Sunday, 30 August 2015

Scan files legal action against Bursa Malaysia (3)

Scan Associates announced:

"..... that the KL High Court Suit No. 22NCC-130-05/2015 dated 10 May 2015 between SCAN (“Plaintiff”) and Bursa Malaysia Securities Berhad (“Defendant” or “Bursa Securities”) to restrain the Defendant from enforcing the Directive dated 8 May 2015 ("Suit"), has been withdrawn on even date with costs of RM30,000.00 paid to the Defendant and with no liberty to file afresh."

Finally some common sense in the company, after wasting RM 30K and valuable time and focus, while it is struggling to survive.

The next day the company announced a horrific set of results, with the net assets per share going below zero. The company will need nothing less than a miracle.

Hanergy report (3)

Comments of people should not be taken too serious if they are heavily vested.

From my previous posting on Hanergy, the suspended solar energy company:

[Chairman and majority shareholder] Li also told Xinhua that the company was putting on extra shifts at its plants. “We’re in big production. It’s very, very, very good. Hanergy is in the best shape since it started,” he said.

From Forbes: "Suspended Hanergy Thin Film's First-Half Profit Reverses To Loss"

Hanergy Thin Film Power, the Hong Kong-listed solar energy business whose shares have been suspended since May 20 when a plunge in their price wiped out $19 billion of market capitalization in minutes, yesterday posted a loss of HK$59.3 million, or $7.7 million, for the six months ended June 30.  That compares with net income of HK$1.7 billion a year earlier.

Hanergy said the loss resulted in part from the suspension and termination of a majority of connected transactions between Hanergy and its parent company and affiliates, following what the Beijing-headquartered company said on July 16 was an expression of concern by Hong Kong’s securities regulator about their “large number” and the “ongoing viability of the group and its financial dependence” on the parent.

That does not sound like "very, very, very good" .....

Friday, 28 August 2015

AirAsia X: when it rains, it pours

AirAsia X has been in the limelight recently due to its poor results.

The company announced today another negative surprise:

The Board of Directors (“the Board”) of AirAsia X Berhad (“the Company”) wishes to disclose that its internal and external auditors have recently discovered that certain payments have been made to a service provider between the period of 2010 to 2014 for services which are now established to be fictitious.

Following the discovery of the irregularities, the Board has on the recommendation of the Audit Committee appointed PwCCS to carry out a forensics audit and instructed the Management to ensure the availability of all relevant documents and/or key personnel for PwCCS review and interview, where applicable.

In the course of the forensics audit, PwCCS discovered 24 payments have been made to a service provider amounting to RM7.01 million for fictitious services. The payments were authorised by a person in a management position within the Company.

This fraud came at a very unfortunate moment for the company, in the first half of this year the company lost a whopping RM 259 Million. The fraud will further lead to less confidence, and will draw away much needed focus from the management team.

The share is trading at RM 0.16, below its recent rights issue, and very much below its IPO price.

Tuesday, 25 August 2015

Silverlake Axis down 24%, suspended, after damning report (2)

Silverlake Axis announced yesterday is quarterly earnings, like nothing has happened. Some more information can be found in this article in the Straits Times.

A bit unreal, since the company has not replied to the very serious allegations by "razor99". But may be the results were ready and planned, and it was considered to release the results anyhow, even though the anonymous report was not even mentioned once in the results.

In the Value Investors Club there is a member named "razor99" who has written a report before about possible fraud at Longtop Financial, allegations that proved to be right. In the introduction of the report on Silverlake Axis there is a reference made to this report. If this is indeed the same writer, then that would add to the credibility of the current report.

For those that have not found the time to read the whole report (it is rather heavy on accounting), a shorter version can be found here.

I have read the report several times, and have not been able to find errors in it. I have to admit, that I am not an expert on Silverlake Axis, I only started to follow the company more closely over the last few months after a tip of a friendly party.

Given that, some comments by me:
  • The corporate structure is indeed horrific, and unexplainable so. Why does the group need so many subsidiaries, audited by so many different auditors, and even some in (notoriously non-transparent) BVI?
  • The amount of RPTs (both revenue transactions and acquisitions) is very high (although recently less so).
  • Transparency (in relation to the above) does seem to be a problem.

