Sunday, 23 November 2014

"Pity the Protasco minorities"

Good article from Errol Oh in The Star: "Pity the Protasco minorities, 2 EGMs in 3 days", some snippets (emphasis mine):

This column has argued against the requisitionists’ opacity, and has pointed out that transparency and willingness to engage with minority shareholders will earn goodwill.

The recent developments at Protasco, which calls itself an infrastructure development provider, take us to the other extreme, and it’s equally troubling and frustrating. Here, the problem is not that the principal players are not saying anything. On the contrary, a lot of information is flowing out from both sides, directly and openly or otherwise, but there are so many allegations and counter-allegations of wrongdoings that the minority shareholders can’t be expected to make confident conclusions as to whom they should back.

Lawsuits have been initiated and the saga will probably drag on for many months at least. The EGMs are by no means the final battles, but they’re important because a board seat is a valuable vantage point.

The EGMs are lawful as long as they’re convened and conducted according to the Companies Act’s provisions and the company rules. However, there’s more happening now than those meetings. The brawl has spilled over into the media and the blogosphere, and one wonders how much of this fits the requirement for “full, accurate and timely disclosure”.

Also, there’s little indication that the regulators are at hand to prevent things from going too far. Bursa Malaysia and the Securities Commission may prefer the quiet and subtle way of delivering warnings and gathering facts, but they should also recognise that the unusual events at Protasco offer them a unique opportunity to draw the line between disclosure and negative campaigning. When there’s plenty of mudslinging going on, nobody walks away spotless.

I think this is one of those moments that the regulators and the independent directors of Protasco should step up their game. Sometimes working behind the scene is possible (and may be even preferable), but not in the above case. I think actually a lot of the problems could have been avoided if regulators and/or independent directors had been more active in the first quarter of 2013, almost two years ago. If they had asked the right questions and done independent research then a lot of information would have been gathered.

Please use Google and the keywords "protasco board tussle" to find the many blogs about this case.

"Executive editor Errol Oh is only sure that Chong and Tey can’t both be right."

Correct, and I don't even exclude the possibility that both sides are (at least to some extent) wrong.

The proposed acquisition was always announced as a "non related party transaction" even as recent as August 5, 2014 :

I strongly doubt that was the case.

Saturday, 22 November 2014

MOL Global's share price crashes 54%

MOL Global's share price tanked 54% to USD 4.09 after it announced that its CFO (who only joined three months ago) resigned and the company would postpone its quarterly results, both known red flags.

From Barron's Asia:

Malaysia-based Internet gaming services firm MOL Global (MOLG) said it would postpone its planned third-quarter results from today to Wednesday, December 3. This would be MOL Global’s first earnings call as a public company and the stock has risen over 10% since it went public a month ago in New York.

MOL Global also said its CFO Allan Wong decided to resign for “personal reasons.” Wong only joined MOL Global in August 2014. Jonathan Yoon, currently CFO of one of MOL Global’s business segments, will assume the post.

This is unfortunate timing for Deutsche Bank which just started their coverage with a Buy rating and a price target of $12. MOL closed at $8.86 on Thursday.

The bank analysts Alan Hellawell III and Vivian Hao rushed out a follow-up after the announcement, stepping back from their bullish calls:

MOL, as a relatively small company which spans more than 13 markets, could suffer from poor internal reporting systems, rendering a representation of the business challenging until the actual closing of books at the end of reporting periods. We also note that MOL, with 454 employees, has undertaken no less than 10 investment and acquisitions in five countries since 2009.

Reconciling differences in accounting standards across markets can be a real headache.

The US is a difficult country to list in, with tough laws and "hungry" lawyers. It seems the last category is indeed already on the prowl. How serious that is, I don't know at this moment, we first have to wait for the quarterly results.

MOL Global has come down a lot (67%) since its listing at USD 12.50 per share. One interesting paragraph from its prospectus under "Risk Factors":

You should not consider or rely on statements made by our major shareholder that appeared in a news report in June 2014.

In an article in The Business Times, a Singapore-based newspaper, dated June 23, 2014, information regarding us and this offering was published. This article quoted statements that were made by our major shareholder, Tan Sri Dato’ Seri Vincent Tan, to a reporter, during an interview relating to matters unrelated to us or this offering, and were published without his consent. These statements were also not made with the knowledge or consent of us or our directors, officers or employees. The article referred to statements by our major shareholder regarding the expected timing of our initial public offering and our projected market capitalization and value of our company. Portions of the article were republished by other news agencies.

These statements regarding market capitalization and value by our major shareholder were not based on any methodology, calculations or analysis undertaken by us or, we understand, our major shareholder. We understand these were informal, speculative statements made by our major shareholder that were not expected by him to become public. These statements should not be relied upon for any purpose whatsoever. We are unable to accurately project our market capitalization or the value of our Company because these will be based on many factors beyond our control. You should carefully evaluate all the information in this prospectus, including the risks described in this section and throughout the prospectus. You should only rely on the information contained in this prospectus in making your investment decision.

Neither we nor any of the underwriters in this offering, nor any of our or their respective affiliates, have confirmed, endorsed or adopted any of the information reported in the news articles referred to above, and all such information is disclaimed by us and the underwriters and our and their respective affiliates. Accordingly, prospective investors should not rely on any such statements or information in such news reports.

Friday, 21 November 2014

Jobstreet: excellent entrepeneurship (3)

Mark Chang's final message to existing and former employees of, from SSQuah's blog.

Dear colleagues,

It is almost a 20-year start-up journey for us and we are closing the deal and officially handing over the management to Seek management team.

The most important message I want to say to you and all our former staff is "Thank you". Thank you for all your sacrifices, loyalty, hard work and unselfish contributions all these years. Other people can claim but I know you are the ones who have done all the real work. You are the real unsung heroes of our company. With you in my wing, I had confidence to compete with the best in the world and we became the most successful Internet company in this region to date and touch the lives of millions. With you, I have so much joy in my work and with you, I have found meaning in my life. A simple "Thank you" does not sound sufficient but it is through this simple "Thank you" which encompasses all my wholehearted tributes and all my best intentions to each and everyone of you.

At the end of today, I will no longer your CEO but I will be your friend for life. I ask your forgiveness for all the wrongs I have done. It has been a wonderful journey travelling with you. We did not really change the world; instead, the world has changed us.

I learn that real wealth is not money and the money that I earned, I will give most away for good causes. Real wealth is what money cannot buy such as health, good relationship, happiness and peace of mind. May we, the mortal and foolish ones, have the wisdom to pick the right choices.

May you find what you seek.

Mark Chang

Thursday, 20 November 2014

iCapital: questions regarding adjourned AGM and expenses

iCapital's AGM was recently adjourned. That in it self is already quite unusual. AGMs cost money and time, surely there should be a good reason to ask for an adjournment.

According to an article in The Star (some snippets):

During the Oct 11 AGM, the resolution was not tabled, as shareowners holding a 11.39% stake had already indicated their intention to vote against it two days before the shareholders’ meeting.

“The real issue is whether the 11.39% should control icapital. If they can block the reappointment of one director with only an 11.39% share ownership, what is there to prevent them from abusing their power again?”

Did Tan Teng Boo really say "abusing"? If a shareholder (in this case most like a fund) votes in what it thinks is the best way, can that be labelled as "abuse"? Most likely they simply act in the best interest of their investors. Is there any rule that they breached?

"He said shareholders who opposed the resolution should issue a statement on their rationale for doing so, even though it was not required from a procedural and legislative perspective."

I can't recall ever any meeting being adjourned to ask one of the shareholders for the reason of its voting. And why should shareholders issue statements on their rationale? I am sorry to say, but this sounds beyond weird.

Another matter is that I always regarded Dr Tan as being "stingy", that is, "stingy" in a good way, like Warren Buffett being notoriously stingy in spending. Examples are the cost to list iCapital (which was probably a record low for any Bursa listed company), its year report (without any photo's or colours), etc.

To my surprise, things have rather changed, from the 2014 year report:

Advertisements shooting up from 21K to 708K, AGM expenses increasing from 99K to 452K (and most likely increasing again due to the extra AGM needed). Those are strange increases in expenses, atypical for Tan.

Total operational expenses are RM 8.6M, after deducting the 514K for impairment RM 8.1M. On a fund of RM 426M that means 1.9% expenses. That is still considered ok.

But when one realizes that a whopping RM 240M is simply held in cash (one doesn't need a degree in Rocket Science to manage that), then expenses seem to be on the high side.

I own a managed account where the fund manager only charges fees on the invested part (excluding the cash). If we use the same formula for iCapital then the expenses on the RM 186M investments suddenly are a whopping 4.4% per year, much too high for my liking.

These expenses would also explain (partially) the underperformance of the fund, about which I wrote before.

An interesting discussion on this stock at LowYat forum.