Thursday, 25 December 2014

"all the IPOs this year were making money for investors", really? (2)

According to an article in The Edge (December 22, 2014) named "A dreary year for listings" 14 companies IPO-ed in 2014 on Bursa.

Excluding Only World Group (which just listed) the results are:
  • 3 are in positive area
  • 2 have the same price as the IPO
  • 8 have gone down, some considerably

That is not exactly a good score. Bearish sentiment on Bursa and in particular in the Oil & Gas industry have played an important role.

Icon Offshore was the worst performer, I wrote some cautious words about the company before.

Last year I wrote about an article in The Star, where the following quote was made:

"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."

That all IPO's made money in 2013 was simply not true.

And some of those listed companies did rather bad in 2014, for instance China Automobile Parts, AirAsia X, Sona Petroleum, Caring Pharmacy Group and UMW Oil & Gas.

But the advice to "ride the wave of Malaysia's IPO market" in 2014 also seems dubious, with hindsight, as the above results show.

Five years of booming share market have led to too much financial engineering, too much hot air being injected in soon to be listed companies, too much focus on the Oil & Gas industry.

Not surprisingly, things have come down to more realistic levels.

Wishing all readers Happy Holidays.

Tuesday, 23 December 2014

Hong Kong SFC takes action against short seller Citron

From the Financial Times, some snippets:

Citron Research has become the first shortseller to face action from Hong Kong’s watchdog, which alleges the California-based group knowingly made “false and misleading” claims about Evergrande, the Chinese developer.

Hong Kong’s Securities and Futures Commission on Monday started market misconduct tribunal proceedings against Andrew Left, the head of Citron, for claims made in June 2012 that Evergrande was insolvent and had consistently presented false information.

Shortsellers aim to profit from price falls by borrowing shares they do not own in the expectation that they will be able to buy them back more cheaply. Mr Left made HK$1.7m ($219,251) in profit from selling short 4.1m Evergrande shares before he made his claims, the SFC said.

Mr Left declined to comment.

The Hong Kong action comes as shortsellers fall under increasing scrutiny from Asia’s regulators, who have variously probed the veracity of their claims and their methods. This year, Taiwanese regulators pursued Glaucus Research, another California-based shortseller, while India’s watchdog temporarily banned a small Hong Kong hedge fund for what it said was insider trading.

In June 2012 Evergrande plunged as much as 20 per cent on the day Citron released a 57-page report on the group, which is one of China’s largest developers and a household name for its ownership of the Guangzhou Evergrande Football Club.

Evergrande, which is listed in Hong Kong, had a market capitalisation of about $8.6bn when Citron’s report was published online. It closed the day worth $7.6bn.

Citron is one of the better known of a group of China-focused short-sellers that emerged about five years ago and whose biggest scalp came in 2011 with the collapse of Sino-Forest, a $4bn forestry group, after Muddy Waters, another shortseller, questioned its veracity.

But shortsellers have enjoyed patchier success in recent years as companies have fought back and regulators stepped up their scrutiny. Evergrande was one of the first to issue a robust defence, blasting Citron’s claims and using the sort of colourful language employed by the shorts themselves.

David Webb commented on his website:

"This should be interesting. The SFC will need to show that Andrew Left either knew that his allegations were false or was reckless or negligent as to whether they were, in which case Section 277 of the SFO bites."

Monday, 22 December 2014

Delloyd's hidden gems to be revalued? (3)

I wrote before about Delloyd, here and here.

I hoped that the assets of Delloyd, especially the Sungai Rambai Estate and the estates in Indonesia would be revalued. That has indeed happened.

I also wrote:

"The independent adviser for this corporate exercise is Affin Investment Bank.  I would love to see them write something along the lines: "we estimate that the RNAV per share is around RM 15, therefore we find the proposed price not fair and not reasonable". Will they write that? Although independent advice has been improved significantly, I don't think that will happen."

Indeed, that has not happened.