This is also determined by the Governance and Transparency Index of the NUS Business School, which put Silverlake Axis on the 507th place out of 639:

Why does a multi-billion company with a credible board of independent directors have such poor corporate governance standards, why did the board not insist on improvements? This is indeed a puzzle.

Another question is: why did SGX allow such a company to be listed in the first place? The company should have been forced to restructure pre-IPO, bringing under one umbrella all companies in the group with high RPTs.

On the other hand, the above considerations are red flags, but not really beyond the law.

In Section 5 undisclosed off-balance sheet debt is mentioned, with appendices 12-14 as proof. This allegation looks serious (at least to me), the company definitely needs to come with a good, concrete explanation here.

The report further suggests that because of this there might be more hidden loans. Silverlake Axis might want to give full transparency (beyond what is required) to show this is not the case, even in BVI registered related parties.

Section 6 gives an overview of the chairman cashing out (more than RM 1 Billion), and the minorities coughing up money (RM 555 Million). In itself there is nothing illegal about this.

This is however a very refreshing way to look at things, I hope analysts will follow this example, I suspect there are many other companies where the same has happened in the past. I hope to have time in the future to give some Bursa listed examples.

Section 7 gives a peer analysis. This is indeed quite disturbing for me, if the peers (as selected by Razor99) are typically for the industry, then this section does need some serious discussion by the company. The average salary for an employee is RM 111K, while the revenue per employee is RM 625K. With most revenue coming from project work and maintenance, these numbers do seem puzzling. A lot of the technology of Silverlake Axis even appears to be acquired, while spending little on R&D, not what one would expect from a top-notch technology company.

Section 8 about possible bribery is very disturbing, especially in the Malaysian context. But no conclusive evidence is given (which would anyhow have been impossible to do), although rumours have been going around for some time (I am aware of some of them, something I hardly ever hear).

SIAS announced a press release regarding the matter. It made a stunning comment:

"It is unfortunate that such an anonymous report can have an impact on the stock as it lacks credibility".

I honestly have no idea how anyone can be so sure. Also, why did the author make such a comment without going in any detail whatsoever?

"If the person or persons responsible for the report are found to be mischievous then the company must take prompt legal action and, if the facts indeed are found to be mischievous and misleading, SIAS calls also on the authorities to take police action."

Not one word what action should be taken if it turns out that (some of) the allegations turn out to be true.

"It is the small investors who always suffer the consequences."

Sorry, that is simply playing the gallery.

But what if the allegations are (substantially true)? Would this anonymous report not limit the damage, prevent more money from minority investors to be poured into the company while preventing the chairman of cashing out more money, and enabling the authorities to take action?

Also, it does give the independent directors a chance to improve things on corporate governance issues. Something that anyhow seems to be overdue.

"SIAS calls on all listed companies to be as transparent as possible to their shareholders to prevent such attacks from members of the online community who indulge in such attacks for personal gain. Companies must be prompt in responding to such attacks to ally the fears on the part of the investors and consequently avoid losses."

Finally something I agree with. But given that the company has been the target before, and its long listing history, has Silverlake Axis really been "as transparent as possible"? I strongly doubt it and NUS Business School seems to agree with that, placing the company in the last quartile of its CG list.

How this episode will play out, of course I don't know. It is a very high profile case, with lots of vested interest. The company has been recommended by many astute investors and its numbers did indeed appear very good. Will it turn out that the numbers were simply too good to be true? Time will tell.

Sunday, 23 August 2015

Kian Joo: the deal is getting cheaper and cheaper ....

Kian Joo announced a good set of results for its second quarter:

Both revenue and profit are nicely up.

To recall, there is a RPT in which Kian Joo would sell all of its business to Aspire Insight (owned by the the former MD of Kian Joo and EPF), which translates to RM 3.30 per share.

That deal has taken quite some time due to legal reasons, but Bursa has allowed an extension until September 30, 2015.

However, in the mean time no dividend has been paid since 2013, which means that the net assets have grown nicely. The deal looked already cheaper, now even more so.

