Asian fund managers (3)

One kind reader pointed me at the following book:

The book (written in 1994, published in 1995) seems to be out of stock. I noticed some second-hand prices which seem to be on the high side, readers might want to try their luck at a larger library. Unfortunately, I have never owned or read the book, but found the following review by "Henry":


While a little dated now, in the style of John Train's "Money Masters" books, this tome recounts the modus operandi of consistent stand-out-performance investors in Asia. It includes some well know subjects (eg Dr Doom, Marc Faber) and some less well profiled. The author herself could easily be among them - for she later formed an open ended Asian fund which over the last 12 years has compounded at a rate of more than 28% pa (hence my interest at this late stage in reading her work).


Interesting is the following post, "Nuggets from my book", written by the author herself (December 1998), after the Asian crisis but before the internet implosion.

Asian fund managers (2)

I wrote about the Carrian scandal before: here and here.

I wrote before about successful Malaysian fund manager Cheah Cheng Hye, founder of Value Partners based in Hong Kong.

But what I didn't know was that these two items are connected. In "The Value Investors" by Ronald Chan, it is mentioned that Cheah was a journalist in 1983 with the Wall Street Journal Asia:


"... while investigating red-hot Hong Kong-based conglomerate Carrian Group, Cheah discovered that the company had incomprehensible accounting practices and was involved in strange dealings with Bank Bumiputra Malaysia. The company soon collapsed amid a chain of dramatic events, including accounting fraud allegations, the suicide of a company advisor, and the murder of a Malaysian bank auditor. Cheah's resulting story in the Asian Wall Street Journal was an impressive combination of crime investigation and in-depth analysis of the company's financials."


This is just one of the gems in the above mentioned book:

I have lamented that almost all investing books centre around Wall Street, that there is hardly any book dealing with markets in Asia or Europe. The above book makes a refreshing change in that.

Twelve fund managers are interviewed:

• Walter Schloss, Walter & Edwin Schloss Associates
• Irving Kahn, Kahn Brothers Group
• Thomas Kahn, Kahn Brothers Group
• William Browne, Tweedy, Browne Company
• Jean-Marie Eveillard, First Eagle Funds
• Francisco García Paramés, Bestinver Asset Management
• Anthony Nutt, Jupiter Asset Management
• Mark Mobius, Templeton Emerging Markets Group
• Teng Ngiek Lian, Target Asset Management
• Shuhei Abe, SPARX Group
• V-Nee Yeh, Value Partners Group
• Cheah Cheng Hye, Value Partners Group

The Asian component is clear in the last five fund managers, two of which (Teng and Cheah) were born in Malaysia. Teng is running the Singapore based Target Value Fund, about which I wrote here.

Cheah's reasons to set up an own fund are described as follows:


"Honestly, I had become a little fed up with the finance industry and wanted to do my own thing because the industry was, and probably still is, full of what I call 'financial pirates'. These individuals join finance not because they are passionate about investing, but because they have the 'money disease'. Because they think the industry will enable them to make a lot of money, so instead of becoming engineers or lawyers they become bankers. They are a disgrace to human civilization because they contribute nothing!"


Walter Schloss was interviewed for the book a few months before he passed away on February 19, 2012 and the views he provides reflect the wisdom gained over a long and successful life.

An interesting book for people who like to read about fund managers from all over the world, their biography, what drove them to become value oriented and issues like: humility, being contrarian, margin of safety.

This book is not meant for people who like to read about concrete (valuation) techniques or even stock tips.

I hope to read more of these books, especially with an Asian component in it.

Maemode: accurate predictions by Ze Moola, but why did nobody notice? (4)

I wrote before about Maemode (Malaysian AE Models Holdings Berhad), here, here and here.

I am afraid that my fears regarding Maemode being delisted appear to be come true, according to this announcement:


the securities of the Company will be de-listed on 2 July 2014 unless an appeal against the de-listing is submitted to Bursa Securities on or before 27 June 2014 ("the Appeal Timeframe")


The shares have been suspended for a long time, so it doesn't look like a big deal. But the issue that I have with this is that Maemode's minority shareholders and interested observers might never know what exactly has happened.

