Saturday, 8 April 2017

Power Talk: Cheah Cheng Hye (2)

I noticed that blogger "Off-Piste investing" (an excellent website for Asian value investing, highely recommended) made a very precise transcript of the talk by Cheah.

Cheah described his attempts at chess and counting cards at BlackJack, both very familiar to this blogger, besides reading and value investing.

Friday, 7 April 2017

Power Talk: Cheah Cheng Hye

Great talk by the founder of Value Partners, I wrote about him before.

Performance of the Value Partners Classic Fund:

The performance is measured in USD, which makes it even more impressive.

I myself own some units of the Value Partners High Dividend Stocks Fund, which also has done well, but has a shorter history.

Wednesday, 5 April 2017

EPF lost only RM 97 Million on FGV?

Article in The Star:

EPF records RM203.18mil realised loss from Felda Global Ventures stake

One snippet:

The Employees Provident Fund (EPF) recorded a realised loss of RM203.18mil from its investment in Felda Global Ventures Holdings Bhd (FGV) as at August last year.

In a written reply to Dr Ko Chung Sen (DAP-Kampar), the Finance Ministry said, however, that EPF had gained a dividend income of RM105.77mil.

The assumption that most readers will make reading the above is that the loss EPF made on the FGV investment was RM 203 Million, that EPF did however receive RM 106 Million dividends, for a total loss of RM 97 Million.

That is bad, but given that EPF had bought a total of 309M shares in August 2013 for about RM 1.45 Billion, the loss equates to about 7%.

There is one "tiny" problem with the above: the assumption has to be wrong.

EPF must have lost much more on their investment in FGV, my guess is around RM 600 Million, so after adding the dividend of RM 106 Million about RM 500 Million.

The confusion comes (most likely) from losses that EPF had already booked in previous years on the FGV investment. How much these losses were is not revealed.

By mentioning the dividend income of RM 106 Million (which is the total dividend received by EPF over all years), the confusion is further increased. Mixing losses over a limited time with dividends over the lifetime in one paragraph without any further explanation does not seem like a good idea.

My reasoning behind the estimate of much larger losses can be derived from the share graph of FGV:

The first phase (June 2012 until August 2013, from IPO up to the 1st red line) is the accumulation phase in which EPF bought 309 Million shares, for an average price of about RM 4.70, total cost about RM 1.45 Billion.

The second phase (September 2013 until March 2015, between the 1st and 2nd red line) EPF had disposed 110 Million shares, it will definetely have lost money on these trades, but still limited.

The third phase (April 2015 until August 2016, between the 2nd and 3rd red line) is the really painful one, EPF disposed of 199 Million shares and received on average clearly less than RM 2 for these shares, the losses in this phase alone must have been more than RM 500 Million. It is this 3rd phase which makes it obvious that the reported loss of RM 203 Million does not cover all losses.

After adding the RM 106 Million in dividends received and subtracting expenses occurred (brokerage, operational) the losses will be substantial to the tune of about half a Billion RM, much more than the implied losses of RM 97 Million. And that is even without taking into consideration the rather large opportunity costs.

I hope that in the future we can have more clear statements regarding financial matters.

Ajiya: poor accounting

Ajiya announced:

AJIYA reported an unaudited profit after taxation and minority interest of RM18.712 million in the unaudited financial statements of the Company for the year ended 30 November 2016 which was announced to Bursa Malaysia Securities Berhad (“Bursa Securities”) on 19 January 2017 compared to an audited profit after taxation and minority interest of RM14.494 million in the audited financial statements of the Company for the year ended 30 November 2016.

The variance of RM4.218 million between the profit after taxation and minority interest stated in the announced unaudited financial statements and the audited financial statements of the Company for the year ended 30 November 2016 represents a deviation of 22.54% (“Deviation”).

The Deviation was mainly due to the following reconciliations/adjustments made in the audited financial statements of the Company for the year ended 30 November 2016:-

1. Dividend to Minority Interest of a subsidiary company amounting to RM2.898 million;
2. Bad debts, foreign exchange loss and other administrative expenses amounting to RM1.011 million; and
3. Provision for taxation and deferred taxation amounting to RM0.309 million.

That is not impressive at all, especially the first reason given, how in earth could they have overlooked that? Ajiya needs to get its accounting house in order, quickly.

Monday, 3 April 2017

The Shame of Germany's Ship Owners

Article from Handelsblatt Global:

The Shame of Germany's Ship Owners

"No country is more irresponsible when it comes to disposing of its ships than Germany. Even the United Nations is protesting about it."

A snippet:

The list names and shames companies that have their end-of-life ships broken up on beaches in Bangladesh, India and Pakistan. The German ship owners were responsible for the “worst shipbreaking practices amongst all shipping nations,” according to Shipbreaking Platform.
Until now, this has been a taboo topic in Hamburg shipping offices, and for good reason. South Asian beaching yards are notorious for eschewing environmental and safety standards and abusing worker rights. Oil and toxic chemicals seep into the sea. Laborers are exposed to asbestos. Many die in accidents.

Rickmers is mentioned, which manages and majority owns Rickmers Maritime, a business trust listed on the SGX.

Saturday, 1 April 2017

Huishan: all INEDs resign at the same moment, coincidence?

China Huishan Dairy Holdings has been lately in the news, for all the wrong reasons (for instance here, here and here).

The company made an announcement regarding several issues at hand. One of them was the resignation by all four independent non-executive directors.

  • Mr. Song would like to spend more time on his other business and commitments
  • Mr. Gu is getting increasingly busy with his other commitments and is afraid he may not have sufficient time to perform his duties as an INED
  • Mr. Tsui would like to concentrate on his company’s business and personal commitment which requires more of his dedication
  • Mr. Kan would like to concentrate on his other own commitments which require more of his dedication

It must be noted that every statement is different which seems to add to the credibitly of each one.

