"Repco Low": Justice delayed is justice denied

Article from Malaysian Insider's website, in chronological sequence:

• Low (former executive chairman of Repco Holdings Bhd) was alleged to have instructed a representative of Sime Securities Sdn Bhd to buy Repco Holdings shares by taking up any offer price of the shares by sellers on the Kuala Lumpur Stock Exchange. This was an act calculated to create a misleading appearance with respect to the price of Repco shares on the share market. He committed the offence at the 21st floor of Sime Securities, Bangunan Sime Bank in Jalan Sultan Sulaiman, Kuala Lumpur between 11am and 5pm on Dec 3, 1997.
• Low was charged in the Sessions Court in 1999
• On Nov 14, 2006, the Sessions Court acquitted Low without ordering him to enter his defence after finding that the charge against him was defective.
• On Oct 15, 2010, the High Court dismissed the prosecution’s appeal and upheld Low’s acquittal.
• February 28, 2013: The Court of Appeal here today ordered businessman Low Thiam Hock, popularly known as Repco Low, to enter his defence on a charge of share manipulation.

Every old hand (and I am myself one) remembered the "Wild West" days when Repco was trading above RM 100. I still remembered a buy-recommendation from my broker (TA Securities) at around RM 110, with a price target of RM 160 (I can't remember the exact details, but roughly these numbers should be correct). It all had to do with a lottery license which might or might not get approved. However, bubbles don't last forever, and reality did strike, also for Repco's share price.

In 1995 Repco was trading at RM 4.36, this is what happened:

"At the Sessions Court, expert witnesses testified that the price of Repco, which opened at RM108.50 per lot closed at RM113 on Dec 3, 1997. The very next day, the court heard, when there were no buying activities, the price tumbled to RM110 and further dropped to RM11.20 in three weeks."

The offence allegedly took place in 1997, but 16 years later the court case is still on going? Quite unbelievable. As they say, "Justice delayed is Justice denied".


The Securities Commission has initiated another case which also involved "Repco Low", the article can be found here.

"From September 2005 to May 2006, the price of Iris shares rose by 17 times from eight sen to close at a high of RM1.36 on the back of very strong demand with an average of 200 million shares being traded daily. The SC’s investigation found that the manipulation was carried out through a complex layering of the origination of the orders and transactions via foreign intermediaries in several jurisdictions"

AirAsia's dividends: generous but appropriate?

AirAsia published its 4th quarter results. The (in general good) results over the whole year were boosted by a one-off profit from listing their company in Thailand in a previous quarter, no surprise there.

Most remarkably was the large dividend payment, as described by The Star:

"It has also declared a special dividend of 18 sen, on top of a final dividend of 6 sen, which will bring the full-year dividend per share (DPS) to 24 sen. This translates to a DPS yield of 8.4% at RM2.86."

There are two very large financial concerns (next to increased competition from Malindo) regarding AirAsia, their debt and their capital commitments:

 

 

Total Debt stands at RM 8.4 Billion (and increasing) while Capital Commitments are almost RM 65 Billion (also increasing), and the company is paying out rich dividends?

If the company fails (due to the heavy debt burden and/or the capital commitments), the company might be deemed to be "too big to fail" by the government.

And that means that (as usual) the taxpayers are on the hook, to save the company.

Considering that, is the new, generous, dividend policy really appropriate? Should it not preserve cash to ensure it can meet its financial obligations?

Listing panel lacks investors

In Singapore an eleven man committee is formed to review the listing rules. Its members consists of:

SGX's deputy chief regulatory officer, bankers, lawyers, auditors and corporate services and corporate finance professionals. There is also a representative from the Singapore Institute of Directors.

Not a single representative from institutional or retail investors. But they are the ones who will lose money if governance issues crop up in listed firms, say observers.

From the Business Times article (in full to be found on the Singapore Law website):


Because of this alleged conflict of interest, the rules could, in the end, tip the scales towards lower entry standards and letting more firms list, which could be dangerous for investors, they argue.

In recent years, thousands of investors have lost cash in some S-chips - China companies listed here. These firms were allowed to list here but several of them were later caught up in accounting or governance scandals.

"Most of them (the committee members) will benefit from more listings," said corporate governance expert Mak Yuen Teen, an associate professor at the National University of Singapore.