The following are the financial results between 2002 and 2012, the company appeared to be nicely profitable, and although margins were not that great, Maemode looked like a pretty decent company. Its accounts were audited and approved by Ernst & Young, one of the top accounting companies.

 

(all amounts in million RM)

However, when one digs deeper (and blogger "Where is Ze Moola" did exactly that), a troubling trend appears:

The build up of debt is very troublesome. And why have the receivables grown much faster than the sales? From about 45% in 2002/04 to 77% in 2010/12. If the receivables are "able to receive" in a timely matter, then the loans can be repaid, but what if that is not the case?

In an interesting twist, well-known businessman Tey Por Yee became a large shareholder. With hindsight, that might not have been the best timed investment, to put it mildly.

The 2013 results were not so good until the third quarter (a small loss), and financial troubles started to appear when a subsidiary defaulted on a loan.

But the real shocker came when the fourth quarter results were announced:

In one foul swoop, the company went from a large accumulated profit to an accumulated loss of 69 million.

The explanation offered was (in my opinion) completely insufficient:

The company would not issue its 2013 audited accounts, its year report, nor any other quarterly reports anymore. In other words, we are completely left in the dark what actually has happened.

Unfortunately, the authorities (BM & SC) also did not order an investigative audit, something that I think was very much needed.

The "commentary of prospect" in the last quarterly report looked rather "comical" (writing about the Malaysian and Chinese economy when the company is going under):

Will we ever know what really happened with Maemode and will the authorities take appropriate action?

I sincerely hope so,  time will tell.

Kamdar: "It's a messy family affair" (2)

I wrote about the Kamdar Group before. The special investigative audit has been completed and the results have been announced.


The Special Auditors have found that there were four non-business withdrawals transactions amounting to RM 8,842,306 effected from KSB’s bank accounts from 23rd March till 26th March 2005 by two individuals who were former officers of KGMB.

1.  RM 2,420,000 was on 23rd March 2005 withdrawn by way of a cash cheque that was encashed by two individuals.

2. RM 5,762,306 was on 23rd March 2005 utilized to purchase a bank draft for the purpose of purchasing 4,801,920 shares in KGMB from the under-subscribed portion of the shares offered for sale during the listing. These were bought in the name of a third party who claims to be a proxy for one of the individuals. When the shares were sold thereafter the proceeds were given to one of the individuals.

3. RM 580,000 was on 25th March 2005 paid by cheque to the one of the individuals for non KSB business purposes.

4. RM 80,000 was on 26th March 2005 transferred directly to the second individual’s account from KSB’s account by way of internal transfer advice. It was repaid on 11th January 2011. This was an unauthorized payment and could amount to an unauthorised loan.

All the cheques and instructions for the above transactions were signed solely by the same individual.
Several shareholders advanced a sum of RM 8,763,089 to KSB from 28th March 2005. There is no conclusive proof as to what these advances were for.

The Special Auditors concluded that in the General Ledger of KSB, the above transactions were wrongly recorded and the financials were misstated to indicate that they were loans taken by a former director and were subsequently set off by the advances from the shareholders.

MATERIAL IMPACT ON FINANCIALS
The Special Auditors are of the opinion that whilst there is no impact on the profitability of the company, the Balance sheet for that particular and subsequent years should have reflected these as :-
Assets : Amount due from Director / Other Receivables – RM8,842,306
Liability : Amount due to Shareholders –RM 8,763,089


The above does not sound good. First of all, it all sounds terribly messy, unworthy of a listed company. Secondly it begs the question why it took eight years to uncover all these facts. Thirdly, while it looks like the asset and liability roughly cancel each other out, there might still be a problem for the Kamdar Group in collecting the amount due from Director.

Tanjung Offshore: some shareholder activism

Update: please check out this blog for all oil & gas related matters.


Tanjung Offshore has been in the news lately.