I strongly doubt though the sincerity of the reasons stated. Surely the real reason is that the company is in turmoil and the INEDs don't want to get dragged into the matter any further.

The fact that all four resign exactly now can not be a coincidence.

I am very much against these kind of "useless statements", if the directors don't want to give the true reason then a simple statement like "no comment" is much better. At least the reader does not feel like he is taken for a fool.

Thursday, 30 March 2017

Bernas eyes relisting in 2020?

Article in The Edge Financial Daily dated March 30, 2017: "Bernas eyes relisting in 2020".

One snippet:

That appears to be in sharp contrast with an earlier announcement to Bursa:

"after due enquiry with our Directors and major shareholders, the Board of Directors of Padiberas Nasional Berhad (“Company”), wishes to inform that as at today, the Company is not aware of any written arrangement on the following:

(i) any corporate restructuring that includes an impending relisting plan"

The authorities should look into this case.

Next to this, there is the very serious issue if all minority shareholders have been treated equally.

Tuesday, 28 March 2017

Land value increased 10 times in 3 years?

Boustead Plantations announced it proposes to sell a piece of land for RM 620.1 Million:

The company specified the cost of investment:

The company gave more background over the history of the land:

Regarding the acquisition of the land, we can find more announcements here, the independent advice circular (dated November 20, 2013) of the Al-Hadharah Boustead REIT which was subsequently delisted.

The acquired land consists of 678 hectares of the 1,379 hectares from the Malakoff Estate in Penang:

In other words:

  • Boustead Plantations proposes to sell a piece of land for RM 620.1 Million based on a valuation report by Raine & Horne dated December 1, 2016.
  • The land was acquired for only RM 60.4 Million three years earlier based on a valuation report by WTW dated September 5, 2013.
  • The difference in valuation is more than ten times over only three years, which seems shocking.

While the deal appears to be good for shareholders of Boustead Plantations, the previous unit holders of Al-Hadharah Boustead REIT might feel short changed.

The authorities should look into the two valuation reports (both the valuation given and the methods used), the difference in value looks much too large.

They should also revisit the delisting exercise of Al-Hadharah Boustead REIT to review if the deal for minority shareholders was indeed "fair and reasonable", as the independent adviser (Hong Leong Investment Bank) claimed.

Saturday, 25 March 2017

DFTZ: what about the losers?

A lot of hype and euphoria regarding Alibaba, Jack Ma and the DFTZ (Digital Free Trade Zone), stories about jobs been created, opportunities for Malaysian SMEs etc.

But not much attention to who the losers will be, surely there will be some.

A good article in The Star: "DFTZ - boom or bane for our local SMEs?", one snippet (emphasis mine):

Losers from DFTZ?

Depending on the manufactured products brought in from China, our importers, wholesalers, retailers, manufacturers and e-commerce SME’s will be badly disrupted due to lower cost products and tax free, GST free imports. It definitely will be an uneven playing field for our local SME’s. Our authorities should note that we have 200,000 retail outlets in Malaysia and the retail industry hires 1.2 million workers. Even if the DFTZ model disrupts 30% of our commerce retail business, we will lose 360,000 jobs and close down 60,000 outlets. And that is not counting the disrupted manufacturing industry.

Customs Revenue. Assuming 30% of the US$65bil DFTZ sales is imported into Malaysia. Collection of GST alone will be lower by US$1.2bil or RM5bil a year. Not counting those items that still attract import duties.

Our National GDP will actually shrink as the whole market will trade on lower prices.

I agree with the above. There will be lots of winners and lots of losers, very hard to quantify at the moment how the results will be in say 5 or 10 years down the road.

I also agree with the writer of the above article: "Alibaba is a sure winner with this unparalleled tax free advantage".

What should be of some concern for Malaysians is that the big e-commerce players (Alibaba, Amazon, Lazada, Qoo10 etc.) are all foreign owned. How will the future look like, taking into consideration network effects and deep pockets, which might crowd out the smaller local players?

Wednesday, 22 March 2017

Fight between Cyrus Mistry and Tata: AirAsia and Singapore Airlines are mentioned (5)

I was rather disappointed about AirAsia's announcement on October 31, 2017 regarding irregularities at AirAsia India:

"The announcement is quite disappointing, both in size and in content. No timeline is mentioned, nor amount of money involved, no details are given (more information has been released through other channels than was announced).

Also AirAsia does not give a reason why shareholders were not informed before about this matter, the amount of money (allegedly the amount is around RM 13 Million) and the seriousness of the issues at hand seem to warrant that."

AirAsia made today a new announcement in this matter:

"..... as a result of investigations by AirAsia (India) Limited (AAIL) (which were conducted by an external agency), AAIL has been recommended to lodge a police report on the findings of the investigations. AAIL has consequently filed a police complaint before the competent authorities in Bengaluru, Karnataka, India on 9 November 2016. The police is investigating the matter. "

Why the delay of more than four months since the police complaint in making this announcement? No reason is given.

Saturday, 18 March 2017

Sydney Morning Herald blunder

Article on the website of Sydney Morning Herald:

The five faceless investors who own much of Australia's largest companies

One snippet:

It turns out that five investors – HSBC, JP Morgan, National Nominees, Citicorp and BNP Paribas – own a massive chunk of our listed companies. What's surprising about this is that many Australians probably haven't heard of some of them. What's even more surprising is that if you look at the big players in our 20 largest industries, the five faceless investors have a majority stake in most of them. They dominate industries as diverse as airlines, insurance, telecommunications and mining.

Oops, as pointed out by many commentators, these banks don't actually own those shares, they are just the trustee.

Would such a mistake have been possible in Malaysia? I don't think so, please take a look at the last annual report from Maybank:

It is clearly stated that Citigroup, HSBC etc. are the nominees, and the names of the beneficial owners are spelled out.