In the Malaysian context it is very hard to fight these kind of deals. But Datuk Anthony See has a decent stake of about 8.6%, he doesn't like the offer and may be is able to rally the minority shareholders to hold out for a better bid.

The next six weeks will be interesting, both for the minority investors in Kian Joo, and for shareholder activism in Malaysia in general.

Are monkeys suitable fund managers .......?

Research by London’s Cass Business School shows that randomly chosen portfolios — that might as well have been picked by monkeys — are overwhelmingly likely to beat market-cap-weighted indices. But most monkeys failed to match equal-weighted indices, or indices based on most sophisticated measures to limit risk.

So the hierarchy is that simple equal weighting indices beat monkeys, who beat value-weighted indices like the S&P, which beats the average active manager (who nonetheless complains that the S&P benchmark is unfair).

Yet our money is still mostly run by active managers, while none that I am aware of is run by monkeys. For these reasons, and many more, we need to know more about indices.

Interesting article in FT showing that monkeys might be suitable candidates (and probably cost efficient ones) to pick stocks.

I have posted about animals punching above their weight before.

The above article in FT is actually more regarding equally weighted indices:

S&P has long published an equal-weighted 500 index, in which each stock is 0.2 per cent of the index. This is probably a more valid benchmark than the S&P 500 itself — and as the chart shows, it is much harder to beat. The mere act of regular rebalancing needed to keep it equal-weighted means taking profits in gainers and buying stocks that have recently fallen — which is good. It also overweights smaller and cheaper stocks, which do well in the long run.

Wiki: The FTSE Bursa Malaysia KLCI, also known as the FBM KLCI, is a capitalisation-weighted stock market index, composed of the 30 largest companies on the Bursa Malaysia by market capitalisation that meet the eligibility requirements of the FTSE Bursa Malaysia Index Ground Rules.

The same applies to the EMAS index.

Saturday, 22 August 2015

MSWG: concerns regarding Multi Sports Holdings

Below article is from MSWG's latest newsletter dated August 21, 2015. The concerns regarding Multi Sports Holdings (MSHL) in the "MSWG's comments" section all sound very valid, nothing to add. It is puzzling why a company which claims to have cash worth RM 360 Million is not using this cash to extract value for its shareholders, through a share buyback program or dividend pay-out scheme.

MSHL had on 20 August 2015 held 2 special general meetings (“SGMs”) for the proposed variation to the utilisation of proceeds raised from the sponsorship of the Taiwan Depository Receipt Programme (“TDRP”) (“Proposed Variation”), proposed par value reduction (“Proposed Par Value Reduction”) and proposed establishment of employee share option scheme (“Proposed ESOS”).

The Proposed Variation was approved by the shareholders voted by a show of hands, whereby the Proposed Par Value Reduction and Proposed ESOS was approved by the shareholders voted by way of poll.

Result on voting by poll is shown below:

[Source: MSHL’s announcement on Bursa Malaysia’s website on 21 August 2015]

The venue of the SGMs had been changed (at the same resort but different meeting room) at the eleventh hour without immediate notification to shareholders of MSHL. MSWG’s representative felt that it was not right to have done so without providing prior information. The Board agreed to delay the meeting for 20 minutes and also apologised to shareholders for alteration of the venue, as they were informed that the alteration was made by the management of Putrajaya Marriott & Spa without prior notification to the company. Nevertheless, MSWG felt it was imperative that the change of venue should have been posted at the original venue.

During the meeting, the shareholders raised many queries pertaining to resolutions on the Proposed Par Value Reduction and Proposed ESOS, and eventually the resolutions were not carried by a show of hands. The acting Chairman called for a poll vote for all the resolutions before the announcement of the result which were eventually approved as stated above.

MSWG had voted against the Proposed Par Value Reduction, as the company should not be granted the flexibility to raise more funds given the fact that it could not utilise fully its previous proceeds raised from TDRP. MSWG also voted against the Proposed ESOS, as the exercise allows employees to subscribe up to 15% of the company’s new shares at a 10% discount to the 5-day weighted average market price and this would greatly dilute the interest of existing shareholders. The market price of MSHL was RM0.08 as at 20 August 2015, which was 0.08 times to the book value of the Group (the Group’s net asset value per share was RMB1.73 or approximately RM0.98).

