Previous day closing price: $2.84
Recommendation – HOLD (maintained)
Target price – $3.15 (maintained)
ST Engineering (STE) has announced that one of its senior personnel was arrested by the Corrupt Practices Investigation Bureau. Patrick Lee Swee Ching, currently Chief Financial Officer of US subsidiary of Vision Technologies Systems, was released on bail and has been granted permission by the CPIB to leave Singapore. He returned to the US on 10 September 2011 to resume his responsibilities as the Chief Financial Officer of VT Systems. The arrest is believed to stem from the time when Mr Lee was the Group Financial Controller for ST Marine.
It is believed that the CPIB is investigating certain transactions involving two former and one current employees of ST Marine, who were also arrested by the CPIB and released on bail. STE declined to provide further details at this time as the CPIB’s investigation is ongoing, but has also commissioned an internal inquiry.
The Penal Code that Mr Lee was charged with relates to an officer who destroys or falsifies documents 'wilfully and with intent to defraud', but no details were provided on the type of accounts that were being investigated. However, Mr Lee left ST Marine in 2006 to join VT Systems.
While we are short on details, the severity of the offence not known, but we note that Mr Lee was allowed out of the country, and the alleged offence took place at least five years ago. We will keep abreast on this situation, but it will be a negative overhang to STE’s stock price for now. Maintain Hold.
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