Kudos to Bursa Malaysia for the added transparency, which is missing in many other countries.

Tuesday, 14 March 2017

Icon Offshore: rewarding the MD but diluting the minority shareholders?

Icon Offshore announced that it offered 14,000,000 shares to its MD from the ESGP (Employee Share Grant Plan).

I have some problem with this.

Icon IPO-ed three years ago at a retail price of RM 1.85. Since then it has not paid out any dividend at all, loyal shareholders who subscribed to the IPO are currently 75% under water.

In other words, if the share would rise to the IPO price of RM 1.85, minority shareholders would only be back at square one (not taking into account the opportunity cost), while the MD would be sitting on a tidy profit of RM 19,320,000 and that in addition to his normal wages.

Besides the usual problems that have plagued the oil & gas industry the last few years (we can't really blame anyone for that), there have been several other issues with Icon Offshore, I wrote about some of them before. I think there is a case to be made that Equinas (at least partially) might bare some responsibility for those problems.

Given that, is it really fair to dilute the minority shareholders further, and at such a low share price relative to the IPO price, even though the ESGP was approved?

Could the majority shareholder, Equinas, have made a gesture and for instance forked out the shares for the MD from their holding? That would have been rather unconventional, I admit, but I do like the idea.

Monday, 13 March 2017

Poor earnings growth for Bursa listed companies (7)

All results for 2016 have been announced, time to update the score card:

Not impressive, I am afraid, except for a few good companies (like Public Bank and Westports) and a few decent ones.

The totals for the year:

A few remarks:

  • The second down year in a row
  • The results are even worse than 2012, four years ago
  • Counted in USD (an important consideration for international investors) it is much worse, in 2012-2014 the combined profit was about USD 18.5 Billion, in 2016 roughly 30% below that level

Ten companies started to report their 2017 profits, they are roughly similar to the 2016 profits. If there are no more large one-off write downs (like in the oil & gas industry), the combined profit in 2017 might be higher than 2016. But if that is enough to justify the historically high valuation of the Malaysian market, I doubt it. For that there has to be a consistent yearly growth of say on average 10% in net profits, something that seems to have been absent the last few years.

Sunday, 12 March 2017

Bursa annual report 2016

Bursa Malaysia announced its 2016 annual report. A few snippets:

I am rather sceptible about the above investor protection rankings, it does not seem to resonate with what is really going on at the ground. I think it says more about the World Economic Forum and The World Bank than about Investor Protection in Malaysia.

Funds raised from IPOs seems to be clearly lower than the previous years. If that is because of more stringent filtering resulting in higher quality companies, then that is perfectly fine with me.

The years before saw their fair share of lower quality companies and rehashed "listing-delisting-relisting" cases (here, here and here).

Retail participation in trading seems to be decreasing quite a bit. Possible this has a lot to do with that:

In Singapore there is a similar pattern, disappointing returns and less interest from retail investors.

Tuesday, 7 March 2017

United Plantations: annual report but no Q4? (2)

On i3investor's website one kind person commented on this matter and pointed at the right paragraph.

The relevant text can be found in part 3 of the annual report of United Plantations, page 176 (PDF page 37):

Hmmm, not sure what to think about this.

On one side, I am all in favour of making things relatively easy for listed companies, we don't want good quality listed companies to delist or unlisted companies not to IPO because of the huge amount of compliance and/or reporting.

On the other side, I am rather surprised about not giving the 4th quarter results separately. The company anyhow will have the relevant numbers. Analysts and interested investors who want to (and actually: should) scrutinize the quarterly numbers now have to use the Q3 numbers and the annual numbers to come up with the P&L and CF numbers for the Q4 numbers. Also, no relevant comments specific to the Q4 results will be given.

Anyhow, one condition is that the full financial report has to be announced within two months, not many companies will be able to comply with that, hence they have to announce the Q4 financials still the old fashioned way.

Monday, 6 March 2017

United Plantations: annual report but no Q4?

One observer drew my attention to United Plantations, they issued their annual 2016 report already (kudos for that), but strangely enough not their Q4 results.

In other words, we need to dissect the annual numbers, compare them to the Q3 numbers to arrive at the P&L Q4 numbers (the balance sheet for the Q4 is of course the same for the year).

The company did the same the year before, not issue the Q4 financial results, but until 2014 all seems normal:

Highly unusual, I cannot recall ever having seen this before, every company that I have checked issues four quarterly financial results per year. No action was taken in 2016 by the regulators, so I assume all is in order.

Other than that, UP has a pretty good track record, Aberdeen is an investor in the company.

Sunday, 5 March 2017

Fund awards: please use only funds of a decent size

The Edge presented The Edge -Thomson Reuters Lipper Fund Awards 2016.

The full article appeared in the "Personal Wealth" pull out of The Edge Weekly from March 6-12 2017.

What is remarkable that apparently fund size did not play a role in the selection process.

From an international point of view, a USD 500M fund or larger has a decent size, that would correspond to a fund of more than RM 2 Billion. Almost no awarded fund fits that size.

In Singapore it has been said that a hedge fund (I admit, that is a different breed from a pure equity or bond fund, but just for comparison sake) has to have a minimum of about USD 50 Million to have a sufficient size to survive (because of expenses, compliance etc.), in other words more than RM 200 Million. But many of the awarded Malaysian funds don't even have this size.

There are quite a few awarded funds with its size below RM 25 Million, way too small to consider, in my humble opinion.

And then there is even one fund with a size less than RM 1 Million.

Honestly, those micro size funds should not have been considered for the awards. At a very small size one can invest in opportunities that are not available at a larger fund size.

In plain English: if investors pour money in these awarded funds based on their previous track record (achieved at a very small size), they might be disappointed in the future.

Anyhow, I think there are much too many unit trust funds in Malaysia. I can imagine some choice between bond funds and equity funds, pure Malaysian focused and international focused, but some fund houses have more than 20 funds. I question the amount of focus given to each fund by the managers. And with so many funds under one umbrella it will be hard not to win an award.

