SINGAPORE – Capital World’s ability to continue operating depends on the real estate developer completing a long-running property sale to Mustafa, the Singapore retailer planning an outlet at its Capital City Mall in Johor Bahru.
In an Oct 14 exchange filing, the company disclosed that its auditor, Moore Stephens, had flagged a material uncertainty that could cast significant doubt on the group’s ability to continue as a going concern. The auditor said this depended on completing the property sale.
Mustafa had agreed in January 2023 to buy 591 unsold retail units and other assets at Capital City Mall, which has 11 storeys, for RM368 million (S$116 million). The other assets included accessory parcels and carpark lots.
However, completion remains outstanding, with government approvals obtained for only 55 of the 591 units, Capital World said in a July 9 update.
The Straits Times reported in February that Mustafa was in negotiations with the individual owners of the retail units at Capital City Mall, which is a strata-titled mall. Mustafa had planned to open its store in JB in the second half of 2023.
Capital World later clarified that it was not aware of the details of Mustafa’s negotiations with other unit owners at the mall.
It announced in April that fit-out and renovation works had begun at the mall for Mustafa’s JB outlet and that the retailer would initially occupy about 240,000 sq ft on the mall’s ground floor.
An opening date was targeted “before the first quarter of 2027”.
In its Oct 14 filing, Capital World said it had received RM98.2 million in deposits from Mustafa by June 30 and another RM45.5 million after the end of its financial year.
Capital World’s board added that it viewed the remaining completion process as administrative, with nothing being brought to its attention suggesting that the sale would not be completed within the next 12 months.
Meanwhile, the company also revealed that it has asked two creditors to defer payments totalling about RM10 million, and is negotiating with a third creditor to extend repayment of approximately RM19 million.
The board expects the first two requests to be granted, as those creditors had previously agreed to instalment plans.
The company added that all six bank accounts of its subsidiary Capital City Property, which were previously frozen in connection with a Malaysian Anti-Corruption Commission investigation, had been unfrozen and were available for normal operations.
Taking these factors into account, the board said its cash flow forecast indicated sufficient working capital to meet its obligations falling due over the next 12 months.
While the group’s short-term assets exceeded its short-term liabilities by RM135 million, substantial sums were tied up in properties rather than readily available cash.
The auditor highlighted inventory properties valued at RM110.7 million and non-current assets held for sale worth RM200.6 million, saying the group’s ability to continue operating hinges on closing the Mustafa deal.
Despite the auditor’s warning, the board said it considered the group able to continue operating, citing the expected completion of the Mustafa sale, deposits received and efforts to defer payments to creditors.
Meanwhile, the group continues to face several legal proceedings involving property purchasers.
Capital City Mall is the retail component of Capital World’s flagship mixed-use development in Jalan Tampoi.
In April, the developer said it was seeking additional tenants across food and beverage, fashion, lifestyle, entertainment and essential services.
In an Oct 1 update, it revealed that a Federal Court matter involving 99 purchasers had been scheduled for a physical hearing of a motion on Nov 2, 2026.
A separate case involving 20 other purchasers had concluded its trial, with a decision scheduled for Dec 8. Other proceedings remain ongoing, including an appeal by purchasers scheduled to be heard in July 2027.
In its financial disclosures, management said it did not consider an outflow of resources from the third-party claims probable, citing legal advice.
Separately, the Catalist-listed developer is proposing a capital restructuring to write off RM938.7 million in accumulated losses. An extraordinary general meeting has been scheduled for Oct 29.
Capital World is also proposing to consolidate every 100 shares in the company into one share to help reduce share price volatility and improve investor interest.
Its shares last traded at 0.1 cent, giving the company a market value of $16 million.
Capital World has seen heavy turnover in its finance leadership in recent years, with Tan Yu Heng, who was appointed financial controller in May, due to leave on Oct 23, following a resignation announced in August.
His predecessor Koh Chee Huat left on April 1, while an earlier financial controller, Kenneth Lim, left in Jan 18, 2025.
The company is led by managing director Eric Tan Eng Huat, who took over on Jan 13, 2025