First of all there is an article in The Star: "A tale of two waivers".


Waivers should only be granted in exceptional and extenuating circumstances. One wonders what is the basis for Tanjung Offshore Bhd asking for two significant waivers: one from Ekuiti Nasional Bhd (Ekuinas) against a non-competing clause and another from the Securities Commission (SC) to waive the requirement for Tanjung Offshore’s new shareholders from having to make a mandatory general offer (MGO) despite buying up more than 33% of the company.

To recap, Tanjung Offshore has reportedly already asked Ekuinas to waive the clause (that was inked back in 2012 when the fund bought the offshore support vessels business from Tanjung Offshore) that prohibits Tanjung Offshore from getting into a similar business until mid-2015.

Tanjung Offshore is in the midst of a reverse takeover (RTO) exercise that will see it buying marine vessels from several parties who would end up with more than 33% of the company. Tanjung Offshore is seeking a waiver from the MGO rule. A group of minority shareholders, on the other hand, are opposing this.

It is difficult to fathom why Ekuinas should grant Tanjung Offshore a waiver. Ekuinas had done right by including the non-competitive clause after paying a whopping RM220mil for Tanjung Offshore’s OSV assets.
 
Ekuinas’ planned floatation of Icon Offshore Bhd (which is essentially the asset it had acquired from Tanjung Offshore) already has some challenges in the form of seemingly toppish valuations and one report questioning the certification of some of Icon Offshore’s vessels. The last thing it would need is having another competitor creep into the same sector.

As far as the MGO waiver is concerned, it should be opposed as minority shareholders should be protected in this deal by offering them a chance to exit the business at the same price the new shareholders are buying into the company.


I like to draw the readers attention to the word "whopping". To put things in perspective, these assets were injected into Icon Offshore, a company that will IPO at a valuation of RM 2.2 Billion. In other words exactly ten times the price that Tanjung received for its assets. I have to admit, there were other assets in Icon Offshore, and Ekuinas might have injected funds or loans into Icon Offshore. But still, there is a huge valuation gap, and I would not immediately assume that Tanjung received a whopping amount. My guess is that the deal in 2012 was very good for Ekuinas, not so much for Tanjung Offshore. That assumption is also based on the fact that part of the IPO proceeds of Icon Offshore will go towards its existing shareholders and part will be used to shore up its balance sheet.

One group of Tanjung Offshore minority shareholders seems to have this same opinion, according to this article in The Malaysian Insider: "16 minority shareholders oppose Tanjung deal, say they are shortchanged".


“The directors have a bad track record when it comes to striking deals, and this transaction does not look good,” Chuah told The Malaysian Insider yesterday.


My guess is that Chuah was referring to the sale of its assets to Ekuinas in 2012.


"If Tanjung is exempted from the MGO, the new owner or investor will become the controlling shareholder. This means we don't have the option of cashing out and will have to go along with whatever deal that is struck.” Chuah said that with the RTO, Tanjung is expected to return to the same business it disposed of two years ago, as Bourbon is involved in marine vessel services. Chuah fears that the minority shareholders would be asked to cough out extra cash in order to complete the deal, and questioned why they were excluded from the deal.


The CI is currently in record territory, but the share price of Tanjung Offshore has languished, despite being in an industry that is perceived to be quite "hot" these days. The company did pay out a dividend of RM 0.44 in 2012, which explains the sudden drop (the share going "ex"), but other then that, the share has performed very disappointingly. Another indication that things have not gone very well for the company.

 

 

For me, I have some doubts about the industry. The perception seems to be that there will be lots of growth due to "juicy" contracts by PETRONAS. I doubt that these contracts will be that juicy. Next to that, it seems every single company in this business is raising money to further increase its fleet. Somehow or the other, that doesn't make much sense. And lastly, activities onshore have hugely increased (for instance in North-America) recently through the use of "fracking":

 

 

Hydraulic fracturing is the fracturing of rock by a pressurized liquid. Some hydraulic fractures form naturally—certain veins or dikes are examples. Induced hydraulic fracturing (also hydrofracturing, fracking, and fraccing) is a mining technique in which a high-pressure liquid fluid (usually water mixed with sand and chemicals) is injected to a wellbore in order to create small fractures (usually less than 1.0 mm wide) in the deep-rock formations in order to allow natural gas, petroleum, and brine to migrate to the well.