Saturday, 4 March 2017

Better think twice about owning US shares

If you (plan to) own shares of US companies, better think twice. According to this article:

Do you own more than US$60,000 in U.S. stocks? If the answer is YES, then you are technically liable to pay U.S. estate taxes of up to 40 percent on those assets upon death.

And it adds:

" .... this tax is a MAJOR issue for foreign buyers of U.S. real estate"

The implications could be horrendous, you could have bought the shares just a short while ago, you could even be sitting on a paper loss, still, there will be a 40% tax on anything above USD 60K.

I am not aware of any other country in the world with the same laws, luckily.

The US seems to have lost its way. Pity, but that is the way all large empires eventually go, and may be that is not such a bad thing after all.

Thursday, 2 March 2017

Webb on SGX

A link and comments on the website of David Webb:

"They reportedly also propose widening the bid-offer spread, which is a sure-fire way to reduce liquidity, not increase it. This is another sign of desparation after the proposal to list second-class shares. Who is running SGX these days? What next - introducing minimum commissions? Rather than fiddle with trading hours and rules, consider allowing competing exchanges, then let the market discover which hours and spreads it wants."

A previous article by Webb on bid-offer spreads can be found here: HKEx keeps wide spreads

Wednesday, 1 March 2017

EPF: trading just to recognize returns?

Article in The Star: Can EPF maintain its good returns?

One snippet:

Analysts say that while the EPF knows it has unbooked profits to be made, it does, however, only recognise profits and payments to dividends once it sells its shareholdings.

In order for the EPF to be able to announce their yearly returns it needs to sell shares and buy them back, occurring expenses in the process?

What a strange policy, why do they not just mark to market all of their listed investments?

This does explain the rather weired behaviour (which I have observed numerous times) like in this announcement:

I am dumbfounded, what a waste of money and effort and that just for some silly accounting practice, one which I don't even agree with.

All I can say is: I wish I were EPFs broker.

Sunday, 26 February 2017

APFT: messy announcements (2)

And the company made another announcement, correcting the mistakes noted in the previous blog post.

The way things went:

  • An "interested observer" noted that the price could not be right, and informed me
  • I posted a blog posting about the subject
  • Most likely Bursa picked it up and notified the company
  • The company (most likely the company secretary) amended the announcement, for the third time

This bags the question, how many times in the past have there been mistakes in these kind of announcements? My guess: many times.

Automating (part of) this process (probably with a link to the CDS system) should greatly help, both in the amount of work needed currently and in the quality of the announcements, avoiding the most obvious errors.

Saturday, 25 February 2017

Scan Associates: which breach? (2)

Article in The Star: Scan Associates discloses reason for suspending director

Some snippets:

Scan Associates Bhd director Yeoh Eng Kong, who was suspended for more than five months to facilitate an investigation against him, had been penalised for seeking an extension of time to submit a regularisation plan without the board’s knowledge and approval.

This was the ICT security solutions company's answer to Bursa Malaysia Securities’ query on the details of Yeoh’s breach of duties as director.

Scan had suspended Yeoh as director for two months in September last year but extended the period of his suspension twice, as an investigative committee set up by the company needed more time to analyse and conclude the case against him.

The suspension was finally uplifted with effect from Feb 17, the day after the committee concluded that Yeoh had indeed breached his duties as a director.

Scan so far has not explicitly said that the investigative committee had been dissolved. One of the matters that it was supposed to probe was related to “the preparation of the company’s subsidiaries’ audited financial statements.”

In the initial announcement on Yeoh’s suspension on Sept 9 last year, Scan said the board decided to form a committee to investigate “the possible serious breach of duties of a director and the preparation of the company’s subsidiaries’ audited financial statements.”

Scan’s external auditor Baker Tilly Monteiro Heng had in June last year tendered its resignation as auditors of the company and its subsidiaries. The reasons given were the outstanding amount of professional fees and the receipt of the writ and statement of claim filed by Yeoh on May 16.

External auditor resigning, probe in the subsidiaries' audited statements, it looks like more information will be revealed down the road.

Thursday, 23 February 2017

New ETFs: exotic or toxic?

Article on Bloombers website:

Singapore Readies New Exotic ETFs to Catch Taiwan, Hong Kong

A snippet:

Preparations are underway in Singapore for the first new listing of leveraged and inverse exchange-traded funds in almost eight years.

Singapore Exchange Ltd. last week published a new web page about the products, described as “a form of passive collective investment schemes (like ETFs) and structured as open-end funds,” following revised guidelines from the Monetary Authority of Singapore in August.

Singapore, along with Hong Kong, is seeking to capture a bigger share of an expanding pie through types of funds that have seen success in Japan, Taiwan and Korea. Leveraged ETFs in Taiwan, which started in 2014, now have more than $4.8 billion in assets, according to data compiled by Bloomberg. Daily trading of inverse and leveraged funds is more than half of Taiwan’s ETF market, said Andy Chang, president and chief executive officer of Cathay Securities Investment Trust Co.

I am seriously underwhelmed by this initiave, is this really the best the SGX can come up with to attract retail investors?

I like "long" ETFs on a certain large market with low fees very much, I use them myself if I think a market is relatively cheap and I don't have my eyes on some particular stocks in that market.

I can also imagine that an investor sometimes wants to invest in an inverse ETF without leverage, as a (partial) insurance against his portfolio of value shares going down together with the market when the market looks richly priced but the value shares still offer enough upside.

But these leveraged ETFs, I am not keen at all on them, the management fees are often much higher than the "long" only ETFs. In addition to that there are also higher expenses related to the instruments the ETFs use to create the leverage. In the longer term the fees will have a serious impact on the returns.