Friday, 21 August 2015

Silverlake Axis down 24%, suspended, after damning report

Trading in Singapore listed, Malaysia based, software solution provider Silverlake Axis was halted today after the share plunged 24%, as reported by The Edge.

The reason for the plunge and the trading halt is the following anonymous report:

"The Unbelievable Financial Alchemy of Silverlake Axis"

It is a rather comprehensive report with quite a lot of detail. I leave it to the readers to draw their own conclusions.

A bit more background about the company and its founder can be found in two recent articles in The Star, here and here. From the last article, one worrisome sentence:

"But investors find it hard to comprehend technology-based companies and even in the region, where Singapore-listed Silverlake Axis has a S$3.19bil market capitalisation, and where the bulk of its business derives from, many do not understand the company."

What now is needed from Silverlake Axis is a comprehensive, blow-by-blow, answer on all allegations in a very short time, preferably over the weekend. A flat denial, a superfluous answer or an attempt to shoot the messenger will simply not do (I guess Noble Group will agree with that, they have tried them all before).

Silverlake Axis should also be able to come up with a quick answer since this report does not come as a surprise. Rumours have been flying regarding this company for quite some time (I was aware of them), witnessed for instance by this article or this posting. In other words, the company was warned and should be prepared.

For Malaysia, it is another blow to its decreasing credibility.

First of all, there are simply too many scandals recently.

Secondly, corruption (one of the country's largest problems) is mentioned in the report as a possibility:

The corruption is not actually proven (that would be very hard to do for an outsider), but in the main report itself there is clearly more detail given than the above.

Asian investors in VGMC conned for RM 7 Billion (2)

I wrote about this issue before.

Richard Smith has written more articles about this issue, and also about "Power 8" , which he describes as: "Power 8’s a pyramid fraud, not a Ponzi". There seems to be links to VGMC, and both Malaysia and Singapore are mentioned:

"Somewhere out there, there’s an additional $240Mn+ of stray Power 8 investor funds, too: by January 2015 the very same big Far Eastern investors who had trooped out to Power 8’s Spanish offices were complaining that they couldn’t get at their invested funds any more, and the fund-raising leg of the pyramid fraud had run its course."

Monday, 17 August 2015

Unethical companies

The Norges Bank has a list with exclusions in which the Norwegian state fund is not allowed to invest in, based on ethical considerations.

The Guidelines for observation and exclusion from the Government Pension Fund Global can be found here.

More fund managers are looking these days at CSR (Corporate social responsibility) issues and the Norwegian fund is a very large fund, so this list will most likely become more important over time.

On the list of about 65 companies there are several Malaysian companies, the latest additions being Genting and IJM, both because of their plantations. The Malaysian companies:

  • British American Tobacco Bhd (Production of tobacco)
  • IJM Corp Bhd (Severe environmental damages)
  • Genting Bhd (Severe environmental damages)
  • WTK Holdings Bhd (Severe environmental damages)
  • Ta Ann Holdings Bhd (Severe environmental damages)
  • Lingui Development Bhd (Severe environmental damages)

From Singapore:

  • Singapore Technologies Engineering (Anti-personnel land mines)

Sunday, 16 August 2015

iCapital: "Ostrich policy" will not solve the issues

I have written several times about iCapital (of which I am a long time shareholder), most notably here and here.

The two elephants in the room regarding iCapital's share performance are:
  • Persistent underperformance relative to its benchmark (KLCI) since 2008
  • Persistent discount to its NAV price since 2008
The new year report has been published, so I was interested to see how the company handles both matters. Well, the way the issues are handled is best described by the below picture:

"Underperformance, discount ...... I don't see any ...... do you?"

In the Netherlands this is called "Ostrich Policy": "to ignore obvious dangers or problems and pretend they don't exist; the expression derives from the supposed habit of ostriches to stick their head in the sand rather than face danger".

Lets start with the results for the latest year:

That is really disappointing, given that the funds cash level was a whopping 65% throughout the year. That cash is generating interest of about 3 per cent a year, so one would have thought that the fund would have performed clearly better than the KLCI.

