Wednesday, 20 August 2014

Jobstreet, Masterskill, MH17, Madoff, Pension Funds

[1] Jobstreet announced that Seek has increased its offer from RM 1,730 million to RM 1,890 million, an increase of RM 160 million. Good news for the shareholders who held on to their shares. Probably good negotiations by Mark Chang.

[2] Masterskill announced that it sold its shares in Hong Kong listed company Gayety Holdings Ltd. for a total cash consideration of RM 33 million, netting Masterskill a profit of RM 12 million. I didn't believe much in this (in my opinion rather strange) acquisition, so this sale (and the profit) looks good for the company. Finally some good news for the minority shareholders.

[3] I never used to believe much in those typical US conspiracy theories, but these days, I am not so sure anymore. The following article looks interesting enough to share, although I can't guarantee the truthfulness of the contents (reader beware):

MH17 Verdict: Real Evidence Points to US-Kiev Cover-up of Failed False Flag

[4] Interesting article about the Madoff fraud case:

36,000 Madoff Victims Have Not Received a Dime in Restitution; 1,129 Fully Reimbursed

On May 5, 2014, Irving Picard, the court-appointed trustee in charge of finding and distributing Madoff’s swindled funds to investors released this statement in a press release announcing the fourth interim distribution of funds to victims: “…1,129 accounts will be fully satisfied following the fourth interim distribution. All allowed claims totaling $925,000 or less will be fully satisfied after the distribution.”

Just eight days later, Richard Breeden, the Special Master that’s working on behalf of the U.S. Department of Justice to distribute a separate pool of funds to Madoff’s victims reported that more than 36,000 claimants have filed documents with his office indicating that they haven’t yet received a dime of restitution. Yes, 36,000 people from all over the globe.

That’s bad enough but the story goes downhill from there. Almost six years from the date that Bernard Madoff turned himself in as the largest Ponzi fraudster in the history of finance, the U.S. Department of Justice is still scratching its head over just how much money Madoff actually ripped off from investors and puzzling over how to divvy up its inadequate pot of money

The only consistent message here is that the U.S. financial regulatory structure is just as bad at delivering fraud restitution as it is at detecting fraud.

[5] And lastly an article by Yves Smith: "How Your Pension Fund Became a Casino".

The original premise of the prudent-man rule was that pension-fund managers needed to operate as if their clients were widows and orphans. Sadly, experience has shown that the managers are often as vulnerable to exploitation as the people on whose behalf they are investing.

Tuesday, 19 August 2014

Eratat: another S-chip bites the dust (5)

On the same subject, an article in the Business Times (Singapore), some snippets (with some comments by me in red):

The Fujian office of China's bank regulator China Banking Regulatory Commission (CBRC) has found that an Agricultural Bank of China (ABC) bank document purportedly showing a cash balance of 577 million yuan (S$117 million) in an Eratat subsidiary bank account was forged by the subsidiary.

Even more egregiously, representatives of the subsidiary might have impersonated as ABC bank staff to reassure visiting independent auditors and company directors that everything was okay.

They apparently used the bank's Jinjiang Chendai Branch premises earlier this year, verifying the forged bank statement as true. They even informed the visitors that the Eratat subsidiary concerned was a good customer and did not have any loans with the bank.

The news is likely to hit retail investors, who own about three quarters of the company. Eratat had a market valuation of almost S$50 million before trading was suspended in January.

It would be rather naïve if retail investors still expected to get some return on their money, after all the previous information, for instance here. They should have counted on a total loss, anything else would be a bonus.

But Eratat executive director Ye Sanzhi sold off his entire 6.77 per cent stake for S$4.44 million last August.

That is indeed a red flag, and unfortunately not uncommon.

Last November, Eratat was awarded runner-up in the "Most Transparent Company Award 2013, Mainboard Small Caps Category", by the Securities Investors Association of Singapore. The same month, with the company trading at about nine cents a share, Voyage Research had an "increase exposure" call on the company with a target price of 28 cents a share.

Awards etc. do not mean much. There is a whole list of companies being featured on the front page of magazines like Fortune or Forbes which have gone down the drain. Often the moment they were featured was their highest point, after that things only went downhill. Companies with good governance can turn for the worst.

Much more useful is a list of companies with bad governance, they seldom improve.

Monday, 18 August 2014

Eratat: another S-chip bites the dust (4)

Announcement by Eratat on the SGX-website:

- HMW is the company’s principal operating subsidiary Fujian Haimingwei Shoes Co., Ltd.
- ABC is the Agricultural Bank of China where Eratat maintained a bank account.
- CRBC is the China Regulatory Banking Commission.

The above announcement seems to indicate a very serious case of fraud, not really unexpected given what happened before, please see the previous blog postings about Eratat.

The above case is also relevant for Chinese companies listed on Bursa Malaysia. There are several China based companies where the amount of cash is unusually high, sometimes as high as RM 1 Billion. The investing public (nor I for that matter) doesn't seem to trust those accounts, and the companies are trading at very low valuations, given their cash holding and profitability per share.

What the Malaysian authorities could do is insist that a high authority at the main office of the banks holding the cash confirm the size of the cash plus indicate that the there are no unreported liabilities. I don't think that is a particularly cumbersome or expensive thing to do.

Either the cash balances (and lack of liabilities) are confirmed as being genuine (in which case the companies might be undervalued), or the opposite (in which case the fraud is exposed, authorities can take action and future damage is prevented, like in Eratat's case).

The transparency provided (either positive or negative) would give a very much needed boost of clarity for all China based companies on Bursa.

Sunday, 17 August 2014

Australia: Cheating rife in financial planning

Shocking article in The Age about the situation in Australia regarding financial planners. Some snippets:

.... “The basic qualification to be a financial planner could be regarded as a joke were it not for the fact that financial illiterates armed with nothing more than this flimsy “qualification” are turned loose to advise people on their life savings, with often tragic results. That this has been the case for so long is yet another damning indictment of the slumbering regulator, ASIC.”

Senator John Williams, who is a member of the parliamentary joint committee, says: “You can walk out a shearing shed and do an eight-day crash course and then go and tell people how to invest their life savings. Something is wrong.”

.... Australians have seen recurring examples of rampant abuse of consumers and a lack of professionalism shown by the advisers they trusted, and he warns that only the ability of Australians to identify and place their trust in competent, ethical and more highly educated professional financial planners will re-build confidence in the nation’s markets.

As it currently stands, hairdressers, tyre fitters and mechanics require more onerous standards of education and work experience than a financial planner.

More criticism on ASIC can be found here.