Saturday, 1 December 2012

Finally some shareholder activism

In Malaysia, minority shareholders might not be a happy lot, but they hardly ever put up a fight. So if they do, they deserve at least mentioning.

A group of disgruntled shareholders of Metronic Global Bhd (holding more than 10% of the shares) have requested for an EGM:

to remove each of the following from the office of Director:

- Dato' Abd. Gani bin Yusof, Tan Sri Dato' Kamaruzzaman bin Shariff; Liew Chiap Hong, Mohd Kamal bin Omar; and

to appoint each of the following to be Director of MGB:

- Dato' Dr . Chin Yew Sin, Ling Yew Kong, Liew Chee How, Ng Wee Peng

The details of the reasons behind it can be found here.

Reason A concerns the receivables from related parties, a very old issue:

This should not come as a surprise for readers of this blog, since the issues have been detailed more than one year ago here and later here again.

Reason B concerns the selling of one of the rare well performing assets of Metronic:

The disgruntled shareholders have indeed valid points, but will they succeed? The shareholding structure is very dispersed, so they might indeed have a chance.

On the other hand, will it help?

On November 27, 2012 Metronic Global announced:

"that MH Projects Sdn. Bhd, (“MH”), Main Contractor for a project previously undertaken in the ordinary course of business by Metronic Engineering Sdn. Bhd. (MESB), a wholly owned subsidiary, has been put into winding-up by the court. MH currently owes MESB an amount of RM44,450,738. MESB will submit its proof of debt to the liquidator of MH in due course and will also continue to pursue recovery direct from Jabatan Kerja Raya in line with the Deed of Assignment executed between MESB and MH previously. The Company has made a provision of RM20,057,510 on the debt and is now assessing on whether a further provision of debt should be made on the remaining balance."

And the most recent quarterly results were bad, again due to the receivables, which were not able to receive.

Metronic Global has now accumulated losses of more than RM 34 million, and that might increase further. By far the biggest item in the list of assets is still Trade Receivables, RM 54 million.

I am therefore afraid that the actions of the minority shareholders, good in itself, are simply too little, too late.

But questions need also be raised why the authorities (BM, SC and SSM) have so far not taken any action whatsoever. Surely there was enough reason to do so. And then there is still the issue of Ernst & Young, approving the year report for six years in a row, including the dubious receivables (from a related party) which eventually had to be written off.

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