Thursday, 1 December 2016

MyEG shares jump after juicy government contract (3)

I wrote before about this issue, here and here.

Bursa announced the following enforcement:


Bursa Malaysia Securities Berhad (635998-W) (Bursa Malaysia Securities) has publicly reprimanded My E.G. Services Berhad (“MYEG” or “the Company”) and its Managing Director, Wong Thean Soon for breaching the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (Main LR).  In addition, the Managing Director has been fined RM50,000.

MYEG is publicly reprimanded for breaching paragraph 9.08(2) of the Main LR which prescribes that a listed issuer must ensure that no disclosure of material information is made on an individual or selective basis to analysts, shareholders, journalists or other persons unless such information has previously been fully disclosed and disseminated to the public (i.e. to Bursa Malaysia Securities pursuant to paragraph 9.08(5) of the Main LR).  In the event that material information is inadvertently disclosed on the occasion of any meeting with analysts, shareholders, journalists or others, it must be publicly disseminated as promptly as possible.


MYEG had at the CIMB Conference on 6 January 2015 disclosed the government’s decision for MYEG to implement the fully online renewal of foreign workers’ permit from 2015 onwards (“the New Renewal of Foreign Workers Permit Arrangement”) as well as impact of the same to the Company (e.g. market share and market potential).


However, the announcement on the New Renewal of Foreign Worker Permit Arrangement was made to Bursa Malaysia Securities only on 9 & 12 January 2015 and even so, without any disclosure of details of its impact / implication on MYEG’s financials which was disclosed in MYEG’s presentation to the fund managers at the CIMB Conference.


The New Renewal of Foreign Workers Permit Arrangement was material / significant to the Company’s business and prospects as well as financials to MYEG particularly as the arrangement would increase the Company’s market share on renewal of foreign work permits from 8% (based on MYEG’s representation at the CIMB Conference) to 100%.


There was a significant increase of up to 26% in the Company’s share price from 6 January 2015 to 9 January 2015 with high volume traded following MYEG’s presentation at the CIMB Conference on 6 January 2015, the CIMB Equities research report issued on 7 January 2015 which had, amongst others, stated that the target price for MYEG was to be RM7.80 (from RM5.28) and The Star article on 9 January 2015 which had reported on the New Renewal of Foreign Workers Permit Arrangement. 


Wong Thean Soon, the Managing Director of MYEG is publicly reprimanded and fined RM50,000 for breaching paragraph 16.13(b) of the Main LR where he had permitted the Company’s breach of paragraph 9.08(2) of the Main LR.  He had selectively disclosed information on the New Renewal of Foreign Workers Arrangement in making the presentation for MYEG at the CIMB Conference on 6 January 2016.


In addition to the public reprimand, MYEG is required to undertake or arrange for the necessary training programme(s) in relation to compliance with the disclosure obligation under the Main LR and ensure its directors and relevant personnel of the Company attend the same.
Bursa Malaysia Securities views the contravention seriously as the disclosure obligations are fundamental obligations of listed companies to preserve and sustain market integrity and investor confidence.


Bursa Malaysia Securities has reminded MYEG and its Board of Directors on their responsibility to maintain the appropriate standards of corporate responsibility and accountability to its shareholders and the investing public
.


The above enforcement was expected, it is reasonably fast and gives the right amount of detail in the above press release, both regarding the impact of the contract on the business of MyEG and on the share price.

However, the size of the fine (only RM 50K) looks very low, is this really an adequate deterrent? Especially since Wong Thean Soon settled only a few months before the highest regulatory amount in the history of the SC:


"On 26 September 2014, Wong Thean Soon (“TS Wong”), entered into a settlement with the Securities Commission Malaysia (“SC”) in the sum of RM7,000,000 when he agreed without admission or denial of liability, to settle a claim that the SC was proposing to institute against him and 13 others for the manipulation of MyEG Services Berhad shares between 16 January 2007 and 24 April 2007, contrary to section 84(1) of the Securities Industry Act 1983."

Wednesday, 30 November 2016

INIX: why no audited accounts of its associate? (2)

Today the company issued its annual report.

The Chairman's statement is disappointing, only one page, widely spaced, hardly giving any useful information about the loss incurred and the plans going forward to improve its results. Surely an annual report should be more informative than that.




"Maintaining the profit trend"? The company just lost RM 5 Million and has accumulated losses of RM 20 Million! I surely hope, for the sake of the minority shareholders, that the trend will not be maintained.

I was interested in the associate company that didn't have audited accounts (page 64). No reason was given, instead a short, simplified balance sheet was given, but the profit & loss was rather comical:


If this same information was given to the auditors of INIX, then I understand why they qualified the accounts.

INIX: why no audited accounts of its associate?

INIX announced that its audited accounts are qualified, the reason given by the auditor:



I can come up with several scenario's why the audited financial stataments were not made available, each with its own degree of how serious the impact would be for INIX.

But why do we have to guess which scenario is the one, why does INIX not simply provide the proper reason for the above?

Surely minority investors deserve to know, this seems to me to be material information.

Tuesday, 29 November 2016

Oops, CIMB releases Vivocom's results premature (2)

During the day CIMB took the research note from their website:


And later Vivocom announced their 3rd quarter results, very similar (but not exactly the same) as the numbers from CIMB. Probably CIMB used some preliminary numbers in their research report.

Bursa just today announced that it reprimanded SKP Resources and fined 3 executive directors.


SKP had verbally disclosed the Contract including the contract value [RM 400 Million worth] to 2 research houses on 7 May 2015 without making an announcement of the same to Bursa Securities immediately thereafter.


Of interest for the Vivocom case is the following (emphasis mine):


..... a listed issuer must ensure that no disclosure of material information is made on an individual or selective basis to analysts, shareholders, journalists or other persons unless such information has previously been fully disclosed and disseminated to the public (i.e. to Bursa Malaysia Securities pursuant to paragraph 9.08(5) of the Main LR).


In other words, it appears that Vivocom clearly breached the listing rules in a similar way as SKP by selectively disclosing (preliminary) quarterly results to CIMB.

Apart from that, there is the ethical issue, surely CIMB, being professionals in this business, must have know that Vivocom was breaching the listing rules.

And lastly there is the question if Vivocom and CIMB were much too close for comfort, as witnessed by the many postive research reports from CIMB, the high target price and the above breach of the rules.