"I'm not saying they are not people of integrity but it's a fact that most of them will benefit from more listings. Investors' representation is sorely lacking."

MBF, HLCap, MRCB

I often receive requests to look into certain corporate matters. I don't have as much time as I would I had, but will make a quick round-up of three deals that are hugging the limelight:


[1] Regarding the privatisation of MBF, MSWG is organising a forum on Thursday 28th February at 11AM, at MSWG's Training Centre in KL:

"Some shareholders have raised questions whether the earlier announcement by the Board on dividend arising from the sale of MBF Cards & Services would be paid to them. The privatisation is Tan Sri Mogan Lourdenadin's third attempt to take control of MBF Holdings. In 2010 Mogan had tried to take MBF private through a proposed selective capital reduction and repayment exercise by offering 65 cents per share, but was unsuccessful after minorities rejected the offer due to the low price."


[2] There are several articles about Hong Leong Capital (HLCap), suggesting something is brewing in this privatisation exercise:

From The Star, February 19, 2013:

"Shares in Hong Leong Capital Bhd (HLCap) continued to overshoot the privatisation offer price of RM1.71 made by parent company Hong Leong Financial Group Bhd (HLFG), finishing five sen up to RM1.87 in a weak broader market.

Dealers contacted randomly by StarBiz said they were still puzzled by the broad ongoing buying despite scant indication of any price increase in the buyout offer.

Some dealers continued to speculate that parties friendly to the offeror could be continuing their buying of HLCap shares from the market presumably to ensure HLFG secures a high percentage of shares from acceptances of the general offer, which would then help make the case for the delisting of HLCap, the group's stockbroking, investment banking and asset management arm."

Another article from The Star, February 22, 2013:

"Meanwhile, a new substantial shareholder has surfaced in HLCap Datuk Dr Yu Kuan Chon, the chairman and executive director of publicly-listed and family-run YNH Property Bhd.

Yu, a low-profile former medical officer for the Government, rapidly increased his stake in HLCap to 17.24 million shares or 6.98% as at Wednesday from 14.67 million shares or 5.94% on Monday.

It is not known if Yu is a friendly party to Tan Sri Quek Leng Chan, the patriarch of the Hong Leong group, who is taking HLCap private via his flagship Hong Leong Financial Group Bhd (HLFG) for RM1.71 per share.
......

Dealers have speculated that parties friendly to the offeror could have bought HLCap shares from the open market to ensure HLFG secures a high percentage of shares from acceptances of the general offer, which would help make the case for the delisting of HLCap."


Investors should be very cautious making investment decisions based on the above, since it is mere speculation, as pointed out by The Star. But the matter at hand might have serious consequences for minorities. Parties acting in concert (PAC) should be identified, since the price to be paid by the offering party should be the highest paid by them or any PAC.

Bursa Malaysia should monitor this situation very closely and make sure that minorities are not disadvantaged, either by not receiving timely and accurate information, or in money terms, not receiving the offer price they are entitled to.


[3] MRCB announced a deal with Gapurna, this matter is rather difficult, I refer to articles on the website of KiniBiz:

MRCB-Gapurna deal raises eyebrows
EPF says good to have entrepreneur head MRCB
MRCB-Gapurna: Salim defends deal, explains role
Could the EPF have done more?

And lastly, as a stark reminder that one should not mix politics with business:

MRCB’s chequered past colours its future

"With its political clout, MRCB grew to own such choice assets such as 20.2 per cent in Commerce Asset Holdings Bhd which owned Bank of Commerce Bhd (now CIMB)—via NSTP, a chunk of power generation companies like Malakoff Bhd, Sepang Power and Port Dickson Power among a whole host of other large assets."

How many billions of ringgits would the stake of CIMB alone be worth now, if only they still owned it?

"For its financial year ended August 1999, the company suffered losses of about RM1.45 billion from RM235.39 million in revenue. As at August 1999, MRCB was saddled with short term borrowings of RM923 million while the company long term debt commitments were RM473 million. On the other side of the balance sheet MRCB had cash and bank balances amounting to RM38 million."

In the Asian crisis many dreams came crashing down to Earth.

"Eventually MRCB was acquired by EPF in an apparent rescue of the group."

And that is how the EPF became the controlling shareholder.