Sunday, 27 January 2013

Weekly roundup: Country Heights, gold trading, Protasco, CDS information leaked

MSWG has tackled the "Country Heights Grower Scheme", according to this article in The Star:

“Why the rush to terminate when the prevailing average crude palm oil (CPO) price is still hovering around RM2,300 per tonne, which is above the minimum RM800 per metric tonne?”


Rita pointed out that Ferrier Hodgson, the independent adviser, had stated that a shortfall between the grower's fee payable of RM215mil (contributed by the subscribers) and the underlying value of the land at RM129mil cast doubt on the recoverability of the grower's fee.

“Would CHGS be able to refund the capital of about RM215 million in this two years?” questioned Rita.

“If the net yield payments were not made, would it not be deemed as a breach of the terms and conditions of the agreement signed between the subscribers and CHGS?”

“Why is there a difference, ie, RM86mil, ie, RM215mil and the value of the land, ie, RM129mil? Why was there no professional valuation carried out for the said land?”


The first grower scheme in the country will be seeing its general meeting next month on Feb 8.

“In addition, what was the reason for fixing the general meeting date a day before the Chinese New Year's celebration, given the expected long break holiday?”

These seem to be all very valid questions. Although Country Heights is a listed company, the details of this kind of investment scheme can not be found on the website of Bursa Malaysia.

On MSWG's website Rita writes:

"It is time market regulators re-examine all such schemes, its structure and marketing taglines to ensure that subscribers/investors are protected"

This scheme is attracting a lot of attention in the forums, for instance on lowyat.

An old link from a Bloomberg interview with Country Heights's Lee about the Grower scheme:

``It's like money dropping from the tree,'' Lee, managing director of developer Country Heights Holdings Bhd., said July 2. ``I'm a very conservative guy. The only risk they take is the price of the palm oil. 

Bee Garden Holdings Sdn., owned by Lee's wife and which runs the project, has sold 8,000 of the available plots, and expects to sell the rest by the end of the year, said Lee.

"Under the so-called Country Heights Grower Scheme, plot buyers will receive 12 percent each year on the amount invested if palm oil averages above 2,100 ringgit a ton from the fourth year onward, and a further 5 percent depending on the plantation's output. If palm oil prices are lower, the annual return drops on a sliding scale, paying 1 percent if the price of palm oil is between 901 ringgit and 1,100 ringgit a ton. There is no return on a price below 800 ringgit. ``It's very difficult for the price to drop below 800,'' Lee said. ``The potential is so great on palm oil.'' In total, annual returns will probably range from 11 percent to 17 percent from the fourth year onwards, the project's prospectus says."

With palm oil around RM 2,300 per ton, annual returns should be good, so MSWG's concerns regarding the termination of the contract seem to be correct.


A more general article about Malaysian investors hungry for yield and the rise of unregulated investment schemes can be found on Bloomberg.


In Singapore another gold trading company, Gold Guarantee, has apparently run into problems, the newspaper article is mentioned here.


I would caution investors to participate in these kind of schemes. If an investor is bullish about gold, he could invest in one of the large, listed mining companies in the US, Canada or Australia. If an investor is bullish about palm oil, he could consider investing in any of the listed plantation companies. And for property there are the REIT's. Information on these companies is much better and can (for Malaysian companies) easily be found on Bursa Malaysia's excellent announcements website.


On my posting "Protasco's Puzzling Purchase", "anonymous" suggested that the purchase might have to do with the recent change in directors and shareholding. "Ronnie" mentioned that "MSWG is doing a fine job given its limited resources. Hopefully they will do something or raise the alarm.", with which we agree.

The red flags are too numerous to count, and the announcement was of extremely poor quality. Not a single reason (production numbers, proven/probable/possible reserves of oil or gas, large historic profit numbers) was given why PT ASI would be worth that much money. A valuation would be done, but is it not the normal way first to do research before one buys a part of a company?


