In a recent development that could significantly influence market sentiment, Coolan Group Limited has issued a detailed clarification letter to the SGX-ST regarding the conditions attached to its resumption proposal. The company’s announcement comes on the back of the SGX-ST’s rejection of its resumption proposal, which imposed a series of time-sensitive conditions.

The key points in the document reveal that Coolan Group is actively engaging with the SGX-ST to address concerns over several critical regulatory conditions. The clarifications submitted target issues ranging from the appointment of new auditors to the many complex approvals required from various Chinese governmental agencies.

Highlights of the Clarification Letter

• Auditor Appointment and Financial Reporting Timelines:
  The company has sought the SGX-ST’s prompt approval for a circular regarding the appointment of new auditors. This move is essential to ensure that audited financial statements for the year ended 30 June 2024 can be prepared and presented at the upcoming annual general meeting. The effective transition to a new auditor is underlined as a key determinant for fulfilling these conditions.
• Regulatory Approvals for Key Projects:
  Coolan Group has requested leniency from SGX-ST regarding conditions that require confirmation of obtaining approvals for connecting HYI’s railway to China’s Shenhua Railway, enhancing the coal loading process, and extending HYI’s railway along with constructing a new pulverised coal field. The company candidly explained that timing for government licence processing, particularly approvals needed by 31 December 2024, are largely beyond its control.
• Financing and Construction Practices:
  The clarification further states that for upgrades and improvements (such as those furthering construction projects on a debt basis), it is common practice in China to undertake projects without obtaining all requisite approvals upfront. This has led the company to indicate it does not plan to secure the necessary financing in advance for these projects.
• Independent Review Report:
  The group has stipulated measures to commission an Independent Review Report by its statutory auditors covering comprehensive pro-forma financials and projections for both the Group and HYI. This report, along with audited financial statements for the year ended 31 December 2023, is to be included in the revised proposal, underpinning the company’s strategy to meet the remaining conditions.

SGX-ST’s Response and Extended Timeline

In its response, the SGX-ST acknowledged the submissions from Coolan Group but noted a lack of significant progress concerning several critical conditions. Notably, the regulatory body refused to grant waivers on conditions related to obtaining necessary approvals from Chinese agencies for project connectivity, process improvements, and infrastructural expansion.

The SGX-ST has, however, extended the compliance deadline to 30 June 2025. This extension is conditional upon HYI resuming its operations and the fulfillment of specific conditions (auditor appointment and the procurement of the Independent Review Report) being met by 30 April 2025. The company’s next steps remain under careful scrutiny as it looks to address these challenges in its upcoming revised resumption proposal.

Implications for Shareholders and Market Impact

The clarifications and subsequent response by the SGX-ST underscore a period of uncertainty for shareholders. Delays in meeting stringent regulatory conditions, the dependency on the efficiency of Chinese governmental approvals, and the reliance on HYI’s operational resumption are all factors that could have a material impact on the company’s trading status and its share price. Investors need to be aware that these conditions, if not met, could potentially lead to further setbacks or even rejections of the proposed resumption of trading.

Given the situation’s significant reliance on external governmental processes and the inherent risks involved with the outlined projects, market participants should exercise heightened due diligence. The outcome of these regulatory hurdles is likely to be a key catalyst for share price volatility in the near term.