Article in The Star, some snippets:
Shares of MyEG Services surged at mid-morning on Wednesday after it was appointed by the government to compile and maintain database on the country’s foreign workers.
CIMB Research in a note said that it has raised MyEG's target price from RM5.28 to RM7.80.
It said the database will come from employers of foreign workers that must use MyEG’s online foreign workers work permit renewal services (FWPR) from 2015 onwards.
“We bump up our EPS forecasts by 38%-63% to reflect higher earnings mainly from the FWPR...."
Looks like MyEG got a pretty juicy contract here. According to CIMB Research the company was suddenly about 50% worth more, just because of this single contract.
Good news also for major shareholder Wong Thean Soon, who owns 44 million shares directly and 197 million shares indirectly. If the estimate of CIMB is correct than his worth has increased by more than half a billion RM.
Suddenly the highest regulatory settlement in the history of the Securities Commission doesn't look that large anymore:
"On 26 September 2014, Wong Thean Soon (“TS Wong”), entered into a settlement with the Securities Commission Malaysia (“SC”) in the sum of RM7,000,000 when he agreed without admission or denial of liability, to settle a claim that the SC was proposing to institute against him and 13 others for the manipulation of MyEG Services Berhad shares between 16 January 2007 and 24 April 2007, contrary to section 84(1) of the Securities Industry Act 1983."
Wednesday, 7 January 2015
Monday, 5 January 2015
Fraud at Kontena Nasional (2)
I wrote before about NCB Holdings and the fraud at Kontena Nasional.
Today the company announced:
"... the resignation of En. Syahrul Azmir bin Ahmad Zaki as the Chief Executive Officer of Kontena Nasional Berhad, a wholly owned subsidiary of NCB Holdings Bhd. The effective date of resignation is from 1st January 2015."
No reason was given, which is exceptional.
In an unrelated announcement it was reported that MISC sold its shares in NCB to a wholly-owned subsidiary of MMC Corporation.
With the majority shareholder of MMC (Tan Sri Syed Mokhtar) already having stakes in other Malaysian ports, there might be a potential for a monopoly.
Today the company announced:
"... the resignation of En. Syahrul Azmir bin Ahmad Zaki as the Chief Executive Officer of Kontena Nasional Berhad, a wholly owned subsidiary of NCB Holdings Bhd. The effective date of resignation is from 1st January 2015."
No reason was given, which is exceptional.
In an unrelated announcement it was reported that MISC sold its shares in NCB to a wholly-owned subsidiary of MMC Corporation.
With the majority shareholder of MMC (Tan Sri Syed Mokhtar) already having stakes in other Malaysian ports, there might be a potential for a monopoly.
Sunday, 4 January 2015
Malakoff associate gets penalty of RM 157M
MMC Corporation announced regarding legal proceedings against an associate company of Malakoff in connection with sea water desalination plant in the district of Tlemcen, Algeria:
"...that MCB [Malakoff Corporation Bhd] had been informed by AAS [Almiyah Attilemcania Spa] solicitors on 30 December 2014 that the lower court of Ghazouet (“Court”) in the district of Tlemcen has imposed a penalty of DZD3,929,038,151.36 (approximately US$44.6 million at the exchange rate of US$1=DZD88) on AAS in respect of the Legal Proceedings (“Penalty”).
AAS has been advised by its solicitors that the Penalty would not be enforced until the exhaustion of all rights to appeal by AAS in respect of the Legal Proceedings. AAS had filed an appeal against the decision of the Court to the Algerian Court of Appeal."
That is quite a high penalty, it is not often that one sees a penalty of more than RM 100 million.
The Malaysian press has been rather silent about the case. Some more details can be found in this announcement:
3. During the financial year 2009, it was discovered that there was a considerable gap between the value of the delivered equipment and the value of the payment made by AAS to the supplier cum contractor (“Invoice Gap”). AAS wrote to the supplier cum contractor requesting for clarifications as they are responsible to resolve tax and customs issues. The invoice gap however was not resolved by the supplier cum contractor and the Algerian Customs then initiated investigations and thereafter the charge was brought against AAS.
4. Due to the Invoice Gap, it is alleged that AAS has failed to repatriate a sum of USD26,900,000. No interest is imposed in the Legal Proceedings but the Court can impose penalty as it deems fit.
Malakoff is planning a relisting exercise, after having been listed and subsequently delisted before. The kind of "games" that are often played by Malaysian tycoons on Bursa. The valuation at relisting is often very much higher than the valuation when the company was delisted. Unfortunately, there is not much that minority investors can do against this practice.