One reason for this is the management fee (including relatively high expenses for advertisements and AGM), the total is about RM 7 Million. That translates to about 1.75% per year, which is not a problem if the fund is fully invested and outperforms. But it is a problem if 2/3rd is held in cash, earning about 3% per year on that cash, of which more than half is eaten away by fees and expenses.

Given the persistent high cash level, the board of directors should renegotiate the management fee, for instance a lower fee for the cash it is holding (one does not need a degree in rocket science to manage a fixed deposit), and a higher fee for the equity part. However, no indication is found in the year report that this is even considered.

All the outperformance of the fund came in the first few years. The last seven and a half years the fund has underperformed, especially if dividends are accounted for. The combined effects of the underperformance and discount is shown in the red column, showing that the share price has actually decreased since December 31, 2007.

One must therefore put question marks behind the comment by the Chairman:

Also puzzling is the comment regarding "shorter-term options which do not benefit share owners in the longer-term", how is it possible that company decides this for its share holders?

On December 31, 2013 the NAV was around RM 3.10 while the share price was around RM 2.47 for a discount of around 20%. Apparently the fund manager could not find enough value and decided to raise cash levels to 50%. If the fund had decided to discontinue and return back the money to shareholders, surely share holders would have been in a much better situation than currently (the share price is now RM 2.18).

iCapital continues to harp on its performance since its IPO. But which percentage of the shares is actually still held by the same persons who bought them at the IPO? If people bought their shares say 1, 3 or 5 years ago, would they not be interested in the performance over that period, instead of the performance since IPO? The performance over those intervals are simply disappointing.

Another puzzling comment is the following:

There is absolutely no need to seek for viable options to address the discount, they have been conveniently listed in iCapitals IPO brochure, as described in my previous posting:

  • Shareholder activism: this is very ironic, given the way the fund and its manager have responded so far on any attempts in this direction (for instance here)
  • Share repurchase: in my opinion an excellent way to decrease the discount
  • Open ending
  • Takeover
  • Liquidation: again an excellent way to get away of the discount; after this the investors can decide themselves where they want to invest in
  • Managed distribution policy

Another issue is that there seems to be an "obsession" with Warren Buffett and Berkshire Hathaway. Rather surprisingly, since Berkshire Hathaway is a US based fund (and thus accounted in USD, a currency that has performed very strongly relative to all currencies including the RM), investing a lot of money in non-listed companies, and only being interested in large acquisitions while iCapital is focused on Malaysian listed companies (which might include small caps, given its small size).

In other words, if there was ever a comparison between apples and oranges, this would be it.

Another rather interesting issue is that Warren Buffett and Charlie Munger each only charge USD 100K per year in wages, versus USD 1.5 Million (RM 6.4 Million) charged by the fund manager of iCapital, despite Berkshire Hathaway having a market cap of more than a thousand times the market cap of iCapital.

I have no idea where iCapital got these charts from, but they must be completely wrong. One of the best investors in the world has an annual compound return on its NAV of -0.39% over the last ten years?

The reality is very different according to the last year report, despite its huge size it actually was able to book very decent increases in its book value:

Another matter is that Berkshire Hathaway announced the following:

In other words, it might be better to look at the market value of Berkshires shares instead of the (understated, conservative) NAV.

[1] What iCapital should have done (instead of focus on Berkshire Hathaway) is give a clear and correct (that is based on dividends reinvested, it is not giving those at the moment) comparison of iCapitals performance versus similar funds, like the Malaysian ETF or Malaysian equity based unit trusts of reputable fund managers over the last 10, 5, 3 and 1 year periods. That would be comparing apples with apples.

[2] Next to that it should have openly discussed the persistent discount to its NAV, and why it has not taken any of the six measures as described in its IPO brochure. Those measures were listed there for a good reason, to assure potential investors that if there is a persistent discount, then there are measures (and implicitly: those measures will be taken).

[3] And lastly, it should have openly discussed the expenses and fees, which have been simply too rich in the last years given the high cash levels.

I used to have a lot of sympathy for iCapital and its founder Tan Teng Boo, they have been good for Bursa in areas of educating Malaysian investors. But that sympathy is decreasing each year, at least with me.

