.

In an Emphasis of Matter, KPMG noted that Rapid Synergy had transferred MYR40.34m to the related law firm for the purchase of properties. The law firm has paid deposits of MYR32.27m for a number of properties, which was higher than the market norm. It also noted that the properties had similar principal place of business with the rental property above. KPMG also highlighted that

• no property agent was involved in these transactions;
• a lack of documentary evidence to indicate that the Group conducted appropriate due diligence on the ownership of the properties;
• no valuation reports have been received and the Board of Directors approvals were still pending.

However, the audit report qualification had no immediate effect, with the share price rising from MYR26.80 on 31 October to a high of MYR29.54 on 28 December 2023, an increase of 10%.

On 10 January 2024, the share price started to rapidly collapse and fell about 97% over the next 5 months. It is unclear why the price declined.

KPMG: Independent Auditors Report - Qualified Opinion, 31 Oct 2023
The Edge: Rapid Synergy's auditor raises red flags over FPE2023 accounts, 1 Nov 2023
The Edge: Frankly Speaking - Be mindful of red flags, 6 Nov 2023
Rapid Synergy: Annual Report, YE Jun. 2023 (18 Month FY)
Rapid Synergy: Annual Report, YE Dec. 2021
Bursa Malaysia: Rapid Synergy- Company Filings