Weekly roundup: MISC, growers scheme, RBTR

Wishing all readers happy holidays.

Petronas & MISC
More and more pressure is mounted on Petronas to increase their offer price and on EPF to reject the current offer on the table.

P Gunasegaram wrote about the issue in Malaysiakini, the article can be found here for free. The article is very good, I strongly recommend it to the readers, nothing more to add.

MSWG has also entered the battle, in "The Observer" dated February 7, 2013 they write (emphasis mine):

"As the offeror already held 62.67% of total MISC shares, it requires another 27.33% to reach not less than 90% to have MISC delisted. However to compulsorily acquire MISC the threshold level must reach 96.3%. And to ensure the privatisation is successful and accepted by the minorities a better price should be offered.

In addition, the points to note for readers are as follows:

1. Shipping is mired with many challenges and low freight rates. More importantly we need to understand the long term contracts at good rates versus that of spot transactions which are subjected to competitive rates.
2. MISC disposed the loss-making liner business, thus the situation should look more promising for the company.
3. Last but not least MISC had issued rights issue at RM7.00 in 2010 for every 5 shares held. Based on this the average cost per share was about RM8.25 and with the offer price of RM5.30 per share, investors who had subscribed would suffer a significant loss.

We will look at it again the fairness of the offer upon the issuance of the offer document."

As usual, I have nothing against a General Offer, in the contrary, but I hate those accompanied by a "delisting and compulsory acquisition threat", against which minority shareholders have hardly any chance. In this particular case, should minority shareholders who decided not to sell when the MISC shares were going for around RM 8 (between 2005 and 2011) be pressured to sell at a much lower price?

EPF claimed it is actively fighting for its rights, this case might be good to prove it means business.


Country Heights Grower Scheme
"All's well that ends well."

Many questions are still not answered, like:

• Were the investors properly informed about the marketing expenses?
• Were the investors timely informed about the situation of the low yields at the plantation?
• Was the independent report of sufficient quality, highlighting all important issues?
• Why the hurry, with all being scrambled just before CNY?

But the result (with the improved offer and the faster handling of all money within six months) looks pretty good for the investors. At the end of the day, it is the result that counts. A good day for shareholder activism in Malaysia.

Still a good moment for the authorities to relook at the whole saga, if things can be improved regarding these alternative investment schemes.

For a long list of related articles, please visit MSWG's website on this subject.


RBTR

The Securities Commission has filed a suit against RBTR and seven other defendants:

RBTR ASSET MANAGEMENT BERHAD
AL ALIM BIN MOHD IBRAHIM
VALENTINE KHOO
LOCKE GUARANTY TRUST (NZ) LIMITED
LOCKE CAPITAL INVESTMENTS (BVI) LTD (British Virgin Islands)
ISAAC PAUL RATNAM
NICHOLAS CHAN WENG SUNG
JOSEPH LEE CHE HOCK

The details can be found on the website of the SC. I have written about this case before.

“We are concerned that no further action was taken because the case involves Bank Rakyat chairman Tan Sri Dr Syed Jalaludin Syed Salim and Bank Rakyat managing director Datuk Kamaruzaman Che Mat,” he added. Bank Rakyat had once held a 20 per cent stake in RBTR and lent its “Rakyat” name and logo to RBTR, then called Rakyat BTR Capital Partners Sdn Bhd, when RBTR had solicited funds from the public from mid-2007 till mid-2008. Syed Jalaludin and Kamaruzaman were directors of RBTR before Bank Rakyat sold its stake in 2008.


Searching for "Rakyat" in the statement of claim gives the following three hits:

26. In early 2007, Isaac was introduced to Al Alim by one Tan Sri Dato’ Dr. Syed Jalaludin Syed Salim, the then Chairman of Bank Rakyat Berhad and Director of RBTR, to explore new business opportunities.

43. At all material times during the marketing and/or promotion of the EDI Scheme to Malaysian investors , RBTR described it self as “Rakyat BTR”, an “associate of Bank Rakyat Group’. SC contends that RBTR therefore deliberately gave the impression to the Malaysian investing public that its products were in fact associated with and/or were endorsed by Bank Rakyat, which representation was in fact untrue. SC further contends that this representation was critical towards inducing the Malaysian investing public to invest in the EDI Scheme.

107. Particulars of Breach: (d) (i)
using the “Bank Rakyat” logo and describing itself as an “Associate of Bank Rakyat” in the EDI Scheme Promotional Material without the knowledge or acquiescence of Bank Rakyat knowing that this was likely to be material in inducing investors to participate in the EDI Scheme;


We need to wait for details from the civil suit to find out more details regarding this case and Bank Rakyat and its directors, enough questions remain. For instance:

• Bank Rakyat must have noticed that RBTR was promoting the EDI Scheme with the Bank Rakyat logo on it, did it take immediate and decisive action?
• Did Bank Rakyat have a 20% stake in RBTR, if so when did it dispose of it?
• Who were the directors of RBTR from mid-2007 until now, are they all included in the civil suit, if not why?