APFT: messy announcements

On January 17, 2017 the company announced:

On February 16, 2017 the company amended the above announcement:

Two changes, but both puzzling:
  • There was no "disposal of shares via open market" done on January 4th 2017 at a price of RM 0.40. 
  • It is not possible to announce on January 17th 2017 (the date of the original annnouncement) a disposal of shares in the open market to be done on February 6th 2017.

A second amendment was announced, but no changes in the above.

I guess we have to wait for a third amendment, will they get it right this time?

It all looks very amateuristic and reflects badly on the company.

Also, I like to reiterate a call to automate these kind of announcements.

Wednesday, 22 February 2017

Scan Associates: which breach?

Scan Associates announced:

The Board of Directors (“Board”) of Scan Associates Berhad (“SCAN”) wishes to announce that the Investigative Committee had on 16 February 2017 concluded that Mr Yeoh Eng Kong (“YEK”) was in breach of his duties as a Director of the Company.

After considering the statement/representation given by YEK, the Board agreed to uplift the suspension of YEK as Director of the Company with effect from 17 February 2017 and he shall resume his role as a Director on the same date.

The Company shall not take any further action against YEK as his suspension period is adequate and deemed to serve the purpose.

Can we please get some more information regarding this breach and the whole affair? The above sounds all very vague.

At one moment in time shareholders have to vote on YEK's directorship, if they want him to continue being a director of the company or not, surely they deserve to know how serious the matter was and if indeed the suspension period was adequate and served the purpose.

Tuesday, 21 February 2017

"Snap", the sound of voting rights

Article in The Star:

Snap arrives in London to woo sceptical investors ahead of IPO

Some snippets (emphasis mine):

Snap Inc, owner of popular messaging app Snapchat, kicked off its first investor roadshow on Monday, looking to persuade London money managers to back its initial public offering in the face of concerns about its growth prospects, valuation and corporate governance.

The U.S. company, which has yet to make a profit, is targeting a valuation of between $19.5 billion (£15.6 billion) and $22.3 billion from listing on the New York Stock Exchange, after cutting its initial target of $20 billion-$25 billion last week following investor feedback.

Some fund managers have said they will stay away from Snap given its decision to adopt a three class share structure - the first of its kind - that will mean shareholders who buy in through the IPO will not have any voting rights.

Yes, dear readers, mayhem has descended on us: people are asked to fork out billions of USD for a company with a history of losses and will receive no voting rights in return for that.

While all forms of engineering have made strong progress throughout the years resulting in a more safe and efficient world, financial engineering has been the one and only exception.

Time trusted principles (like one share, one vote) are abandoned in place of sheer madness, just for the sake of coming up with more extreme solutions, for which the consultants can charge handsome commissions.

One manager offered some "comforting" words:

"Snapchat offers a cocktail of hype, insane valuations, dubious fundamentals and weak governance. However, the same was said about companies like Google and Facebook when they listed," said Geir Lode, head of global equities at Hermes Investment Management.

Sunday, 19 February 2017

APFT: why the generous options for directors?

This is the share graph of APFT over the last five years:

And here are the financial results for the last five years:

Next to that, the latest audited accounts have an "emphasis of matter", quoting:

".... there are material uncertainties that may cast significant doubt on the ability of the Group to continue as a going concern."

In short, things have been pretty tough, both for the company and its shareholders.

But still the company announced that Directors would receive millions of options:

The usual reasoning for these kind of options is to allign the interests of shareholders and directors, but that seems to have been lost in the case of APFT.

Friday, 17 February 2017

Are there really no concealed placements to nominees of major shareholders in Malaysia?

From Hong Kong:

SFC seeks court orders against former chairman of Kong Sun Holdings Limited and China Sandi Holdings Limited

The Securities and Futures Commission (SFC) has commenced legal proceedings in the Court of First Instance to seek disqualification and compensation orders against Mr Tse On Kin, former chairman and executive director of Kong Sun Holdings Limited (Kong Sun) and China Sandi Holdings Limited (China Sandi), for devising a scheme to conceal his interests in the companies’ share placements in 2009 (Notes 1 & 2).

The SFC alleges that Tse, who was the chairman of the two companies at the material time, used a nominee company to subscribe for their placement shares, which were intended only for independent placees.

Tse also allegedly concealed his interests in the placement shares from the companies’ boards and shareholders in order to obtain them at discounts for which he should not have been eligible.

As part of the proceedings, the SFC is seeking orders to compel Tse to account for the profit he made from the sale of the placement shares in Kong Sun and to pay compensation to Kong Sun for the secret profit he made (Note 3).

In Malaysia both shares being held by nominees and the issue of private placements are a rather common practice (in the very large majority of private placements we will never know the names of the persons or companies that will receive the placement shares).

I am therefore almost sure that the above scheme to conceal interests must have happened at Bursa listed companies, probably frequently.

But why has there been hardly any enforcement at all in this area? Are the enforcement agencies not pro-active enough, doing some investigations, looking for clues, connecting the dots, following the money trail?

I don't suggest enforcement of this is easy, but a few successfully prosecuted cases would at least give some confidence that action is being taken and that perpetrators are at a risk.

Thursday, 16 February 2017

Sabana Reit: shareholder activism (2)

It seems that the activism (I wrote about it before) is progressing quite well, an interesting case to follow.

A new development was reported by The Edge:

Disgruntled Sabana REIT unitholder lodges complaint with CAD over valuation of Changi South property

A disgruntled Sabana REIT unitholder has lodged a complaint to the white-collar crime department of the Singapore police against the property valuation houses of Colliers, Savills and Knight Frank.
This is in relation to the valuation reports the three houses have done to support the acquisition of 47 Changi South Ave 2 by Sabana REIT from its sponsor Vibrant Group.

Colliers was engaged by Vibrant while Knight Frank and Savills were engaged by Sabana REIT's manager. The transaction requires the permission of minority unitholders at an EGM, which is yet to be scheduled.