"...that MCB [Malakoff Corporation Bhd] had been informed by AAS [Almiyah Attilemcania Spa] solicitors on 30 December 2014 that the lower court of Ghazouet (“Court”) in the district of Tlemcen has imposed a penalty of DZD3,929,038,151.36 (approximately US$44.6 million at the exchange rate of US$1=DZD88) on AAS in respect of the Legal Proceedings (“Penalty”).
AAS has been advised by its solicitors that the Penalty would not be enforced until the exhaustion of all rights to appeal by AAS in respect of the Legal Proceedings. AAS had filed an appeal against the decision of the Court to the Algerian Court of Appeal."
That is quite a high penalty, it is not often that one sees a penalty of more than RM 100 million.
The Malaysian press has been rather silent about the case. Some more details can be found in this announcement:
3. During the financial year 2009, it was discovered that there was a considerable gap between the value of the delivered equipment and the value of the payment made by AAS to the supplier cum contractor (“Invoice Gap”). AAS wrote to the supplier cum contractor requesting for clarifications as they are responsible to resolve tax and customs issues. The invoice gap however was not resolved by the supplier cum contractor and the Algerian Customs then initiated investigations and thereafter the charge was brought against AAS.
4. Due to the Invoice Gap, it is alleged that AAS has failed to repatriate a sum of USD26,900,000. No interest is imposed in the Legal Proceedings but the Court can impose penalty as it deems fit.
Malakoff is planning a relisting exercise, after having been listed and subsequently delisted before. The kind of "games" that are often played by Malaysian tycoons on Bursa. The valuation at relisting is often very much higher than the valuation when the company was delisted. Unfortunately, there is not much that minority investors can do against this practice.
Friday, 2 January 2015
Moody and its Chinese red flags
From Reuters: "China developer Kaisa says fails to repay $51 mln loan, may default on others"
Chinese property developer Kaisa Group Holdings said it had failed to repay a HK$400 million ($51.3 million) loan and warned it may default on more debt, the latest problem to hit the firm amid a downturn in the real estate sector. In a stock market filing late on Thursday, the company said the payment of the loan and its interest became compulsory on Dec. 31, following the resignation of its chairman Kwok Ying Shing. The failure to repay the HSBC term loan may trigger default on other loan facilities, debt and equity securities, co-chairman Sun Yuenan said in the filing to the Hong Kong exchange.
China observers are most likely not surprised, the Chines property market appeared to be red hot, and the balance sheets of many developers stretched, Kaisa was one of them.
As so often, with 20/20 hindsight we are all experts. But there was one company which did stick out its neck, namely Moody, in 2011. Its report "Red Flags for Emerging Market companies: A Focus on China" can be found here.
Kaisa does indeed feature on the list of Chinese property issuers, with seven possible red flags being tripped and a negative outlook on its bond rating:
We know now that Kaisa is indeed in big troubles, so it appears to be a job well done by Moody's.
But quite soon after publishing the report drew the attention of the Hong Kong regulators, according to this article from Reuters:
"The report caused a sharp fall in the stock and debt prices of some Hong Kong-listed companies it flagged, including West China Cement (2233.HK) whose shares slumped 17 percent before rebounding. That prompted stinging criticism from some market analysts who debated the agency's risk framework, especially since at least one of the so-called "red flags" was publicly denied by one of the companies. The Moody's note also grabbed the attention of the city's market regulator, the Securities and Futures Commission."
David Webb wrote "SFC actions risk chilling critics" about this issue:
.... let's look at the total returns on the stocks since the day before the report (8-Jul-2011) up to the end of 2014 to see whether Moody's scoring system was broadly right. Kaisa's stock is down 42.07% , but it wasn't one of the top 5 companies singled out by the report, which tested 61 companies with 20 possible red flags. The top 5 were: West China Cement Ltd (2233), down 69.76%, Winsway Enterprises Holdings Ltd (1733), down 92.14%, China Lumena New Materials Corp (0067) down 56.86% (and suspended), Hidili Industry International Development Ltd (1393), down 89.07% (source: Webb-site Total Returns) and last but not least, LDK Solar, which was US-listed and is now bankrupt. We'd say that's a pretty good hit rate, even though industry factors are involved in some of the declines. For all HK-listed stocks, the median (718th) stock in that period returned 0.32%.
One can of course argue with Moody's methodology, but that kind of debate on which factors matter for future performance is what makes a market.
The Moody's appeal has yet to be heard, and the SFC's Decision Notice is not yet a public document, so we don't know what the precise allegations are, the arguments in their favour are or what Moody's full appeal will be, but we hope that the SFC has more grounds for complaint than a few errors in a report covering numerous companies, because it would be unreasonable to expect that a report on 61 companies with 20 different flag-tests would be correct on all of the 1220 tests.