And then there was the saga of CDS account information possibly having being leaked. The Star's editor Risen Jayaseelan suggests to make the list of the largest 1000 shareholders available,  for a price:

News editor Risen Jayaseelan reckons that if made available, the latest shareholder list of companies like Hong Leong Capital Bhd would be a sought-after item, as it would shed light on who is really buying the shares at prices above the takeover offer.

Bursa Malaysia was initially reluctant to investigate, hiding itself behind the excuse that it had not received any complaint. If information is credible (which it appeared to be, from different sources), then Bursa should just act and not use these kind of excuses, but act pro-actively and fast. Luckily, a few days later did it had indeed started an investigation into this matter, according to The Edge.


Busy days for the regulators.

10 comments:

  1. I think there is error in the link to Bloomberg article.

    Thank you

    ReplyDelete
  2. Thanks, corrected, also found another Bloomberg article about "money dropping from trees", hope that will be the case, but I have my doubts .....

    ReplyDelete
  3. Actually Mr Lee's reputation and integrity is questionable. There are too many red flags in the growing scheme but again the crowds will ignore as long as the return is guaranteed. I just couldn't understand why there are so many fool in the world but I had yet to meet one in my whole life (excluding my family members)!

    ReplyDelete
  4. "If an investor is bullish about gold, he could invest in one of the large, listed mining companies in the US, Canada or Australia."

    http://www.businessinsider.com/hugh-hendry-insane-to-own-gold-minging-equities-2012-10

    ReplyDelete
  5. guys, please refer to POST 958 at http://forum.lowyat.net/topic/545351/+940

    There is a letter from Tan Sri to all the growers.

    ReplyDelete
  6. It was a informatory post and it has a significant meaning , thanks for

    sharing the information. Would love to read your next post too……..


    gold trading

    ReplyDelete
  7. I had just done a rough calculation of the worth of plantation land in listed company.
    Below info is extracted from 2011 annual report. There might be some discrepencies due to increase of landbank.
    Sarawak Oil Palm with market cap of RM 2.48833 billion and land bank of 72653 hectare. The land worth about RM 34249/ha.
    Rimbunan Sawit with market cap of RM 1.02718 billion and land bank of 44188 hectare. The land worth about RM 23246/ha.
    TSH resources with land bank of 57532.82 hectareand market cap of RM 1.75217 billion. The land cost is roughly RM 30455/ha.
    Cepat wawasan with market cap of RM 281.16 million and land bank of 9816.979 ha. The land cost is roughly RM 28640.1754.
    I wonder how come a scheme with unplanted land can be sold at RM 53341.6/ha? Others are even more ridiculous. Golden palm can be sold at RM 77362.63/ha. Golden Agro at RM 78944.18/ha. Sorry for East West One as the pricing is too complicated.

    ReplyDelete
  8. Thanks for the work, if these numbers are indeed correct then that leaves even more question marks. I would not be completely surprised, with landbanking etc they also buy cheap land, subdivide it and sell at a huge premium. And then hopefully the land gets converted to commercial/resedential use and profit is indeed made.

    I fail to see why all these alternative investment schemes would be more profitable then simply investing in blue chips in the same industry. The only thing for sure is that one has less rights with those schemes then investing in a listed company.

    ReplyDelete
  9. Dear Sir/Madam,

    Hope everything is fine at your end.

    First of all, we would like to introduce ourselves to you in regards of the Country Heights Grower Scheme matters, we are the publicist for the scheme.

    This is in regards of the thread dated (xxx) initiated by you (refer to below link). We would be delighted to be the contact point to answer all your queries Country Heights Grower Scheme issues in future.

    Please do not hesitate to contact us regarding the scheme and any other matters.

    Thank you for your attention and have a nice day!

    email: jlpwcomms@gmail.com

    ReplyDelete
  10. Gold does not always react in the fashion we may want, like or perceive,

    ReplyDelete