Investors want news on asset manager probe, fear cover-up

Update: another interesting link can be found here: SelangorTimes

Worrisome article in the MalaysianInsider regarding RBTR Asset Management. Abdul Razak said that RBTR’s custodian UBB (Malaysia) Trustee Bhd had paid the monies to British Virgin Islands company Locke Guaranty Trust (NZ) Ltd (LGT). But in 2007 the Securities Commission of New Zealand has already issued a very alarming alert on this company.


Investors should be warned about the scheme because the Commission believes claims made about it are likely to deceive, mislead or confuse investors," the Commission's Director of Primary Markets, Kathryn Rogers said. LGT advertised the plan on its website. It stated that the investment is safe and risk free. All investments have a degree of risk and the Commission believes these statements are deceptive and misleading. "The website may have given the false and misleading impression that LGT has been licensed and/or approved by the Securities Commission or the Reserve Bank," Kathryn Rogers said. "LGT is not a registered bank in New Zealand and is not subject to banking regulations." If its claim that New Zealanders are not eligible to invest is true, then the offer is not subject to the Securities Act. It does not comply with the Act. The description of the scheme is confusing because it is unclear how LGT intends to use investor's money and information about this appears inconsistent.

How could RBTR Asset Management have overseen this warning?

"Bank Rakyat had once held a 20 per cent stake in RBTR and lent its “Rakyat” name and logo to RBTR, then called Rakyat BTR Capital Partners Sdn Bhd, when RBTR had solicited funds from the public from mid-2007 till mid-2008".

Syed Jalaludin and Kamaruzaman were directors of RBTR before Bank Rakyat sold its stake in 2008.
But the investors claim they were not informed of Bank Rakyat’s withdrawal, despite the fact that most had invested with RBTR due to the company’s association with the Bank Rakyat Group.

It appears that Bank Rakyat and its directors must also bare (at least some) responsibility for what happened.

And why is the Securities Commission so terribly slow in taking action, funds were solicited in 2007 and 2008, that is four full years ago! Quickly investigate the case, interview the persons involved, follow the money trail, it all should not take that long. There is also still no news regarding SJAM, another asset manager which ran into problem.

A group of investors want the Finance Ministry and Securities Commissions (SC) to complete investigations, already delayed two years, on what they say are losses of more than RM13.5 million invested in an asset management company.

They allege that licensed asset management firm RBTR Asset Management Bhd had failed to pay them the principal sums in a Euro Deposit Investment (EDI) scheme upon maturity.
After taking over the company in October 2009, the Securities Commission (SC) and its appointed receiver, BDO Binder, informed the investors the following year that RBTR had less than RM10,000 in its bank account that once held as much as RM13.5 million.
“This is a clear cut case for the SC or Ministry of Finance to pursue an outright criminal case or criminal breach of trust against the criminal parties,” Petaling Jaya Utara MP Tony Pua told reporters at a press conference here.
“However, the investors have not received any substantive updates in the past two years, nor has any of their money been recovered.
“We are concerned that no further action was taken because the case involves Bank Rakyat chairman Tan Sri Dr Syed Jalaludin Syed Salim and Bank Rakyat managing director Datuk Kamaruzaman Che Mat,” he added.
Bank Rakyat had once held a 20 per cent stake in RBTR and lent its “Rakyat” name and logo to RBTR, then called Rakyat BTR Capital Partners Sdn Bhd, when RBTR had solicited funds from the public from mid-2007 till mid-2008.
Syed Jalaludin and Kamaruzaman were directors of RBTR before Bank Rakyat sold its stake in 2008.

But the investors claim they were not informed of Bank Rakyat’s withdrawal, despite the fact that most had invested with RBTR due to the company’s association with the Bank Rakyat Group.
“The reason my husband and I invested our hard-earned RM150,000 in the first place was because Bank Rakyat guaranteed we would receive a return,” a 64-year-old retiree told The Malaysian Insider.
“This whole fiasco has caused me so much stress, and now I can’t even pursue legal action as I barely have enough money to pay my monthly medical bills for my cancer treatment,” she added.

RBTR had told investors that the EDI was a capital-protected investment into AAA-rated
 banks in Europe with total annual returns of eight per cent payable every six months and capital to be paid upon maturity.
Although investors were assured that their funds would be deposited into two Swiss banks — Liechtensteinische Landesbank and the EFG Group — Abdul Razak said that RBTR’s custodian UBB (Malaysia) Trustee Bhd had paid the monies to British Virgin Islands company Locke Guaranty Trust (NZ) Ltd (LGT).
Pua said he would be writing a letter to the SC demanding updates on the investigation.
“It is crucial that the SC act with transparency and efficiency so that the integrity of Malaysia’s capital markets are protected,” he said.
“If the Bank Rakyat chairman can go off scot-free, investors will lose their confidence in Malaysian capital markets,” he added.