The Securities and Exchange Commission (SEC) has asked Pace Development Corporation Plc to clarify the assumptions used to determine the fair value of two investment projects, as the valuation process affects the company's financial statements.
"Pace's auditor has not provided a conclusion on the company's consolidated income statements in the second and third quarters of 2017 because the auditor could not conclude an assessment of the fair value of Pace Project One Co and Pace Project Three Co on revenue projection of MahaNakhon Tower, the assumptions for which were based on estimated future revenue," the SEC said in a release.
Instead, Pace used the estimated income to record an investment amount of 8.23 billion baht and recognised a gain of 8.9 billion baht from a loss in control of a subsidiary, according to the SEC.
The auditor could not conclude an income estimation for MahaNakhon Tower's observation deck because construction remains incomplete and no commercial operations are in place, said Pace chief financial officer Natha Kittiaksorn.
"The use of reasonable assumptions in the valuation of investments is important and affects the accuracy of the investment and the loss of control of a subsidiary," the SEC said. "The company has not disclosed clear information and important assumptions to supplement its financial statements, such as estimation of the number of people using the service [the observation deck at MahaNakhon Tower], which could cause uncertainty and affect shareholders' investment decision."
The SEC has demanded Pace submit the required information to the Stock Exchange of Thailand within 14 days.
If the results of the reviewed assumptions find that they affect the fair value of investments and figures recorded in the submitted financial statements, the company should submit revised financial statements to the SEC within 30 days, the regulator said.
On Tuesday, Pace reported a consolidated net loss of 961.7 million baht in the third quarter, widening 20% year-on-year, due to a decline in gross profit of the company's food and beverage business. However, the company registered a net profit of 3.77 billion baht in the first nine months.
Pace is a high-end property developer, with projects such as MahaNakhon Tower along with residential projects like MahaSamutr, a luxury resort project in Hua Hin, and condo Nimit Langsuan, altogether worth 20 billion baht.
Pace has been saddled with massive debt after using short-term debt instruments in the capital market to fund long-term investments. The company plans to raise funds through recapitalisation and the sale of two residential projects, the combined acquisition value of which could be 14.5 billion baht.
Pace signed a memorandum of understanding on the sale of Nimit Langsuan, plus 25% of the total units at The Ritz-Carlton Residences Bangkok in MahaNakhon, to Sansiri Plc, which is now conducting due diligence.
PACE shares closed yesterday on the SET at 0.68 baht, down three satang, in trade volume worth 46.8 million baht.