Affin came up with a SOPV (Sum Of Parts Valuation) of RM 7.60. Since the offer price of RM 5.15 is a 32% discount to that valuation, the offer is deemed to be "not fair".

However, Affine still thinks the offer is "reasonable", hence their verdict: "not fair but reasonable, accept the offer". The rather ambiguous judgement that is quite common these days for independent advisers reporting on deals related to Bursa listed companies.

The most important part of the report is probably this:

Are both assets indeed worth only about RM 320M? I have read much higher valuations than that.

The problem that I have in general with many of the privatisation exercises on Bursa is:
  • Why are so many offers "not fair", is it not the duty of the Board of Directors to try to get an offer that is "fair" to all shareholders?
  • Why is there almost never a competing offer? In this case, Delloyd could have tried to sell its estates individually, to check if there is an interest in them, and if so, at what price. If the price is indeed good, then it could propose to sell the asset and distribute the proceeds to all shareholders. Has the Board of Directors actively tried to find buyers for its assets?

Thursday, 18 December 2014

Masterskill: another deal aborted

I have written many times about Masterskill, I am afraid not often in a positive way.

The company recently aborted its proposed sale of its properties. Below information is from MSWG's newsletter, December 18, 2014:

According to the announcement released by MEGB on 16 December 2014, the independent valuer namely Cheston International (KL) Sdn Bhd, had ascribed an indicative market value of RM110.4 million for Masterskill (M) Sdn Bhd’s operating property assets in Cheras, Kota Kinabalu, Kuching and Pasir Gudang (“Properties 1”), which is significantly higher than the initial indicative sale consideration of RM75 million offered by Mr. Siva Kumar A/L M. Jeyapalan.

Following the above, the parties were unable to mutually agree on a revised sale consideration for the Properties 1. As such, the Board of MEGB had resolved to abort the proposed disposals and proposed ESOS and will consider other alternatives to implement its asset light strategy and raise funds for the company. The Board will make the relevant announcements in due course.

Again another corporate exercise of restructuring to revive the business of MEGB fell off eventually with a significantly higher indicative market value by the independent valuer. Shareholders are growing impatient and disappointed to go through multiple corporate proposals and more so they were also astounded by significant fluctuations in the market value of their shares upon the abortion of multiple proposals. The negotiation price of RM75 million, representing a deep discount of 32% to the indicative market valuation would raise the question on how it was possible that the Company could initially have considered such a low indicative sale consideration of RM75 million which was so much below the indicative market valuation although the offer was subjected to independent valuation and shareholders’ approval.

It is even weirder if we go back to the 3rd quarter result of 2013, the company posted a loss of RM 104 Million, and the (rather short) reason it gave was (emphasis mine):

The higher loss before tax was largely due to provision for impairment loss on goodwill and certain of the Group’s property, plant and equipment totaling RM88.2 million.

In other words, it had just written down its property by a large amount. And Siva Kumar offered to buy the property assets at this low valuation, "willing buyer, willing seller". The independent valuer, Cheston International, seems to think the deal is not that great for the other shareholders.

Sunday, 14 December 2014

Some great links

"122 Things Everyone Should Know About Investing and the Economy"

Written by Morgan Housel, a treasure trove full with wisdom about investing. A few of my favourites, which are probably also relevant in the Malaysian share market:

  • Saying "I'll be greedy when others are fearful" is easier than actually doing it.
  • When most people say they want to be a millionaire, what they really mean is "I want to spend $1 million," which is literally the opposite of being a millionaire.
  • My main life lesson from investing: self-interest is the most powerful force on earth, and can get people to embrace and defend almost anything.
  • Buy and hold only works if you do both when markets crash. It's much easier to both buy and hold when markets are rising.
  • 72% of mutual funds benchmarked to the S&P 500 underperformed the index over a 20-year period ending in 2010.
  • The phrase "double-dip recession" was mentioned 10.8 million times in 2010 and 2011, according to Google. It never came. There were virtually no mentions of "financial collapse" in 2006 and 2007. It did come.
  • Our memories of financial history seem to extend about a decade back. "Time heals all wounds," the saying goes. It also erases many important lessons.
  • The most boring companies -- toothpaste, food, bolts -- can make some of the best long-term investments. The most innovative, some of the worst.
  • There were 272 automobile companies in 1909. Through consolidation and failure, three emerged on top, two of which went bankrupt. Spotting a promising trend and a winning investment are two different things.
  • Try to learn as many investing mistakes as possible vicariously through others. Other people have made every mistake in the book. You can learn more from studying the investing failures than the investing greats.
  • If you roll dice, you know that the odds are one in six that the dice will come up on a particular side. So you can calculate the risk. But, in the stock market, such computations are bull -- you don't even know how many sides the dice have!
  • Most people still haven't figured out that brokers don't have their best interest at heart.
  • Twenty-five hedge fund managers took home $21.2 billion in 2013 for delivering an average performance of 9.1%, versus the 32.4% you could have made in an index fund. It's a great business to work in -- not so much to invest in.
  • You can control your portfolio allocation, your own education, who you listen to, what you read, what evidence you pay attention to, and how you respond to certain events. You cannot control what the Fed does, laws Congress sets, the next jobs report, or whether a company will beat earnings estimates. Focus on the former; try to ignore the latter.
  • Companies that focus on their stock price will eventually lose their customers. Companies that focus on their customers will eventually boost their stock price. This is simple, but forgotten by countless managers.
  • Several academic studies have shown that those who trade the most earn the lowest returns. Remember Pascal's wisdom: "All man's miseries derive from not being able to sit in a quiet room alone."
  • The best company in the world run by the smartest management can be a terrible investment if purchased at the wrong price.
  • No investment points are awarded for difficulty or complexity. Simple strategies can lead to outstanding returns.
  • No investment points are awarded for difficulty or complexity. Simple strategies can lead to outstanding returns.

"The PMARCA Guide to Startups"

A series of articles about starting a tech start-up. My guess is that most readers of this blog are more interested in general investing. Start-up tech companies are special, in that they are supposed to scale very quickly, enabled by new technology, which also serves as a barrier to entry to (future) competitors.

There are many gems of wisdom which are also relevant for normal business. For instance a list of the risks involved:
  • Founder risk -- does the startup have the right founding team? A common founding team might include a great technologist, plus someone who can run the company, at least to start. Is the technologist really all that? Is the business person capable of running the company? Is the business person missing from the team altogether? Is it a business person or business people with no technologist, and therefore virtually unfundable?
  • Market risk -- is there a market for the product (using the term product and service interchangeably)? Will anyone want it? Will they pay for it? How much will they pay? How do we know?
  • Competition risk -- are there too many other startups already doing this? Is this startup sufficiently differentiated from the other startups, and also differentiated from any large incumbents?
  • Timing risk -- is it too early? Is it too late?
  • Financing risk -- after we invest in this round, how many additional rounds of financing will be required for the company to become profitable, and what will the dollar total be? How certain are we about these estimates? How do we know?
  • Marketing risk -- will this startup be able to cut through the noise? How much will marketing cost? Do the economics of customer acquisition -- the cost to acquire a customer, and the revenue that customer will generate -- work?
  • Distribution risk -- does this startup need certain distribution partners to succeed? Will it be able to get them? How? (For example, this is a common problem with mobile startups that need deals with major mobile carriers to succeed.)
  • Technology risk -- can the product be built? Does it involve rocket science -- or an equivalent, like artificial intelligence or natural language processing? Are there fundamental breakthroughs that need to happen? If so, how certain are we that they will happen, or that this team will be able to make them?
  • Product risk -- even assuming the product can in theory be built, can this team build it?
  • Hiring risk -- what positions does the startup need to hire for in order to execute its plan? E.g. a startup planning to build a high-scale web service will need a VP of Operations -- will the founding team be able to hire a good one?
  • Location risk -- where is the startup located? Can it hire the right talent in that location? And will I as the VC need to drive more than 20 minutes in my Mercedes SLR McLaren to get there?

