Sunday, 22 January 2017

AirAsia mentioned in Rolls-Royce bribery case (2)

The relevant documents on the website of the SFO (Serious Fraud Office from the UK) can be found in the following documents, the AirAsia case is referred to as "Count 12 - Malaysia Civil":

Deferred Prosecution Agreement – Statement of Facts – SFO v Rolls Royce PLC, paragraph 314 and further;

SFO -v- Rolls Royce judgment, paragraph 107 and further;

SFO -v- Rolls Royce Appendix A, paragraph 147 and further.

SFO -v- Rolls Royce Appendix B, detailing the financial sanction to be paid, in the AirAsia case being GBP 17 Million (RM 94 Million).

AirAsia mentioned in Rolls-Royce bribery case

Article from Malaysiakini (partially behind paywall), some snippets:

UK's Serious Fraud Office (SFO) has named AirAsia Group as one of several foreign parties involved in bribery cases with jet engine manufacturer Rolls-Royce PLC.

AirAsia Group, in an immediate response, told Malaysiakini that it had complied with procedures in its dealing with Rolls-Royce.

According to the Statement of Facts filed with the Crown Court at Southwark, Rolls-Royce failed to prevent its employees from providing an AirAsia Group executive with credits worth US$3.2 million (RM14.2 million) for the maintenance of a private jet.

This was despite Rolls-Royce employees believing that the credits would lead the AirAsia Group executive to perform his function "improperly".

"This financial advantage was given at the request of the AirAsia group executive, in return for showing favour towards Rolls-Royce in the purchase of products and services provided by Rolls-Royce and its subsidiaries, including Total Care Agreement services to be supplied to AirAsia X, a subsidiary of AirAsia Group," it said.

It also alleged that there was an attempt to conceal the fact that the credits, given to AirAsia X in 2013, would be used for the private jet, which was unrelated to the AirAsia Group.

On Oct 17, 2012, a Rolls-Royce employee reported to the Rolls-Royce senior employee that the AirAsia Group executive was seeking to "make the corporate jet deal 'invisible' with its 'value covered within additional A330 Total Care Agreement charges" for AirAsia X".

On March 15, 2013, a Rolls-Royce employee reported to his senior that the AirAsia X senior employee, who had been negotiating for the Air Asia Group executive's private jet, wanted a "cash settlement that is off the record and not visible to the AirAsia X group".

The Rolls-Royce employee raised concern that it was "unethical and likely illegal" and would rather not handle the case.

The Rolls-Royce employee complained that the AirAsia X senior employee had avoided discussing the private jet in front of other AirAsia X or Rolls-Royce employees and refused to communicate via email about the matter unless it was verbally or on Blackberry Messenger, a secured chat application.

In an interview during the SFO's investigation, the Rolls-Royce employee said the AirAsia X senior employee went as far as suggesting that the Corporate Care entry fee for the private jet be secretly spread across other AirAsia X payments to Rolls-Royce.

"Rolls-Royce employees believe the relevance of the jet to the issuing of those credits was most likely to be concealed from AirAsia X executives by the AirAsia X senior employee.

The above sounds very worrisome and requires an official, much more detailed answer from AirAsia than given.

I have written before about the huge amount of RPTs between the different companies in the AirAsia group and also the privately owned companies. This gives rise to numerous conflict of interest situations.

If the holding company was listed, with all subsidiaries (like AirAsia, AirAsia X and the subsidiary owning the private airplane) 100% owned, then many problems (like the above mentioning in the Rolls-Royce bribery case) would not have existed in the first place.

Friday, 20 January 2017

Sabana Reit: shareholder activism

Shareholder activism is still very rare in Singapore (or Malaysia for that matter), so if it happens, we have to take note.

Some disgruntled shareholders of Sabana Reit have started a blog, voicing their discontent with the high fees that the company is paying, and proposing a restructure (bringing the management inside the listed company), which deals with the current conflict of interest between the management and the shareholders of the Reit.

Two snippets:

The Total Fees paid to the External Manager/Property Manager was $8,513,000 in 2013, $9,683,000 in 2014 and $9,288,000 in 2015!!!

On the other hand, the Annual Distribution per Unit paid to us DROPPED FROM 9.38 CENT TO 6.85 CENT in the same period.  We need to do something fast!!!

The share price of Sabana, which has performed badly:

The share price fell further after recently a rights issue was announced. With the money form the proposed rights issue new properties will be acquired which will (I assume) increase the management fees even further.

Friday, 13 January 2017

Paramount acquisition: where are the financial numbers? (2)

As expected by this blog, Paramount Corp was queried by Bursa and answered accordingly.

I am still surprised that Paramount did not provide the rather basic information in the first place, listed companies should avoid being queried by Bursa, which hints at a possible lack of transparency.

The financials that Bursa asked for and Paramount provided:

In other words, based on the historic 2015 numbers:
  • 3.0 times revenue
  • PE of 22.7
  • 5.1 times shareholders equity

For an unlisted company these appear rather rich multiples.

However, ROE is quite high (23%), there is (some) branding, and the R.E.A.L. group probably has grown quite fast in the past.

Also, may be the 2016 numbers (which unaudited are surely already available) are good compared to the 2015 numbers.