Saturday, 16 May 2015

Goh Ban Huat: connecting the dots

Excellent detective work by Errol Oh in The Star: "From Casio King to King of Coincidences".

This in regard to the acquisition by Goh Ban Huat of 20% in Time Galerie (M) Sdn Bhd for RM 14 Million, as announced here and here.

The detailed work showing possible relationships is much too cumbersome for ordinary retail investors.

Unfortunately, because there are systems out there that would make things much more easy, for instance "Handshakes" and "Webb-site". Pity that Bursa is not making similar systems for retail investors.

Related Party Transactions (RPTs) have a horrific reputation in Malaysia, as detailed in many cases in this blog (and much more cases in "Where is Ze Moola") where minority investors often received the short end of the stick.

But there is one category even worse, RPTs that are dressed up as non-RPTs. With many big players registering their holdings under nominee accounts, in a country where conflict of interest is normal, surely this is happening many times per year.

Unfortunately, enforcement on this aspect is really weak, we hardly hear about relevant cases against major shareholders who do business deals with related parties and fail to report this.

This is very relevant, since RPTs have to follow much more stringent rules and guidelines than non-RPTs. Larger RPTs even require an independent adviser and have to be approved in EGMs where the related parties have to abstain.

That all doesn't mean that Goh Ban Huat's acquisition is a RPT. But it does mean that the regulators actively should look into this deal (and in many similar deals).

It also doesn't mean that it is bad for its shareholders, Time Galerie looks like a very decent, profitable company.

There is one part in the reply to Bursa's query though that I don't like, the comparison to similar transactions. It shows that the PE of Time Galerie (11.8) compares reasonable with five other deals done with listed companies.

However, unlisted companies are sold for much lower PE's, a PE of 5 is often considered reasonable, and a PE of 2 is not unheard of. Shares in unlisted companies are very illiquid, and the standard of the audits is much lower than those of listed companies, hence those companies are trading at a large discount to their listed rivals.

In an unrelated matter, an interesting story about how Robert Tan gained control over Goh Ban Huat can be found here, paragraph 4.3. And for readers who like to know more about Syed Mokhtar (about whom I have written many times in this blog), paragraph 4.2 seems to be interesting.

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