"Zero to One: Notes on Startups, or How to Build the Future"

Peter Thiel is a intelligent and outspoken (sometimes controversial) person. A very clear book full with interesting theories, many of them quite general and not only relevant for start-ups. One of the best business books I have ever read.

Friday, 12 December 2014

Insider trading effectively legalized in US?

Yves Smith wrote "Bill Black: Second Circuit Decision Effectively Legalizes Insider Trading", a very worrisome article. Some snippets:

A U.S. appeals court dealt federal prosecutors a blow in their crackdown on insider trading on Wall Street on Wednesday, overturning the convictions of two former hedge fund managers charged with making illegal trades in technology stocks.

The 2nd U.S. Circuit Court of Appeals in New York said prosecutors presented insufficient evidence to convict Todd Newman, a former portfolio manager at Diamondback Capital Management, and Anthony Chiasson, co-founder of Level Global Investors.

The court held that defendants can only be convicted of insider trading if the person trading on confidential information knew the original tipper disclosed it in exchange for a personal benefit.

What does this mean in practical terms? The court has just provided a very-easy-to-satisfy roadmap for engaging in insider trading legally. Don’t give the person who gave you the choice tidbit any explicit payoff. You can give him all sorts of buttering up before hand (fancy meals, hot women, illicit substances, box seats, whatever you think will induce cooperation and show your seriousness and ability to pay) and just engage in vague winks and nods. As long as you don’t pay the tipster for the trade in any crass or traceable way (and no communications that point to an explicit payoff), you are good to go. Compensation down the road, in hard dollar or soft forms is perfectly kosher.

Needless to say, the implications are terrible. Thanks to high frequency trading, way too cozy a relationship between the Fed and its preferred banks, and years of suspicious trading patterns (markets too consistently not breaching technically significant price levels, with the trading looking decidedly not organic) has sapped the faith of retail and even smaller institutional investors in the integrity of markets. The Second Circuit has just announced open season on pervasive misuse of inside information.

Wall Street’s court of appeals (the Second Circuit) has just issued an opinion not simply overturning guilty verdicts but making it impossible to retry the elite Wall Street defendants that grew wealthy through trading on insider information. Indeed, the opinion reads like a roadmap (or a script) that every corrupt Wall Street elite can follow to create a cynical system of cutouts (ala SAC) that will allow the most senior elites to profit by trading on insider information as a matter of routine with total impunity. The Second Circuit decision makes any moderately sophisticated insider trading scheme that uses cutouts to protect the elite traders a perfect crime. It is a perfect crime because (1) it is guaranteed to make the elite traders who trades on the basis of what he knows is secret, insider information wealthy absent successful prosecutions and (2) using the Second Circuit’s decision as a fraud roadmap, an elite trader can arrange the scheme with total impunity from the criminal laws. The Second Circuit ruling appears to make the financial version of “don’t ask; don’t tell” a complete defense to insider trading prosecutions. The Second Circuit does not simply make it harder to prosecute – they make it impossible to prosecute sophisticated insider fraud schemes in which the elites use junior cutouts to create (totally implausible) deniability.

In Malaysia, recently regulatory activities regarding insider trading has increased. However, progress is very slow, a recent announcement by the SC involved an alleged insider trading case which happened more than 7 years ago.

Thursday, 11 December 2014

Opportunities in 3 SPACs? (2)

I have received very helpful comments from "Malaysia Stock Talk", who pointed at the following paragraph from the IPO brochure of CLIQ:

So for people who plan to vote against any qualifying acquisition, they will indeed get their cash pro rata to their shares.

I guess there are three categories of investors:

  • Category A who invests now, to gain an almost risk-free return, voting against any acquisition;
  • Category B who supports the management, who believes in the company and who will vote in favour of acquisitions; this could include investors who bought their shares at a higher price and might incur a loss if they vote against the acquisition;
  • Category C of people who haven't yet made up their mind.