 

Liberalization of the Unit Trust industry (2)

"Wammo" commented on my previous posting: "Check out the performance of local funds on Fundsupermart - very few stand-out performers".

I have used his link to fund selector of Fundsupermart. I used the criteria:

• Main Categories: "Equity"
• Geographical sector: "Malaysia"
• I looked for funds with at least a 3 year track record

These are some of the disappointing funds that I found:

 



 

Please be informed that the above numbers exclude any initial sales charge. In other words, for an investor the returns are even worse.

In comparison, this is the graph of the CI, since 1994, highlighted the last 10 years:

Fund managers have nothing to complain about, the market went up from 820 to currently 1877, a rise of 129%, or annualised 8.6%. Any fund manager worth his salt, with a disciplined attitude towards value investing should easily beat the return of the CI in the longer term.

And they are supposed to do exactly that, that is what they are paid for in the first place through the yearly management fees. Otherwise a low cost index-tracking ETF makes more sense.

The average 10-year performance over all Malaysian equity funds is 9.7%, not that bad, at least one per cent more than the index. But the outperformance will most likely be lost by the initial sales charge, which can range up to a whopping 5%. I strongly recommend investors never to pay more than 2% in sales commissions, preferably less.

Liberalization of the Unit Trust industry

Article in The Edge Malaysia: "Local players not ready for unit trust liberalisation":


"Local unit trust management companies (UTMCs) are not ready for full liberalisation of the local unit trust industry, Permodalan BSN Bhd chief executive officer (CEO) Kamarul Izam Idrus said, adding that they still need more time to prepare themselves. "While we welcome the idea to liberalise the unit trust industry, we feel that it would greatly impact local players who are still struggling to increase their market share. I don’t think local players such as Permodalan BSN and other small UTMCs are ready for the [impending] stiff competition,” he told The Edge Financial Daily. Kamarul cited branding, reputation and fund performance of local fund houses that are yet to be strengthened as reasons."


"Fund performance ...... yet has to be strengthened", to me that can only mean that some of the unit trusts have had a disappointing performance. That is of course bad for people who invested their hard earned money in them. Should fund performance not be of paramount interest, more important than the protection of certain unit trust management companies?

Anyhow, these management companies had a long time to get their act together, and would have certain advantages over their foreign counterparts. They should be much more informed about the local investment scene (where not all is what it appears to be), and should have had ample time to develop marketing channels.

Luckily it does look like the Prime Minister is serious about liberalizing this industry. What is needed is top notch managers and lots of transparency regarding (for instance) performance and sales commissions (I think commissions should never be higher than 2%, preferably even less).

Malaysia has lots of good managers (and the occasional bad one), both in Malaysia and in other countries. In know several good ones in Singapore, but one of the best known managers is Cheah Cheng Hye, about who I wrote in the past.

Bernas: are all minority shareholders really treated fair and equal? (2)

I wrote before about the privatisation exercise of Bernas,

In a new twist to this story, The Malaysian Insider published the following article:

"Story behind Syed Mokhtar’s ‘RM2.25 billion tax-exempt’ Bernas deal revealed, says PKR MP"

In it is again allegedly confirmed that minority shareholders of Bernas are not treated the same:


"In the letter, Syed Mokhtar gave his personal undertaking that he would guarantee the national interests of rice in Malaysia. In the relisting of Bernas, 10% shares of Bernas IPO will be allotted to Putrajaya for the National Farmers Association (Nafas) and the National Fisherman Association (Nekmat). Syed Mokhtar also pledged annual contributions to the welfare programmes of Nafas and Nekmat for five years or until the relisting exercise of Bernas was completed."


And that is simply not allowed, according to the rules.

Will the authorities (Securities Commission and/or Bursa Malaysia) investigate the above and take any action, if appropriate? I guess we have to wait and see, even if action is taken it can often take a very long while.

The shares of Bernas have been removed from the Official List of Bursa Securities with effect from 9.00 a.m., Friday, 18 April 2014.

Focus Malaysia vs Icon Offshore

Icon Offshore issued a quite lengthy rebuttal on the Focus Malaysia article, about which I wrote here.

Icon Offshore also issued a letter of demand to the weekly magazine to retract its story, according to The Sun Daily.

The ball is now in Focus Malaysia's court. Tomorrow a new issue of its magazine will be published, will they counter Icon Offshores rebuttal?

Conflict of interest when regulators sit on company boards

Good article from The Malaysian Insider, see below.

Regulators should not sit on the boards of companies, be they listed or not, be they GLC or not.

Best is if this would be extended after retirement or quitting their job.

From the Hong Kong Civil Service Bureau:


"To maintain the integrity and standing of the Civil Service, it is important that civil servants on final leave and former civil servants should continue to act with good sense and propriety when pursuing post-service outside work as their actions will be seen by the public as a reflection of the culture and character of the Civil Service. They should avoid work which might be construed as being in conflict with their previous duties in the Government, or might bring the Civil Service into disrepute or cause public controversy."


If Malaysia is serious about combatting corruption (I am not convinced because the absence of any "big fish" being caught is painfully clear, I hope I will be proven wrong) then conflict of interest has to be avoided, whenever and wherever possible. It could take an example of Hong Kong, once one of the most corrupt cities in the world, that has significantly cleaned up its act.


"Question: Should regulators be on the board of government-linked companies (GLC)?

Datuk Seri Idris Jala (pic), the minister in charge of transformation unit Pemandu, does not think so and said so at an event yesterday.

The government's GLC Green Book recommends that regulators do not sit on board of GLCs. The reasons are simple: to avoid a conflict of interest and to make sure that there is fairness in decision-making and allocation of resources.

Actually, common sense should dictate that the people tasked with the job of making sure taxpayers funds are used prudently and government policies benefit the public should do so without being influenced by pecuniary or other considerations.

And yet, right across boards of GLCs, officials from various ministries are sitting pretty, and collecting hefty allowances on top of their monthly salaries, raising questions whether they can be seriously expected to function as regulators.

This is evident at Malaysia Airports Holdings Berhad (MAHB) where a couple of senior Transport Ministry officials are board members. They are paid between RM48,000 and just under RM170,000 in directors fees and other emoluments. This is in addition to the salaries they earn as senior Transport Ministry officials.

The problem with this arrangement is what are these individuals from Transport Ministry wearing: that of a regulator or that of a ministry official?

Put it more simply: did these individuals warn the government of the numerous problems at klia2 ranging from cost overruns to shoddy work? Did they raise red flags during MAHB board meetings on klia2 or even warn Prime Minister Najib Razak that more delays were expected, preventing him from making a premature announcement on the budget terminal's opening?

And when they deal with private airlines or deal with the combative Tan Sri Tony Fernandes and his AirAsia Group, are they acting as regulators or a GLC that pays them?

In short, who do they owe their allegiance to? Regulators have to be fair and must always look at the big picture."

Focus Malaysia vs Icon Offshore

Focus Malaysia published a rather negative article about Icon Offshore, a company going for IPO very soon:


"A threat to one’s life, a police report, alleged irregularities and a cover-up all seem the ideal ingredients for an interesting movie script. Only in this case, they are believed to be actual events in the run-up to the listing of Icon Offshore Bhd, an Ekuiti Nasional Bhd-controlled (Ekuinas) company. According to sources, the company, which is scheduled to list its shares on June 25, has had to address these issues in recent months. Its prospectus was launched on May 30.While these issues are not expected to derail or delay the offshore support vessel OSV) provider’s listing debut, it does raise questions that all was not well in the company and whether these issues have since been addressed. Based on documents obtained by FocusM, a police report was lodged on Jan 15 by a Petronas Carigali Sdn Bhd senior official over threats to his life following his alleged discovery of several irregularities in Icon Offshore."


Icon Offshore announced today:

We have to wait how this story will evolve.

Regarding the IPO, I don't have much of an opinion, it looks rather pricey to me both versus the historic PE and its NTA. The "hot" story of Oil & Gas (and PETRONAS' future plans) seems to me to be overdone. All industry players keep on increasing their fleet (Bumi Armada just announced a huge rights issue), surely that can't go on for ever, and at one day might lead to increased competition and margin depression. The numbers from POSH (in the same industry as Icon Offshore) showed that its utilisation rates are dropping, that seems quite worrisome to me for the whole industry.

Director interlocks and conflicts of interest

Excellent article by Eugene Kang in the Business Times (Singapore), even more important in the Malaysian business context, where situations like conflict of interest, related party transactions, holding shares under trustees, mixing politics and business etc. is all very common. Some snippets:


"Interlocks between firms in the same industry are referred to as horizontal interlocks. From a governance perspective, directors are required to discharge their duties and responsibilities as fiduciaries of their firms. However, an interlock between rival firms can create serious conflicts of interest if it prevents an interlocking director from exercising his objective judgement and discharging his fiduciary duties to both firms. In certain jurisdictions, horizontal interlocks attract anti-trust scrutiny. For instance, the Clayton Antitrust Act in the US currently prohibits, with certain exceptions, one person from serving as a director of two rival firms."


One prime example in the Malaysian context was the joining of forces between AirAsia and MAS and the huge conflict of interest that occurred, about which I wrote here and here.


"Vertical interlocks are formed between firms in a buyer-seller relationship. A director that represents a buyer owes a duty to secure the lowest possible price from the seller. Conversely, a director that represents a seller owes a duty to secure the highest possible price from the buyer. When the same director represents both firms, it is easy to see how a conflict of interest arises."


The Tune Group is a prime example of a network of both horizontal and vertical interlocks, owning a travel agency through which one can book an hotel room from Tune Hotels, can book an AirAsia X ticket, which is branded by and using a long list of other services from AirAsia (which itself has other daughter companies in Thailand and Indonesia), using Tune Insurance as the insurance company, etc.

One example how things can go horribly wrong is Metronic Global, about which I wrote several articles. Metronic  Global was basically a sub-contractor for a related party and had a huge amount of receivables from that party, which it still hasn't been able to receive after many years. Worrisome is that the current management hardly seems to do anything about it, although the amount of money involved is huge (more than RM 40 million). The investigative accountant report highlighted some very serious issues.

A similar situation of vertical interlock arises at Ranhill Energy, about which I wrote here.


The authorities (Securities Commission and Bursa Malaysia) should play a much more active role in these kind of cases. Conflict of interest was one of the primary reasons behind the huge destruction of capital in the Asian Crisis in 1997/98.

SGX advertizes company featured on the MAS Investor Alert list (3)

Yesterday I wrote about the investment schemes that are being sold by certain marketing agencies, both in Singapore and Malaysia. Coincidentally, Focus Malaysia wrote on the same day the following:


"The flyer looks harmless enough. In simple graphics, simple terms and bad grammar, the reader is told he or she will get a return of 3% every three months on fixed payment dates, from "proven track records". That is 3% per quarter, or 12% a year. All one has to do is invest a minimum of RM 10,000 to buy crude oil.

It looks simple enough but how does a person like me, who isn't a commodities trader, buy crude oil?

The information on the flyer tells me the investment plan has been carried out, with success, in another country. Apparently, this scheme has "successfully raised over Euro 300 mil" through its "11,000-strong client base in Germany, and has distributed over Euro 37 mil to investors".

How the investment plan works is, I will be buying physical crude oil at a 3% quarterly discount from an established Canadian oil and gas (O&G) company, from its existing producing oilfields. The company will then sell the oil to its clients at the "normal" rate, which means an automatic 3% in my pocket.