Wednesday, 12 August 2015

Benalec: are reprimands and fines enough?

Article in The Star: "Benalec’s Leaw brothers reprimanded":

Bursa Malaysia has reprimanded Benalec Holings Bhd’s three Leaw brothers for breaching listing requirements and also fined them a total of RM250,000.

According to the stock exchange regulator, the directors failed to make immediate announcement, appoint an independent adviser and procure shareholders’ prior approval of the land disposals entered between Benalec’s subsidiary, Strategic Land Sdn Bhd (SLSB) with Sunshine 2000 Sdn Bhd (Sunshine 2000) and Seaside Synergy Sdn Bhd (Seaside Synergy) on Jan 18, 2012 and March 12, 2012.
On top of that, the land reclamation player also failed to appoint an independent adviser and procure shareholders’ prior approval of the Heads of Agreement announced on Dec 5, 2013 in relation to the rescission and cancellation of the land disposals.
The directors, who are also brothers, are Benalec managing director Datuk Leaw Seng Hai, former executive director Datuk Leaw Ah Chye and Datuk Leaw Tua Choon, who resigned on Dec 4, 2013.

Bursa announced some more detail:

Datuk Leaw Ah Chye and Datuk Leaw Tua Choon

Based on the evidence, the Purchasers (of the Land Disposals) were persons connected to (i.e. accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of) Datuk Leaw Ah Chye and Datuk Leaw Tua Choon by virtue of the control / influence of the 2 directors and the son of one of these directors had over the Purchasers as well as their involvement in the Purchasers.

Notwithstanding their interests in the Purchasers and the Land Disposals, Datuk Leaw Ah Chye and Datuk Leaw Tua Choon had:-

(a)    failed to declare their interests to the board of BENALEC and SLSB in accordance with paragraph 10.08(8) of the Main LR;
(b)   failed to ensure that BENALEC complied with paragraph 10.08 of the Main LR; and
(c)    concealed their interests in the Land Disposals from BENALEC and its board including persistent denial (including under oath) their interests despite being asked by the board after the complaint.

Further, Datuk Leaw Ah Chye had signed the directors’ resolutions of SLSB dated 18 January 2012 and 12 March 2012 authorising SLSB to enter into the Sunshine 2000 SPA and Seaside Synergy SPA respectively in contravention of paragraph 10.08(6) of the Main LR.

Dato’ Leaw Seng Hai

He was the Managing Director of BENALEC primarily in charge of the day to day management of the business and operations of the company including land disposals by BENALEC Group and had approved the Land Disposals on behalf of by SLSB.  He was also aware or should have been aware of the anomalies / unusual circumstances of the Land Disposals and the magnitude / materiality of the Land Disposals. Notwithstanding these, he had failed to undertake due enquiry and address these anomalies resulting in the breaches of the Main LR by BENALEC.   

More background can be found in this announcement:

An allegation was made in March 2013 by a complainant via email which was disseminated to various parties, including Bursa Securities, that two (2) land disposal transactions (concluded in January and March 2012 respectively) between a wholly-owned subsidiary of Benalec Holdings Berhad as vendor and two private companies as purchasers were related party transactions in that Datuk Leaw Tua Choon and Datuk Leaw Ah Chye were linked to the purchasing entities.

Related Party Transactions (RPTs) are often bad, many examples can be found in this blog. However, even worse are RPTs which are not earmarked as such.

Many cases however will go unnoticed. In that light, the chance to get caught is small. In the above case there was a tip off.

Given all the above (the severity of the breaches and the small chance of getting caught), is the punishment as meted out by Bursa really sufficient? I strongly doubt it.

Saturday, 8 August 2015

Cliq: messy annual report

Cliq announced on August 3rd its annual report, on August 5th its amended annual report and on August 7th another amendment on the same report. The last amendment consists of seventeen pages, quite shocking.

I do understand that Cliq's Board of Directors is getting all excited about its possible acquisition, but it really should put more care in writing its annual report.

Kinibiz wrote a good article, clarifying the different motives for management and shareholders of a Spac:

"Misaligned management and shareholder goals: Spacs".