An acquisition will go through:

Approval might be an issue if Category A becomes larger and larger. And that chance increases if the price stays low, and investors buy shares to profit from the arbitrage.
It also makes planning by the management difficult, not knowing how many people might vote against the acquisition(s).

If there is no acquisition within the approved time period, then the SPAC will dissolve and return the remaining money. In that case a lot of work has been done for nothing, and quite a few expenses have been incurred.

And warrant holders might be the proud owners of a worthless piece of paper.

Opportunities in 3 SPACs?

Regular readers of this blog will know that I am not exactly a fan of SPACs, especially in the Malaysian context (previous postings here, here and here).

To me it just doesn't make sense to list an empty company, it is already difficult enough for investors to make sense of companies that IPO with a real track record (as a rule of thumb, I insist that companies are listed for at least two years to become "investable", at least to me).

I saw the interest in especially energy SPACs as a sign of a market that has become much too speculative.

The Star published today an article on its website: "HLIB: Opportunities for investors to lock in long-term returns in three SPACs". Some snippets:

The three listed special-purpose acquisition companies (SPACs) that have yet to make their qualifying acquisition (QA) are trading below their “intrinsic cash values” and hence offer a unique opportunity to investors, according to Hong Leong Investment Bank Research.

“Reach Energy Bhd, Sona Petroleum Bhd and CLIQ Energy Bhd are currently trading at a 13% to 16% discount to their respective intrinsic cash values,” said analyst Jason Tan in a note.

He added that the current discount provides a “unique opportunity” to lock in long-term returns.

First of all, the word "unique" sounds overdone for me. There are many companies trading at a discount to its NAV, sometimes even to its cash holding, in other cases having assets that can be disposed of in a short period.

Secondly, the fact that these companies have not yet made an acquisition is most likely a blessing in disguise, with the price of oil having fallen so much lately.

In a worst-case scenario, investors holding to maturity could get an attractive return of 17% to 29%, he said.

Worst case scenario? Surely the analyst must be joking. I can imagine many worse scenario's, for instance the company making an acquisition that doesn't work out, or an investor having to sell their shares with the share being lower then now. The worst case of each share of a listed company is simply that its price goes to zero, SPACs are no exception to that.

.... when Hibiscus announced its QA, the discount was zerorised and thereafter the stock began trading at a premium towards the completion of the deal.

“This underpins our belief that the intrinsic cash value serves as a base return with an upside option from a value accretive QA,” Tan said.

Few comments:
  • Building a theory based on one single case (Hibiscus) is a tricky thing to do
  • Hibiscus share price did indeed take off after the acquisition, but it has also sharply decreased in price lately, from above RM 2 to currently below RM 1 (although still higher than its IPO price)
  • Hibiscus is still showing an operational loss, the only profit it has shown was a "paper" profit based on a revaluation exercise

I continue to be highly sceptical of SPACs, despite certain quarters continuing to write about success stories in other countries (which I strongly doubt). Trading in shares and warrants of SPACs on Bursa appears to me highly speculative.

A new SPAC will be introduced, Asian Healthcare Group led by former banker Yvonne Chia. It will be interesting to follow how that company will fare.

Monday, 8 December 2014

Buying on margin is a bad idea, including for employees (2)

First of all, to add to my previous story, The CEO of Bumi Armada has resigned per January 1st, 2015 due to "Family Reasons".

One broker (UBS) commented:

"UBS downgraded its medium term and normalized outlook for oil where its Brent forecast for Q414E/2015E is now at US$77.50/US$69.75 with some recovery to US$80/US$85/US$90 in 2016E/2017E/2018E. In the next 1 year, UBS' forecast is even lower than the forward prices. While we believe that its medium term cash flow is secured by contracts already won, FPSOs are typically used in deeper waters and marginal fields. Hence, in the current environment of volatile oil prices, oil companies could take longer to evaluate projects and award contracts.

Meanwhile, the market could perceive CEO Hassan Basma's resignation on Friday for family reasons (and also the sale of his 4.5m shares in the company since end-Nov) as lack of leadership in the company until the issue is addressed by the board and / or new CEO is appointed."