Colliers, Savills and Knight Frank separately and independently did a valuation on the Changi South property using the Capitalization Approach and Discounted Cash Flow Analysis (DCF).

All three concluded that the property was worth exactly $23 million, which is also the price at which Vibrant will sell the asset to Sabana REIT.

Jerry Low Chin Yee, the unitholder of Sabana REIT who complained to the CAD, is questioning how Colliers, Savills and Knight Frank could have arrived at exactly the same valuation for the property. “In order for all three to come up with the exact valuation figure, they must have used the same future rental income, same assumed discount rate, same forecasted 30 years rent renewal payable and the same estimated terminal value etc," he says in his complaint to the CAD, a copy of which The Edge Markets has seen.

“Colliers, Savills and Knight Frank all agree that the Changi South property is worth exactly $23m. I can only hypothesize that they were given the same exact figures to value the property,” alleges Low.
If this is true, it begs the question of objectivity and independence of these and past valuation reports, says Low.

“It will be worst if all of them (including the vendor and the manager of Sabana REIT) actually conspire to come up with the exact $23m figure so that the property can be “properly” sold to the REIT at $23m in accordance to the code of collective investment scheme pertaining to Related Party Transaction,” adds Low.

Low says he does not have any evidence of wrongdoing but believes the matter warrants scrutiny “purely on the fact that for all three valuation houses to separately and independently come to a valuation of exactly $23m for a property with so many variables, is too much of a coincidence unless they are using the same input provided by either the Vendor or the REIT Manager. And the price of $23m was by design rather than by valuation.”

I hope the complaint will be dealt with soon, I agree that the matter warrants serious scrutiny.

In the Malaysian context, I have often seen strange valuations and independent valuers agreeing with them:

  • regarding RPTs: major shareholders injecting their private companies at skyhigh valuations in their listed vehicles
  • regarding privatisations: companies taken private for a song,

I have written about several cases, and complained in a few to the authorities, to no avail (no surprises there), although I was proven right at the end.

The only positive message is that things seem to have improved somewhat lately in Malaysia. Not much comfort though for the minority investors who were disadvantaged in the past for huge amounts of money.

Tuesday, 14 February 2017

Multi Sports: new allegations

I wrote before about Multi Sports.

Although the number of Bursa listed companies from China is only a bit more than one percent of the total, they are experiencing a hugely disproportionate part of the irregularities reported.

That is what more or less could have been expected, for instance based on the experience at the SGX.

Multi Sport is one of those Chinese listed companies on Bursa, beside the problems they already have, they announced new ones:

The Board in Malaysia has also just received details of alleged unreported finance transactions and litigation involving the Company’s operating subsidiary in China, Jinjiang Baixing Shoe Materials Ltd, and the Senior Management of the Company. Should the allegations be validated, such information would be material and would need to be incorporated into the Outstanding Annual Report.

When it rains it pours .....

Monday, 13 February 2017

SC sues Stone Master executive (2)

Some updates in this case.

From The Edge: Stone Master deputy MD fails to strike out Securities Commission's civil suit

A few snippets:

Stone Master Corp Bhd deputy managing director Datin Chan Chui Mei failed in her application to strike out the Securities Commission's (SC) claims against her for allegedly causing wrongful loss to the company.

Following the decision by High Court Judge Datuk Has Zainah Mehat, the hearing of SC’s application for an injunction restraining her from dealing with monies in her bank account up to the amount of RM11.54 million, pending the disposal of the trial, is set for decision or clarification on March 20.  

In September 2016, SC obtained an ex-parte injunction against Chan.

Chan was charged under sections 179 and 317A (1) of the Capital Markets and Services Act 2007 (CMSA). She received RM11.54 million out of RM11.59 million meant to be paid by Stone Master to local representatives of 23 foreign companies, relating to the exclusive rights to market and promote their products in Malaysia and Singapore.

Section 179 of the CMSA prohibits a person from using any manipulative device for subscription, purchase or sale of any securities.

Under section 317A, a director or an officer of a listed corporation is prohibited from doing anything with the intention of causing wrongful loss to the listed corporation.

The SC wants Chan to pay the regulator the sum of RM11.54 million, which is to be held in trust for Stone Master, and for Chan to be barred from being a director of a public-listed company for a period of five years.

In addition, the SC is also seeking a civil penalty of RM1 million against Chan.

Despite facing the charges, Chan remains as Stone Master's deputy managing director.

That last sentence sounds very strange, of course the deputy MD should have been suspended immediately, at least temporarily. It seems to me that the other Directors of the company also have a responsibility in this matter.

Also, it seems surprising (given the seriousness of the allegations of the SC) that things have not yet moved to the criminal court, apart from the civil penalty sought by the SC.

Stone Master issued its Annual Report 2016.

If one would read the Chairman's statement, one would not get a very accurate picture of what is really going on with the company. For that one would have to dive into the notes that accompany the accounts.

Note 26 (page 107 contains numerous Related Party Transactions. For instance Starfield Capital, a company related to the deputy MD, made a loan to the company of RM 18 Million.

Note 32 (page 117) details significant events during and after the financial year, a whopping 27 pages packed with information, some of it simply astonishing. Amounts in the Billions of RM are mentioned, and this for a company with a current market cap of only RM 9 Million (and consistently losing money).

If anybody would like to jump into the action, based on those Billions mentioned, one should first read the following paragraph (the current share price of Stone Master is RM 0.10):

My question: was the original business model based on the Exclusive Agencies and mentioning those Billions of RM really ever viable?

Also the action by the Securities Commission and the current PN17 status are mentioned in the annual report. And on page 146 one can find the disclaimer of opinion by the auditor, another clear red flag.

Friday, 27 January 2017

Sime Darby: what happened after its merger?

Sime Darby announced its long expected demerger, and analysts prepared their reports (here, here and here).

I am sure we will be overwhelmed in the next months by sleak PowerPoint presentations and the like, full with jargon like "unlocking of value", "strategic repositioning", "win-win situations", "maximizing shareholders value", "refocussing exercise" etc.

But ten years ago Sime Darby also went through a large restructuring (the merger with Guthrie and Golden Hope), also with sleak PowerPoint presentations, and the results of that exercise are definitely underwhelming.

Sime Darby's share price has performed very poorly, and is even below the level of 2007:

Most likely that can be explained by looking at the revenue and especially profit numbers over the last five year:

That exercise in 2007 must have cost a few hundred million RM, that is quite a nice and tidy amount of money that could have been spend on something else, possibly more useful.

Before Sime Darby jumps into the next restructure (which again will cost quite a bit of money, I assume), can we please get a honest, hard look at what was promised in 2007, and what actually was achieved in the next ten years? For instance, what happened to the promised synergy and economy of scale? Which party actually benefitted of that merger? Was it may be only the advisors and the bankers who came out ahead, charging juicy fees?

Wednesday, 25 January 2017

Blast from the Past: the Carrian case (3)

I wrote about this subject before (here and here).

The CIA has recently released files from their archive, and this document (unfortunately a "sanitized" copy) has to do with the Carrian case.

Has anything been learned from this scandal from the past? Looking at the more recent scandals like 1MDB, I strongly doubt it.

BNM takes action against which financial institution?

Article on Bank Negara's website:

Bank Negara Malaysia Takes Enforcement Action Under Financial Services Act 2013

One snippet:

Pursuant to Bank Negara Malaysia’s (the Bank) press release dated 27 December 2016, the Bank wishes to announce that a financial institution has been imposed an administrative monetary penalty of RM1,400,000 for failure to promptly notify the Bank of a significant audit finding in relation to its dealers’ misconduct involving the fixing of the USD/MYR exchange rate.

Why does BNM not simply mention the name of the financial institution? Surely a healthy dose of transparency goes a long way.

Sunday, 22 January 2017

AirAsia X: late announcement from Tune Group?

I was looking at Bursa's website to check if AirAsia X had made an official statement regarding the UK corruption case of Rolls-Royce. There was no such announcement, hopefully they will release a comprehensive statement soon.

However, there was another announcement, Tune Group notifying its disposal of 147 Million shares of AirAsia X:

A major shareholder disposing a large chunk of shares, that seems like important news. Why did Tune Group wait almost one month to inform Bursa (and AirAsia X's shareholders) about this disposal?

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.

Thursday, 12 January 2017

Jaycorp: late announcement? (2)

Jaycorp was queried by Bursa regarding the awarded contract and gave more details, one snippet:

1. The reason for the delay in making the announcement with regard to the award of the Project was because approvals from the relevant state authorities on the design of the Project were still pending after the letter of award was issued. The lack of these approvals would have materially affected the viability of the Project and the total contract sum resulting in the delayed announcement.

It seems the project started before the approvals were acquired, even before the contract was entered into:

4. The Project commenced on 15 June 2016 and the completion date is 14 June 2018.

Wednesday, 11 January 2017

Paramount acquisition: where are the financial numbers?

Paramount Corporation announced the acquisition of 66% of the existing shares of R.E.A.L. Education Group for RM 183 Million, which puts the valuation for the whole company at RM 277 Million.

That is quite an amount of money.

Both an attachment and a presentation are given, with some statistics and history of R.E.A.L. and how it would complement Paramounts educational arm.

But strangely enough not a single financial metric of R.E.A.L. is presented:
  • no revenue numbers
  • no profit numbers (gross or net)
  • no NAV

Paramount is a company with a pretty good long term track record, the above omissions are therefore rather peculiar.

Surely the minority investors of Paramount are entitled to receive this basic information, to be able to evaluate this deal on its merits.

May be the numbers can be found in extracts to be found at SSM, but should investors really need to do so much effort?

Tuesday, 10 January 2017

Jaycorp: late announcement?

Jaycorp announced:

The Board of Directors of Jaycorp wishes to announce that Jaycorp Engineering & Construction Sdn Bhd (“JECSB”), a 60%-owned subsidiary, had on 17 October 2016 entered into a contract with Solid Destiny Sdn Bhd (“SDSB”) for the construction of a 7-storey shop cum office on L.15864 at Likas, Kota Kinabalu, Sabah known as the Spinnaker SOVO Suite at Likas Bay for a contract sum of Ringgit Malaysia Sixteen Million Seven Hundred Sixty-Three Thousand Five Hundred Ninety-Seven and Sen Sixteen (RM16,763,597.16) only over a period of twenty four (24) months (“the Project”). The Project has a gross floor area of approximately 82,408 square feet.

That sounds like decent news for the company.

The announcement was made January 9, 2017 while the contract was signed October 17, 2016, almost three months ago. That bags the question, why the delay in announcing this contract?

Monday, 9 January 2017

1,000,000 Pageviews

A nice milestone, a million page views!

When I started this blog in 2011 I could not have expected this, so much traffic for a not very popular subject, Corporate Governance in (mostly) Malaysia.

Probably some people came to this website for the wrong reasons (the number of visitors from Russia and Norway is for instance puzzling high), on the other hand i3investor republishes many of the blog postings, which much add to the overall readership.

From a monetization point of view it doesn't really matter: there is none on my blog, no advertisement etc.

This falls simply in the category of doing something back, though I am pretty sure that some of the companies and/or people I wrote about might not agree with that.

Thanks a lot to all the regular visitors.

And even more thanks to all regular contributors, all from within the industry: fund management, the press and also (former) directors of listed companies.

Unfortunately I don't have always time or knowledge to follow up on each tip, apologies for that.

Both the "Protasco's Puzzling Purchase" and "Oops, CIMB releases Vivocom's results premature" postings were based on information from anonymous tipsters, that kind of information is also very much appreciated.

And lastly, thanks to all poorly behaving directors of listed companies, without you there would be no material to write about.

Friday, 6 January 2017

1MDB's new audit company

According to this article from Bloomberg 1MDB has appointed Parker Randall as their new auditor.

Their UK website can be found here. Some screenshots:

I certainly hope that Parker Randall will be the right "choose" for 1MDB, that they can "delivery" that, with the help of the 3 E's: "Exceeding, Expectations, Experts".

The local firm executing the audit will most likely be AFTAAS.

The "about us" page does not reveal much information:

And is exactly the same as the Team-profile.

Similar to the Forum-page:

1MDB was worldwide one of the most talked about companies in 2016, and unfortunately often for the wrong reasons.

A lot of pressure will therefore be on the shoulders of little known outfit AFTAAS, which looks like a rather "remarkable" choice, given the size, scope and history of 1MDB.

Mexter: new major shareholder (2)

Article in The Edge:

Mexter partners with UM spin-off to commercialise e-health solution

"This is Mexter’s first venture since Dr Lim Yin Chow emerged as a major shareholder in the company via his vehicle, LYC Capital Sdn Bhd."

"Dr" Lim Yin Chow?

For more background, please read here, here and here.

Thursday, 5 January 2017

Malaysia, some interesting charts

From an article in the Financial Times, four charts that show Malaysia at the extremes. If that is good or bad, I leave that to the reader.

Malaysia spends less on public healthcare than any other country surveyed (4% of GDP) but has the largest amount of people who think they spend more (37% of GDP).

Anyhow, according to the survey Malaysians are the happiest among those surveyed.

From CLSA, a table that shows that Malaysia's gross savings % of GNI (Gross National Income) was one of the highest in 1997, but in 2015 the lowest among a group of Asian countries.

And lastly, China's growing role in FDI:

Wednesday, 4 January 2017

Is there value in the RM?

Malaysia Market Strategy from UBS: "2017 - A glass half full or half empty?".

Lots of negative stuff regarding 2016 ("a year to forget"):

  • KLCI down for 3rd year in a row
  • Earnings growth down for 4th year in a row (because of this shares still do not look cheap, on average, value probably more to be found in selected small and medium cap shares)
  • Slowing domestic demand, ongoing political concerns, etc

The RM is at an all-time low level against the USD, but there might be value there, according to this graph:

I am not exactly an expert on "REER" (Real Effective Exchange Rate"), but if the above picture is an objective evaluation of the current situation, then the RM looks definetely cheap. However, buyer beware, things can stay cheap for a long time.

Tuesday, 3 January 2017

EPF exits Felda (2)

Article in The Star: "EPF not to be blamed for leaving FGV", some snippets and some remarks by me.

Regarding the title of the article, I don't blame EPF for exiting, in the contrary, I just question why EPF invested in FGV in the first place.

The FGV was sitting on a cash pile of more than RM5bil and its business model was pretty straight forward – which is to collect the fresh fruit bunches and process them into crude palm oil.

The plan was always to expand aggressively through acquistions (even the name hinted clearly at that, "Global Ventures"), for instance this article in the Borneo Post:

The strategic initiatives to improve efficiency include extensive oil palm replanting programme to improve age profile at approximately 15,000 hectares per year utilising Felda’s award-winning planting materials to increase fresh fruit bunch production and improve oil extraction rate.

The proceeds would also be used for potential acquisitions of additional land bank in South-East Asia and Africa for planting oil palm and rubber by 2015.

Meanwhile, Felda would expand downstream capabilities to enhance value of its upstream products.
This included further acquisitions and investments in refinery assets, consumer packed plants and bulking facilities.

In general, roughly 2/3rd of acquisitions globally fail, either they are done for the wrong reasons, or because of the information bias, etc. Investors in FGV should thus have known at that point in time that things might not work out well, those acquisitions might destroy value instead of enhancing it.

The risk was minimal for the EPF. As long as FGV keeps cutting its production cost and utilises its huge cash pile for re-planting activities there is very little to fear.

First of all FGV had announced already they would not just use the money solely for internal purposes. Secondly, since when has an equity investment "minimal risk"?

However even then, there were some nagging issues especially when it came to some corporate governance practices.

Why invest when there are "nagging issues"?

For starters, FGV chairman Tan Sri Mohd Isa Samad is also the chairman of Federal Land Development Authority (Felda) which is the major shareholder of the listed company. Isa, who is also a politician closely aligned to Putrajaya, also sits on board of many subsidiaries.

Please note this article:

Umno vice-president Tan Sri Mohd Isa Abdul Samad (pix) has been suspended from the party by its disciplinary board for six years for breach of the party's code of ethics during the party elections last year, according to his political secretary, Salim Shariff, on Friday.  

The suspension means that Isa will be stripped of the post of vice-president that he had won with the highest number of votes among the three posts of vice-president at the same party polls.

Salim said Mohd Isa, who is Federal Territories minister, was found guilty on five of nine charges he had faced with regard to party discipline.

The Star continues:

"There is nothing wrong with active politicians sitting on the board of companies."

Oh my ....... where to begin?

One should try to minimize conflict of interest situations, because it is exactly those situations that often cause serious problems.

In Malaysia it looks like the policy is to maximize conflict of interest situations.

"Like all its investment companies, the EPF would have certainly voiced its concerns over FGV’s board composition."

Can the writer give concrete examples of this voicing of concerns? I have hardly ever seen the EPF actively fighting for minority investor's rights. EPF is in a very strong position, I am pretty sure that if they voice their concern many newspapers would write about those concerns. Apart from voicing their concerns, the EPF can also actively vote against resolutions. This would also serve as an example for the small minority investors, who would feel more powerfull.

I normally like Shanmugam's articles, but definetely not this time .....