A quick Google search reveals the Canadian company is under investigation in Germany for a similar investment scheme. According to an article in the German BusinessWeek, the company running the crude oil investment scheme denied a request for financial statements and was not forthcoming in revealing its shareholders, which raised questions. It is also questionable that the company aims at investors outside Canada instead of where its home base is.

If this company is under investigation in another country, why is it being allowed to run its investment scheme in Malaysia? Do we have loopholes in our legal framework which can be easily manipulated by those looking for a quick buck?

The story is old. Malaysians have seen it time and again. We have seen schemes in every possible form - plantations, gold, property, offshore investment. We all know someone who has lost money in similar schemes.

For all we know, the crude oil investment plan could be legitimate. But that is exactly the issue - we don't know. And we will not know - until it is too late. What is being done to protect investors from being ripped off?"


I am pretty sure the writer, Farah Saad, refers to the crude oil project as detailed here on Infinity Treasures website, which also goes by the name "Proven Oil Canada".

Pity that Focus Malaysia doesn't give the details, since readers should be informed. That is exactly one of the problems in Malaysia, a press who is (often) not sharp enough, and doesn't mention the alleged perpetrators, enabling them to flourish. "Name them and shame them" works wonders, but of course good enforcement is also needed, something that is problematic in the Malaysian context.

On the "Lowyat" forum more information can be found here.

It seems the investment started in Germany, and, according to the Wirtschafts Woche ("Economy Week") magazine, the scheme has run into severe problems. Unfortunately for the readers (and fortunately for the promoters in Malaysia and Singapore), these articles are all in German. Although my German knowledge is slightly "rusty", I will try to translate (with the help of Google) some of their hard hitting findings.

Die schmierigen Geschäfte von Proven Oil (The sleazy business of Proven Oil)
Die abenteuerlichen Argumente der Ölbarone (The adventurous arguments of the oil barons)
Update: Schräge PR-Kampagne von Proven Oil (Update: Weird PR campaign of Proven Oil)
Das Abkassiermodell Proven Oil (the business model of Proven Oil)
Proven Oil treibt Anleger in hoch riskantes Abkassiermodell (Proven Oil drives investors in high-risk business model)
Ölbarone in Not (Oil Barons in problems)

Proven Oil sued the magazine (as mentioned in the fourth link), but only a few sentences had to be amended, the huge majority of the claims was rejected. Proven Oil had to pay 80% of the cost of the court case, Wirtschafts Woche only 20%. With that Proven Oil had basically scored an own goal, since every one who would still sell the investment product in Germany should by now know what they were selling.

Some snippets:

"Most of Berlin's oil funds stopped the payouts to their investors."

"If you look closely, the investment idea turns out to be robbers gun: The self-presentation of Conserve Oil is outrageous, in the balance sheets it crunches. And who immerses himself in the network of companies of the Canadian oil barons will come up with the name of Jürgen Hanne. He became known in Germany as he aimed big before the year 2000 with real estate funds for nursing homes. "Dr. Hanne funds" were a disaster for investors. Hanne was convicted of fraud and fled on parole to Canada."

"Prior to his real estate career in East Germany Hanne was already in the oil business. In a similar way as today's Proven Oil tries to catch investors: promising high returns, suggesting guarantees, collecting money and first cashing in himself. From the money invested around 20 per cent goes to "additional costs"."

"In fact, the management should know more about olive oil than normal oil - both Conserve Oil chief Crombie and his vice Yoshiki Nakamura come from the hotel industry.

Questions about their qualifications were not answered"

"What happens to their money, investors Proven Oil can barely comprehend. Their German fund companies do not invest directly in Canada, according to the scanty information in the annual reports. More revealing would be the balance of the property companies in Canada, in which the fund companies participate. Their balance sheets do not get sent to the investors."