The company offered pre-IPO a lot of shares (probably at an interesting price) and a lot of options to the CEO.

When the price of oil tanked the share price went down from above RM 2.00 (corrected for the recent rights issue) to the current RM 1.03.

The CEO's shareholding was sold due to margin requirements, he still has "an interest in 50,624,803 unissued shares of Bumi Armada Berhad arising from outstanding options granted to him pursuant to the Company's Employee Share Option Scheme". These options are most likely out of the money and not worth much at the current share price of Bumi Armada.

In other words, although the CEO might have managed the company well, his financial results have been hugely downgraded due to circumstances beyond his control, the price of oil.

It is quite astonishing why the company choose to reward the CEO the way it did. Instead, the company could have given the CEO certain long time targets that are in reach of his control, with an adequate financial reward for reaching them.

And I am afraid the CEO might not be the only one in this predicament, other key persons in the management of Bumi Armada might have received similar structures.

For the minority shareholders, they must hope a good CEO can be found soon.

Friday, 5 December 2014

Buying on margin is a bad idea, including for employees

I wrote before:

"Bumi Armada is especially painful since the stock is not only trading way below its IPO price, but also below the price of its recent rights issue. Also, there seems to be persistent insider selling, even recently at these lower prices."

Today Bumi Armada announced:

"The Disposals were undertaken due to Margin calls on loan facilities taken by Mr. Hassan Assad Basma to purchase the said shares."

At least that makes clear why the CEO of Bumi Armada was selling shares at such a low price (RM 1.02, only a fraction of the IPO price, corrected for the recent rights issue).

But surely the management of any listed company should know that buying shares on margin is a hazardous thing to do?

Interestingly enough, I wrote about this same issue before, that time on Astro, from the same stable of companies:

"Last week Astro had a town hall meeting with their staff to talk about the share price fall and it is really up to the company to handle the situation because no organisation will like to have a group of disgruntled employees. There may be the pressure of margin calls for those who had taken financing to buy their allotment of shares. There might be employees who might not have the ability to hold on to their shares."

I am quite astonished about this all, it almost looks like certain employees are encouraged to buy shares of their company on margin. But that sounds like horrible advice, surely that can't be right. What will the mood of the employees be when the shares tank and they are forced to sell their shares, as now has happened?

I think the authorities should look into this issue.

MOL Global: class-action suits are filed

Four US law firms have filed class action suits against MOL Global, according to this article in The Star.

One complaint can be found here, the most important paragraphs:

Another complaint can be found here:

The Complaint alleges that defendants made false and/or misleading statements and/or failed to disclose to MOL Global investors that: (1) MOL Global was overstating the revenue and profit derived from the Company’s business and operations; (2) the Company’s  actual business model could not sustain the growth trends described in the IPO offering documents; (3) MOL Global would not be able to report its third quarter 2014 financial results on November 21, 2014, as previously stated; and (4), as a result of the foregoing, the Company’s financial statements were materially false and misleading at all relevant times.

I guess we need to wait for more specific information how things will unfold.

I am not a lawyer, although a big fan of TV-series like "Suits" and "Boston Legal". Are we going to see Harvey Specter and Alan Shore cross examining Vincent Tan and Ganesh Kumar Bangah?

MOL Global is currently trading at USD 2.85, 77% down from its IPO price.

Wednesday, 3 December 2014

Fund managers underweight Malaysia

Research from JP Morgan shows that Emerging Market (EM) fund managers have a large underweight allocation for Malaysia. In a survey of key EM managers, only 2 were overweight versus 29 underweight. The resulting score of -27 being the lowest of all major EM countries (some small countries like Qatar having an even worse score).

From the picture on the right can be deducted that the underweight position for Malaysia has been steadily increased from 2008 onwards.