Some snippets:

For the management teams of Spacs, it is about getting a qualifying asset or acquisition at all costs, so the company can graduate to become a full-fledged company like any other on the bourse. Shareholders, on the other hand, want to get a nice return on their investments and this might come even if the Spac does not graduate.

Cliq has identified and signed a sales and purchase agreement to acquire a 51% stake in two producing Kazakhstan oil blocks for US$117 million (RM429.53 million as at the announcement date) from a local Kazakh company, Phystech Firm LLP. It is currently in the process of gaining regulatory approvals before being able to take it to its shareholders. Sona, meanwhile, has said that its management team is in advanced discussions over several assets and is confident they will meet their deadline.They had better be confident, because the alternative is losing their entire investment.

It comes down to this: the management team’s primary focus is to secure a deal so long as it allows them to graduate, while shareholders will be torn between the promise of eventual gains post-QA (possibly quite far in the future) versus a tidy risk-free gain at the end of three years.

Management and shareholders, two different agendas – only in the curious world of Spacs.

Monday, 3 August 2015

XiDeLang: Deal or no deal? (2)

Xidelang made another announcement and in a remarkable turn of events, has revealed most of the information regarding Yangsen as requested by Bursa:

Sunday, 2 August 2015

XiDeLang: Deal or no deal?

XiDeLang announced:

".....  that the Company is proposing to enter into a Heads of Agreement in relation to the Proposed Acquisition of the entire existing business and undertakings of JinJiang YangSen Garments Co.,Ltd (YangSen) including all of its assets and certain agreed liabilities ("Proposeed Acquisition")."

The wording in the attachment is however different: "that the Company has on 29 July 2015 entered into a Heads of Agreement with YangSen".

"Proposing to enter" and "has entered" are of course very different.

The announcement mentioned that XiDeLang proposes to settle the (yet to be decided) purchase amount "via cash and/ or issuance and allotment of new ordinary shares of USD0.03 each in XDL (“XDL Shares” or “Shares”) at the issue price of RM0.22 per Share".

RM 0.22 was clearly higher than the last traded share price, if the seller of the business is agreeable to receive shares of XiDeLang at such a price that looks like good news. Not surprisingly the share price of XiDeLang increased the next trading day.

Bursa decided to query the company, because the announcement was "rather devoid of details" (to put it mildly).

The company answered the queries in a rather astonishing way:

The following information regarding YangSen is currently unavailable:

  • Total assets and total liabilities
  • Total profit
  • Name of directors and substantial shareholders
  • Total contracts value secured
  • Distribution networks
  • Manufacturing capabilities

How is it possible to sign a Heads of Agreement to purchase a business when the most basic facts are not known? It looks like XiDeLang has not even seen the last accounts.

Why does XiDeLang announce this "non-information", why does it not wait until it has more information?

Saturday, 1 August 2015

Fake degrees at listed companies? (4)

Malaysian Insider wrote an article:

"KUB group CEO resigns amid allegations of falsified academic qualification".

A snippet:

In a filing with Bursa Malaysia yesterday, KUB said Zainal Abidin, 52, has submitted his resignation, citing personal reasons, and the board of directors has accepted it. He will serve a three-month notice period under the terms of his contract. According to KUB, a statement was made by a shareholder of the group at its annual general meeting on June 16, 2015 on the alleged falsification of Zainal Abidin's academic qualification.

"The (Zainal Abidin's) resignation was submitted before the board of directors was able to establish a Board Executive Committee to look into the allegations made by the said shareholder," said KUB. "In light of the said resignation, the board has resolved that it serves no purpose to continue with the investigation," it added.

It is good that on the question "Whether there are any matters that need to be brought to the attention of shareholders" the answer "Yes" was given in the Bursa announcement, plus a subsequent explanation of the issue at hand, good transparency.

The relevant Bursa announcement can be found here.

But I don't agree though that the board decided that it serves no purpose to continue the investigation. I think they should investigate, both regarding the allegations regarding the qualifications of the CEO and about the hiring process by the responsible department of KUB.

In the previous case written in this blog, the director had already resigned from the three listed companies involved, but Bursa did (correctly) follow up on the complaint. I assume Bursa will do the same in this case.