Tuesday, 22 July 2014

Singapore regulator plans new rules to shield investors

The Monetary Authority of Singapore (MAS) yesterday proposed a set of regulations to boost investor protection, with new rules for investments linked to land banks, gold and other physical assets - following several scams that have left retail investors high and dry.

Its latest move, laid out in a consultation paper, means investment schemes linked to land-banking and other physical assets such as most precious metals, will no longer be made available to retail investors.

MAS also wants all retail investment products to be rated on their complexity and risk - a decision that David Gerald, president of the Securities Investors Association (Singapore), said would provide needed guidance for retail investors. "It's better late than never," he added.

The central bank plans to tweak its definition of collectively managed investment schemes (CIS) to include schemes that involve pooled profits and remove investors from the daily control of the investments. This will apply to land-banking, which would then be classified as a CIS.

All CIS must meet standards set out in the CIS Code, which ensures that the assets involved are liquid. Since land cannot be deemed liquid, unlike securities, it would no longer be offered to retail investors.


The above article comes from The Business Times and is really great news.

The current (highly unsatisfactory, in my opinion) situation is described by blogger Martin Lee:


Singapore’s approach is slightly different. It specifics a list of financial instruments that are regulated. This includes the usual investments like shares, unit trusts and life insurance. These regulated products can only be sold by licensed representatives who meet the prescribed requirements. Anyone who is not licensed but tries to give individual advice on them will be contravening the regulations (The irony is that you do not violate anything if you conduct a seminar to few hundred people on the same topic).

If a product falls outside this list, it is considered not regulated by MAS. The current position is that any product that does not fall under the scope of MAS is not up to them to regulate and hence they will not stop companies from selling such products. For example, land is considered a real asset so any sale is like a property purchase on a willing buyer and seller basis.


Martin Lee writes also about the proposed changes in the consultation paper.

This blog has also warned several times for unregulated schemes, some of which have collapsed or are likely to collapse in the near future.

Comments on the consultation paper can be submitted latest by September 1, 2014. I hope for a quick implementation of the new framework and subsequent enforcement of all kind of dodgy investment schemes. It is long overdue.

Malaysia (Securities Commission and Bank Negara Malaysia) also should take note, they are dealing with the same situation.

Sunday, 20 July 2014

Patimas: will there be justice?

On March 21, 2014 Patimas Computers Bhd. was delisted from Bursa Malaysia.

An investigative audit by UHY Advisory has shown lots of very serious irregularities, just to mention a few:



 




Next to that there was a court case between Patimas and one of its business relations, Omni Quest, the judgement of which also contained lots of material:


Patimas was audited by Ernst & Young, this was their statement made on April 26, 2011 regarding the annual audited accounts of 2010:


Pretty scary, since the irregularities were going on for so long, and one of the top 4 accounting firms did not find anything wrong in the accounts.

Further more we see things that are normal in a company going under, for instance many director changes, from their 2013 audited accounts:


And the usual rumours start to appear, two instances where Bursa queried the company:

PATIMAS IS RUMOURED TO GET CONTRACT WORTH RM160 MILLION
AZIM ZABIDI IN TALKS WITH FOREIGN PARTY TO REVIVE PATIMAS

Rumours that must have played their part in supporting the share price and volume:



And insiders selling in a big way, when the troubles start to appear:



Will the authorities take appropriate action within a reasonable timeframe? Time will tell.

Thursday, 17 July 2014

'No' to Versatile delisting

Article from The Star, shareholder activism taking place in Versatile Creative Bhd, successfully rejecting plans to delist the company. Some snippets:


Minority shareholders in Versatile Creative Bhd (VCB), citing the exit offer of 50 sen per share was not reflective of the company’s true value, have rejected the company’s delisting plan.

“The minority shareholders rejected the delisting because they argued that Versatile is worth more than the current share price (which was taken to fix the exit offer price), taking into account its land and factory assets,” said a minority shareholder.

VCB has two pieces of industrial land – in Pandan Indah, Kuala Lumpur and Balakong, Selangor – which site its factory buildings. As at Dec 31, 2012, both assets were valued at a net book value of RM27.4mil while the company’s market capitalisation is RM55.32mil based on yesterday’s closing price of 50 sen per share.

VCB’s net asset per share is 64 sen for the financial year ending Dec 31, 2013 compared with 56 sen a year earlier.


However the company made a loss of RM3.16mil last year against a profit of RM2.14mil in 2012, with a negative cashflow of RM3.1mil as at end-2013. It was also in the red in financial years 2011, 2010 and 2008.

Apart from the land, VCB has a 6.2% stake in Iris Corp Bhd. The value of this stake has doubled since November last year after Felda Investment Corp took a 26.7% stake in the technology company.

The net book value of this stake or 126.42 million Iris shares is RM62.58mil, based on Iris’ closing market price of 49.5 sen as at the latest practicable date, the shareholder said.

Wednesday, 16 July 2014

Let the cat out of the bag

What do the following names have in common?

  • Colby Nolan
  • George
  • Henrietta
  • Kitty O'Malley
  • Oliver Greenhalgh
  • Oreo Collins
  • Tobias F. Schaeffer
  • Zoe D. Katze
  • Lulu
  • Molly
  • Pete
  • Sassafras Herbert
  • Sonny
  • Wally

The answer is two things, as far as I am aware:

  • First of all they are all the proud owners of degrees;
  • And secondly, they are all animals.

For more background about their astonishing achievements, please read the articles in Wikipedia and Slate.


To return to the field of investing, a relevant question could be: "if animals can attain degrees (and some even a MBA), can they also be a successful stock picker?".

And the answer to that question should be positive, according to this article in The Observer:




"The Observer's panel of stock-picking professionals has been undone in our 2012 investment challenge by a ginger feline called Orlando who spent time paw-ing over the FT.

The Observer portfolio challenge pitted professionals Justin Urquhart Stewart of wealth managers Seven Investment Management, Paul Kavanagh of stockbrokers Killick & Co, and Schroders fund manager Andy Brough against students from John Warner School in Hoddesdon, Hertfordshire – and Orlando.

Each team invested a notional £5,000 in five companies from the FTSE All-Share index at the start of the year. After every three months, they could exchange any stocks, replacing them with others from the index.

By the end of September the professionals had generated £497 of profit compared with £292 managed by Orlando. But an unexpected turnaround in the final quarter has resulted in the cat's portfolio increasing by an average of 4.2% to end the year at £5,542.60, compared with the professionals' £5,176.60.

While the professionals used their decades of investment knowledge and traditional stock-picking methods, the cat selected stocks by throwing his favourite toy mouse on a grid of numbers allocated to different companies."