What could be the reasons for them being underweight? Possibly:
  • Not very interested in the GLC's (Government Linked Companies)
  • Low Daily Turnover on many counters, too low for large fund managers
  • Fund managers still remembering the Asian Financial Crisis

I personally have a feeling that trading appears (sometimes) artificial, with large-cap counters (GLCs) being supported by certain (government linked) funds (GLFs).

Malaysia's weight in the index of EM countries has also substantially decreased, once one of the darlings of EM countries, its weightage is now only 3.9%.

Anyhow, not all is lost, Malaysia still might be a good hunting ground for value investors, but then more towards the small and medium cap stocks.

Tuesday, 2 December 2014

Good articles (2)

When a prospectus becomes a doorstop (KiniBiz)

Recently, an 800-page prospectus found its way to tiger as well. Yes, 800 pages! Let that sink in for a moment. Do you feel the weight of 800 pages on your investing shoulders yet? Yes? Moving on.

In the spirit that the prospectus is similar to a scientific report, Tiger proposes a form of abstract, something short that covers everything the prospectus would cover, but without going into too much detail.

Maybe the prospectus could include an executive summary, maybe about 10 pages, 15 at most? Why not add forecasts in the executive summary, like the old times? With forecasts alongside the plan the company has in place for the proceeds raised from the listing, prospective investors can get a clearer view of what the company is offering, and in turn may be a better sell for the company.

Transparency, a plan, and recommendations from a few trusted local banks? That sounds like a recipe for a successful fund-raising to Tiger.

At the same time, the shorter (and lighter!) document would definitely be more palatable and more easily digested than 800 pages. By simplifying the document, companies are given the opportunity to present themselves to a barely tapped market of investors, due to the ease of reading of the summary.

Tycoons see their O&G investment value cut by almost half

With the oil and gas (O&G) sector being the hardest hit in the current market rout, tycoons who own significant stakes in these companies have seen a huge loss in their net worth.

These tycoons had collectively had their shareholding in these companies valued at some RM15.89bil when O&G stocks were trading at their highest prices. The fall in global crude oil prices and the plunge in the value of O&G stocks on Bursa Malaysia saw the value of their shareholding cut by almost half to some RM7.86bil yesterday.

What the article doesn't mention is that most of these tycoons have bought the companies at a much cheaper price and are thus still sitting on a handsome profit.

Quite different from the minority investors who bought these stocks recently (or at overpriced IPO prices) and are feeling the losses.

Bumi Armada is especially painful since the stock is not only trading way below its IPO price, but also below the price of its recent rights issue. Also, there seems to be persistent insider selling, even recently at these lower prices.

Somewhere in the (may be not so distant) future there must be a moment where it makes sense to start dabbling in these stocks. For the time being, catching a falling knife is not always the best thing to do.

Monday, 1 December 2014

MOL Global's share price crashes 54% (3)

MOL Global just announced its results for the third quarter:

  • Consolidated revenue increased by 5.6% to MYR47.7 million (US$14.5 million) from MYR45.2 million in the corresponding period of 2013.
  • Profit attributable to shareholders of MOL Global Inc. decreased 61.5% to MYR2.4 million (US$0.7 million) in the third quarter of 2014 from MYR6.3 million in the corresponding period of 2013.
  • During the course of the Company's review of its financial results for the third quarter of 2014, the Company's auditor discovered that its Vietnamese subsidiary, Nganluong Joint Stock Company ("Nganluong"), which was acquired by the Company in March 2013, reported revenue from its payment business on a gross basis, and accounted for the corresponding fees payable to merchants being included in direct cost and other ancillary expenses. However, the Company's accounting policy is to account for such transactions on a net basis because the Company acts as an agent with respect to these revenue arrangements, such that the corresponding fees payable to merchants should have been netted out of revenue and not included in direct cost and other ancillary expenses.
  • Two putative class action complaints have been filed against the Company and certain of its officers and directors alleging certain untrue statements and omissions in its registration statement and prospectus for the Company's initial public offering and seeking unspecified damages and other relief.

Sounds not good.

iCapital: questions regarding adjourned AGM and expenses (4)

iCapital announced: