YC Cheok asked me to post a link to the article on his blog, I am happy to comply with his request:
"An Open Letter to MSWG - Lack of transparency in abortion of proposed listing of STM trust by Berjaya Sports Toto Berhad"
Dear MSWG person in charge,
I was wondering, what minority stock holder can do, to address the below matter?
By referring to page 2, and page 10 Berjaya Sports Toto Berhad Q2 2013 quarterly report
http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/all/5810C9C705AA810248257C400035BD6A/$File/BTOTO%20Q2%20FYE2014.pdf
For the quarter
As compared to the previous year corresponding quarter ended 31 October 2012, the Group recorded a decrease in revenue and pre-tax profit of 4.6% and 20.8% respectively. The higher percentage decrease in pre-tax profit was mainly due to the corporate exercise expenses incurred pursuant to the proposed listing of STM Trust (which was aborted) in the current quarter under review. The drop in the Group's pre-tax profit would be 8.9% should the corporate exercise expenses be excluded.
To find out how much is spent for corporate exercise expenses
* All figures are in '000
127,827 (Q2 2013)
161,451 (Q2 2012) (-20.8%)
If corporate exercise expenses be excluded.
147,082 (Q2 2013)
161,451 (Q2 2012) (-8.9%)
corporate exercise expenses = 19,255 (In '000)
Even without spending RM19,255,000, we can definitely find out Singapore Stock Market is not suitable for dual listing in early stage.
So, why we need to spend RM19,255,000 to learn this simple lesson? Isn't there is something fishy behind?
I feel the entire transaction is lack of transparency? May I know, what action minority shareholders can take, to get the above question answered?
Thanks. Cheok
I would like to add the following. The reason given by Berjaya Sports Toto is the following:
"On 2 December 2013, the Company announced that the Board decided not to proceed with the proposed listing after considering the challenging market conditions and the poor performances of the listed yield stocks such as real estate investment trusts ("REIT") and other business trusts in Singapore."
That is rather strange, REIT's have been trading at a discount for a long time.
Regarding business trusts in Singapore, I wrote about that before, most notably:
We should not worry about lagging behind because we can learn from the Singapore experience,” a banker says, pointing to the fact that most business trusts in Singapore have so far been performing badly, trading below the initial public offering prices, and causing some investors to suffer losses.
In other words, nothing new under the sun. So why exactly did they want to list in the first place, at such a high cost to the company, as explained by Cheok.
Showing posts with label Business Trusts. Show all posts
Showing posts with label Business Trusts. Show all posts
Saturday, 14 December 2013
Monday, 25 November 2013
"all the IPOs this year were making money for investors", really?
Article from the website of The Star: "At least 9 IPOs worth RM18.14bil for 2014".
First of all a list of nine big IPO's in 2014. I have been sceptical about big IPO's, I think Bursa has been pushing this too much, it really should not be a target on itself. The target should be to bring good quality Malaysian companies to Bursa, at a reasonable price, leaving some money on the table for retail investors who might be willing to take the risk.
On the list:
"Besides these IPOs, there is likely to be another group of companies coming to the market under the guidelines for special purpose acquisition companies, or SPACs, and business trusts."
I am highly sceptical of SPACs, and business trusts have performed badly (on average) in Singapore.
In other words, I am not very positive about the announced plans for future IPO's in Malaysia.
The article continues:
"RHB Investment Bank Bhd director and regional head of equity capital markets Gan Kim Khoon recently said that investors should ride on the wave of Malaysia’s IPO market, but only after doing their homework on the new entrants.
He noted that all the IPOs this year were making money for investors and said this trend was likely to continue next year, when speaking at a recent panel discussion on the prospects for next year’s equity market."
All the IPO's this year making money for investors? Surely that can't be true:
Further more statements like "investors should ride on the wave of Malaysia’s IPO market" and "this trend was likely to continue next year", I find those pretty dangerous statements given the high valuations and the bubble like conditions worldwide.
I have never bought a share for long-term investment at IPO price, the risk is pretty high: [1] often there is a lot of hot air injected in the company and [2] the quality of the audits is not up to the standard compared to when the company is properly listed.
I normally wait for at least two full years of audited results before I even consider investing in a listed company. Although I must have missed a few nice gains, I definitely also missed lots of misery.
I do agree though with the following statement: "but only after doing their homework on the new entrants".
First of all a list of nine big IPO's in 2014. I have been sceptical about big IPO's, I think Bursa has been pushing this too much, it really should not be a target on itself. The target should be to bring good quality Malaysian companies to Bursa, at a reasonable price, leaving some money on the table for retail investors who might be willing to take the risk.
On the list:
- Two Iskandar developers, I am scared all the clever money has been made already, and the property market is way too hot and might already be cooling;
- 1MDB (floating its energy assets), I am critical of 1MDB due to the lack of transparency;
- Malakoff and IOI Properties, both playing the listing-delisting-relisting "game";
- 7-Eleven, the listing possibly will not go through, according to an article in The Edge today.
"Besides these IPOs, there is likely to be another group of companies coming to the market under the guidelines for special purpose acquisition companies, or SPACs, and business trusts."
I am highly sceptical of SPACs, and business trusts have performed badly (on average) in Singapore.
In other words, I am not very positive about the announced plans for future IPO's in Malaysia.
The article continues:
"RHB Investment Bank Bhd director and regional head of equity capital markets Gan Kim Khoon recently said that investors should ride on the wave of Malaysia’s IPO market, but only after doing their homework on the new entrants.
He noted that all the IPOs this year were making money for investors and said this trend was likely to continue next year, when speaking at a recent panel discussion on the prospects for next year’s equity market."
All the IPO's this year making money for investors? Surely that can't be true:
Further more statements like "investors should ride on the wave of Malaysia’s IPO market" and "this trend was likely to continue next year", I find those pretty dangerous statements given the high valuations and the bubble like conditions worldwide.
I have never bought a share for long-term investment at IPO price, the risk is pretty high: [1] often there is a lot of hot air injected in the company and [2] the quality of the audits is not up to the standard compared to when the company is properly listed.
I normally wait for at least two full years of audited results before I even consider investing in a listed company. Although I must have missed a few nice gains, I definitely also missed lots of misery.
I do agree though with the following statement: "but only after doing their homework on the new entrants".
Saturday, 24 November 2012
Business Trusts, "buyer beware" is not enough
This article in The Star of September 8, 2012 indicated that Malaysia might also allow business trusts to list in Malaysia. The start of the article is very optimistic:
Malaysia will soon have a new thrust that could promote vibrancy and excitement in its equity market. The framework for the listing of business trust in the country is in the works, and it will likely be unveiled by the Securities Commission (SC) before the year ends.
Several market observers expect business trusts to appeal to both the issuers and investors alike.
“For the investors, a business trust is an alternative investment that gives the comfort of a steady stream of return in the form of dividends; this is perhaps the biggest attraction of a business trust from an investor's point of view,” a corporate financier explains to StarBizWeek.
Take Singapore-listed business trusts. If they are of any indication, dividend yields of such an instrument could range anything between 3% and 10%.
But then, some very much needed dose of realism:
To that, several bankers say there is no need to hurry.
“It is not wise to rush into introducing business trusts in Malaysia just to play catch up. We should not worry about lagging behind because we can learn from the Singapore experience,” a banker says, pointing to the fact that most business trusts in Singapore have so far been performing badly, trading below the initial public offering prices, and causing some investors to suffer losses.
In an article "Time to tighten rules for business trusts" in The Business Times (Singapore) the following was revealed in the below table, aptly titled "Not a pretty sight"
Someone who would have invested $100 in each business trust would be sitting on an average loss (including dividends) of $23 for each investment. Only two out of eleven companies would have given a positive total return, but even in those cases they underperformed the Singapore Straits Times Index (STI). On average, the business trusts lagged the STI annually by 11.5%.
As the main reason, the article writes:
"The less rigorous regime of the business trusts allowes sponsors to exercise their boundless creativity. Caveat emptor is a fair argument to make in a market populated by highly sophisticated investors. In Singapore, the average investor is far from being sophisticated.
Given their atrocious performance thus far, there is a strong case for rules to be tightened for business trusts".
Associate professor Mak Yuen Teen of the NUS Business School responded the next day in a long letter to the editor. Some snippets:
"What are the true economic benefits of allowing increasingly diverse forms of business structures for listed issuers? Do they just end up transferring wealth from public investors to sponsors and intermediaries? Do they really give investors more investment choices or do they merely obfuscate? As we seek to increase retail participation in our markets, are these different structures too complex for ordinary investors to understand, especially as even so-called experts often have difficulty understanding these structures? Is it right to expose retail investors to such investments based purely on caveat emptor, and allowing sponsors and intermediaries to hide behind prospectuses that run into hundreds of pages?
We have also done almost nothing to improve the ability of investors to enforce their rights even as we become even more adventurous in the types of listings we allow.
There has been no substantive debate on contingency fee-based class action, litigation funding or other mechanisms which can improve the ability of investors to take action against issuers, directors, trustee-managers and other intermediaries. Cross-border enforcement by regulators remains a challenge, not to mention by investors.
A disclosure-based system based on caveat emptor ("let the buyer beware") can only lead to grief for investors if it is not accompanied by effective enforcement by both regulators and investors."
How true, and the above relates to Singapore, which scored 64% on enforcement while Malaysia scored a very disappointing 39%.
Another letter to the editor followed, written by Bobby Jayaraman, it can be found here. A snippet:
Despite their opaque nature, the reason business trusts still have a following among investors is the lure of high yields. Investors seem to forget the simple fact that yields only matter if the initial capital stays intact. In most cases, high yields simply provide cover for a fundamentally weak business.
Malaysia, given its weak enforcement, should really think twice before it wants to embark on business trusts. There is a lot to learn from the Singaporean experience with them. And that experience has, so far, not been that great, to put it mildly.
Malaysia will soon have a new thrust that could promote vibrancy and excitement in its equity market. The framework for the listing of business trust in the country is in the works, and it will likely be unveiled by the Securities Commission (SC) before the year ends.
Several market observers expect business trusts to appeal to both the issuers and investors alike.
“For the investors, a business trust is an alternative investment that gives the comfort of a steady stream of return in the form of dividends; this is perhaps the biggest attraction of a business trust from an investor's point of view,” a corporate financier explains to StarBizWeek.
Take Singapore-listed business trusts. If they are of any indication, dividend yields of such an instrument could range anything between 3% and 10%.
But then, some very much needed dose of realism:
To that, several bankers say there is no need to hurry.
“It is not wise to rush into introducing business trusts in Malaysia just to play catch up. We should not worry about lagging behind because we can learn from the Singapore experience,” a banker says, pointing to the fact that most business trusts in Singapore have so far been performing badly, trading below the initial public offering prices, and causing some investors to suffer losses.
In an article "Time to tighten rules for business trusts" in The Business Times (Singapore) the following was revealed in the below table, aptly titled "Not a pretty sight"
Someone who would have invested $100 in each business trust would be sitting on an average loss (including dividends) of $23 for each investment. Only two out of eleven companies would have given a positive total return, but even in those cases they underperformed the Singapore Straits Times Index (STI). On average, the business trusts lagged the STI annually by 11.5%.
As the main reason, the article writes:
"The less rigorous regime of the business trusts allowes sponsors to exercise their boundless creativity. Caveat emptor is a fair argument to make in a market populated by highly sophisticated investors. In Singapore, the average investor is far from being sophisticated.
Given their atrocious performance thus far, there is a strong case for rules to be tightened for business trusts".
Associate professor Mak Yuen Teen of the NUS Business School responded the next day in a long letter to the editor. Some snippets:
"What are the true economic benefits of allowing increasingly diverse forms of business structures for listed issuers? Do they just end up transferring wealth from public investors to sponsors and intermediaries? Do they really give investors more investment choices or do they merely obfuscate? As we seek to increase retail participation in our markets, are these different structures too complex for ordinary investors to understand, especially as even so-called experts often have difficulty understanding these structures? Is it right to expose retail investors to such investments based purely on caveat emptor, and allowing sponsors and intermediaries to hide behind prospectuses that run into hundreds of pages?
We have also done almost nothing to improve the ability of investors to enforce their rights even as we become even more adventurous in the types of listings we allow.
There has been no substantive debate on contingency fee-based class action, litigation funding or other mechanisms which can improve the ability of investors to take action against issuers, directors, trustee-managers and other intermediaries. Cross-border enforcement by regulators remains a challenge, not to mention by investors.
A disclosure-based system based on caveat emptor ("let the buyer beware") can only lead to grief for investors if it is not accompanied by effective enforcement by both regulators and investors."
How true, and the above relates to Singapore, which scored 64% on enforcement while Malaysia scored a very disappointing 39%.
Another letter to the editor followed, written by Bobby Jayaraman, it can be found here. A snippet:
Despite their opaque nature, the reason business trusts still have a following among investors is the lure of high yields. Investors seem to forget the simple fact that yields only matter if the initial capital stays intact. In most cases, high yields simply provide cover for a fundamentally weak business.
Malaysia, given its weak enforcement, should really think twice before it wants to embark on business trusts. There is a lot to learn from the Singaporean experience with them. And that experience has, so far, not been that great, to put it mildly.
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