And further down the article:
The risk of a chilling effect
Free markets depend on free speech and the open exchange of opinions and analysis, whether it turns out to be right or wrong. The SFC will need to tread very carefully in this area and show good grounds for their actions in the SFAT and MMT, otherwise they are likely to have a chilling effect on critical research. That would be very bad for the market, for at least three reasons:
I can't agree more with that.
Wishing all readers a Happy and Healthy 2015!
Chinese property developer Kaisa Group Holdings said it had failed to repay a HK$400 million ($51.3 million) loan and warned it may default on more debt, the latest problem to hit the firm amid a downturn in the real estate sector. In a stock market filing late on Thursday, the company said the payment of the loan and its interest became compulsory on Dec. 31, following the resignation of its chairman Kwok Ying Shing. The failure to repay the HSBC term loan may trigger default on other loan facilities, debt and equity securities, co-chairman Sun Yuenan said in the filing to the Hong Kong exchange.
China observers are most likely not surprised, the Chines property market appeared to be red hot, and the balance sheets of many developers stretched, Kaisa was one of them.
As so often, with 20/20 hindsight we are all experts. But there was one company which did stick out its neck, namely Moody, in 2011. Its report "Red Flags for Emerging Market companies: A Focus on China" can be found here.
Kaisa does indeed feature on the list of Chinese property issuers, with seven possible red flags being tripped and a negative outlook on its bond rating:
We know now that Kaisa is indeed in big troubles, so it appears to be a job well done by Moody's.
But quite soon after publishing the report drew the attention of the Hong Kong regulators, according to this article from Reuters:
"The report caused a sharp fall in the stock and debt prices of some Hong Kong-listed companies it flagged, including West China Cement (2233.HK) whose shares slumped 17 percent before rebounding. That prompted stinging criticism from some market analysts who debated the agency's risk framework, especially since at least one of the so-called "red flags" was publicly denied by one of the companies. The Moody's note also grabbed the attention of the city's market regulator, the Securities and Futures Commission."
David Webb wrote "SFC actions risk chilling critics" about this issue:
.... let's look at the total returns on the stocks since the day before the report (8-Jul-2011) up to the end of 2014 to see whether Moody's scoring system was broadly right. Kaisa's stock is down 42.07% , but it wasn't one of the top 5 companies singled out by the report, which tested 61 companies with 20 possible red flags. The top 5 were: West China Cement Ltd (2233), down 69.76%, Winsway Enterprises Holdings Ltd (1733), down 92.14%, China Lumena New Materials Corp (0067) down 56.86% (and suspended), Hidili Industry International Development Ltd (1393), down 89.07% (source: Webb-site Total Returns) and last but not least, LDK Solar, which was US-listed and is now bankrupt. We'd say that's a pretty good hit rate, even though industry factors are involved in some of the declines. For all HK-listed stocks, the median (718th) stock in that period returned 0.32%.
One can of course argue with Moody's methodology, but that kind of debate on which factors matter for future performance is what makes a market.
The Moody's appeal has yet to be heard, and the SFC's Decision Notice is not yet a public document, so we don't know what the precise allegations are, the arguments in their favour are or what Moody's full appeal will be, but we hope that the SFC has more grounds for complaint than a few errors in a report covering numerous companies, because it would be unreasonable to expect that a report on 61 companies with 20 different flag-tests would be correct on all of the 1220 tests.
And further down the article:
The risk of a chilling effect
Free markets depend on free speech and the open exchange of opinions and analysis, whether it turns out to be right or wrong. The SFC will need to tread very carefully in this area and show good grounds for their actions in the SFAT and MMT, otherwise they are likely to have a chilling effect on critical research. That would be very bad for the market, for at least three reasons:
- There is a systemic skew in investment bank/broker research which produces far more "buy" or "hold" (don't sell) notes than actual "sell" recommendations, because banks face conflicts of interest in seeking business with companies and in maintaining open doors for their analysts. Often the diplomatic way out is just to quietly drop coverage rather than put out a "sell" note. So we need investors, short or long, to express their opinions freely.
- In China, as with other emerging markets, there are vast problems with corporate governance, fraud and corruption, and these need to be exposed, partly to improve market efficiency and partly to deter such behaviour by reducing the chance that it will remain unnoticed.
- One of Hong Kong's core competitive advantages over mainland China is supposed to be the ability to speak freely.
I can't agree more with that.
Wishing all readers a Happy and Healthy 2015!
Subscribe to:
Posts (Atom)