The below scheme shows how Hanne, his sons (Sebastian Hanne and Alexander Gramatzki), his trusted lieutenant (Jurgen Hainzl) and wife (Monika Galba) are all part of the not transparent organisation scheme:

The below new property scheme from Bridge Cap shows how Hanne and David Crowbie (both from Conserve Oil Corporation and the Proven Oil project) are interconnected with the Helwerda's from Sproule, the company that was supposed to independently verify the oil claims of Proven Oil. That independence looks now highly questionable.

In my previous blog article it seemed that "The Exit Scheme" has run into problems and has stopped payments in Singapore.

According to the above, the "Proven Oil Canada" scheme has similar issues and most of the funds have stopped payments in Germany.

Bridge Gap wants to collect another 20 Million dollar for a hotel project in Canada. Any takers?

SGX advertizes company featured on the MAS Investor Alert list (2)

I wrote before about Infinity Treasures and the fact that they had advertised on SGX's website, through the means of Google AdSense. I wrote:


"Does the SGX really need the money of AdSense that they allow on their website targeted advertisements selected by Google (not by SGX), which might include advertisements for websites that are on the Investor Alert List of the MAS?"


I am pretty sure some people within SGX are reading this blog, but SGX has not changed anything at all, they still feature Google AdSense advertisements which content they don't control.

In the mean time, it seems that one of the schemes promoted by Infinity Treasures has run into problems. The Straits Times published an article "US scheme late in paying $64.8m to Singapore Investors" (the article is unfortunately behind a pay wall) written by Tee Zhuo. Some snippets:


Angry investors here are demanding answers from the operators of a United States investment scheme. More than 200 people here could be affected, with $64.8 million yet to be paid back by the scheme, called The Exit Scheme.

One investor, Mr Amos Lee, 42, has lodged a report with the Commercial Affairs Department.

The US operators admit there are problems, but say they hope to return money to investors.

Infinity Treasures, the marketing agent here, is on the Monetary Authority of Singapore (MAS) Investor Alert List. The MAS website says the list shows "unregulated persons who... may have been wrongly perceived as being licensed or authorised by MAS".

Returns have been fully paid from June to October 2012, but those who put in money from November 2012 have faced problems. Some have yet to get payments due six months ago.


I wrote before:

"High returns are always accompanied by high risk, but there is no mentioning about risks.  As a personal choice, I avoid these kind of investments like the plague, these investments are sold (not bought), often the hard way."


I hope that the investors get their money back, but I do see great worries when I read the story in the Straits Times. Investors really should have done their homework first, but I pity those that made their investment based on the fact that it was advertised on the SGX website.

Compliments to Bursa, they have chosen not to use Google AdSense to monetize the traffic to their website.

Regarding Infinity Treasures, they call themselves on their website  "a premier asset-based investment firm". That is playing with words, they are simply not licensed by MAS. They are not a licensed investment firm nor an asset manager, they are just a marketing agent. They don't declare how much commission they make on their website, but I am pretty sure it will be huge.

On their Media-tab no news about the Straits Times article yet. And their track record leaves out "The Exit Scheme". All not really a surprise.

More information on the issues at the "Hardwarezone" forum, which also features a newspaper article in Chinese.

Eratat: another S-chip bites the dust (3)

I wrote about Eratat Lifestyle Ltd. before, here and here.

Unfortunately, things have progressed as expected. The company made a new announcement, with only bad news in it.

Instead of RMB 577 million the company only had a tiny fraction of that amount in the bank. And to make things worse, it even had RMB 34 million borrowings and RMB 30 million trade bills.

As has been the case in several companies in China, the cash in the bank is simply not there. Normal bank statements, online statements, confirmations by the local bank manager of the opposite, they were all simply useless.

Well, at least it explains why the company had to borrow money.

This would be extremely frustrating for the minority shareholders.

When it rains it pours.

Would it be an idea to have a central fund, in which all listed companies contribute a small amount of money on a yearly basis, which could be used for these kind of cases? That at least the disadvantaged shareholders know what actually had happened, and to enable some sort of justice.