APFT: messy announcements (2)

And the company made another announcement, correcting the mistakes noted in the previous blog post.

The way things went:

• An "interested observer" noted that the price could not be right, and informed me
• I posted a blog posting about the subject
• Most likely Bursa picked it up and notified the company
• The company (most likely the company secretary) amended the announcement, for the third time

This bags the question, how many times in the past have there been mistakes in these kind of announcements? My guess: many times.

Automating (part of) this process (probably with a link to the CDS system) should greatly help, both in the amount of work needed currently and in the quality of the announcements, avoiding the most obvious errors.

Scan Associates: which breach? (2)

Article in The Star: Scan Associates discloses reason for suspending director

Some snippets:


Scan Associates Bhd director Yeoh Eng Kong, who was suspended for more than five months to facilitate an investigation against him, had been penalised for seeking an extension of time to submit a regularisation plan without the board’s knowledge and approval.

This was the ICT security solutions company's answer to Bursa Malaysia Securities’ query on the details of Yeoh’s breach of duties as director.

Scan had suspended Yeoh as director for two months in September last year but extended the period of his suspension twice, as an investigative committee set up by the company needed more time to analyse and conclude the case against him.

The suspension was finally uplifted with effect from Feb 17, the day after the committee concluded that Yeoh had indeed breached his duties as a director.

Scan so far has not explicitly said that the investigative committee had been dissolved. One of the matters that it was supposed to probe was related to “the preparation of the company’s subsidiaries’ audited financial statements.”

In the initial announcement on Yeoh’s suspension on Sept 9 last year, Scan said the board decided to form a committee to investigate “the possible serious breach of duties of a director and the preparation of the company’s subsidiaries’ audited financial statements.”

Scan’s external auditor Baker Tilly Monteiro Heng had in June last year tendered its resignation as auditors of the company and its subsidiaries. The reasons given were the outstanding amount of professional fees and the receipt of the writ and statement of claim filed by Yeoh on May 16.


External auditor resigning, probe in the subsidiaries' audited statements, it looks like more information will be revealed down the road.

New ETFs: exotic or toxic?

Article on Bloombers website:

Singapore Readies New Exotic ETFs to Catch Taiwan, Hong Kong

A snippet:


Preparations are underway in Singapore for the first new listing of leveraged and inverse exchange-traded funds in almost eight years.

Singapore Exchange Ltd. last week published a new web page about the products, described as “a form of passive collective investment schemes (like ETFs) and structured as open-end funds,” following revised guidelines from the Monetary Authority of Singapore in August.

Singapore, along with Hong Kong, is seeking to capture a bigger share of an expanding pie through types of funds that have seen success in Japan, Taiwan and Korea. Leveraged ETFs in Taiwan, which started in 2014, now have more than $4.8 billion in assets, according to data compiled by Bloomberg. Daily trading of inverse and leveraged funds is more than half of Taiwan’s ETF market, said Andy Chang, president and chief executive officer of Cathay Securities Investment Trust Co.


I am seriously underwhelmed by this initiave, is this really the best the SGX can come up with to attract retail investors?

I like "long" ETFs on a certain large market with low fees very much, I use them myself if I think a market is relatively cheap and I don't have my eyes on some particular stocks in that market.

I can also imagine that an investor sometimes wants to invest in an inverse ETF without leverage, as a (partial) insurance against his portfolio of value shares going down together with the market when the market looks richly priced but the value shares still offer enough upside.

But these leveraged ETFs, I am not keen at all on them, the management fees are often much higher than the "long" only ETFs. In addition to that there are also higher expenses related to the instruments the ETFs use to create the leverage. In the longer term the fees will have a serious impact on the returns.

APFT: messy announcements

On January 17, 2017 the company announced:

On February 16, 2017 the company amended the above announcement:

Two changes, but both puzzling:

• There was no "disposal of shares via open market" done on January 4th 2017 at a price of RM 0.40. 
• It is not possible to announce on January 17th 2017 (the date of the original annnouncement) a disposal of shares in the open market to be done on February 6th 2017.

A second amendment was announced, but no changes in the above.

I guess we have to wait for a third amendment, will they get it right this time?

It all looks very amateuristic and reflects badly on the company.

Also, I like to reiterate a call to automate these kind of announcements.

Scan Associates: which breach?

Scan Associates announced:


The Board of Directors (“Board”) of Scan Associates Berhad (“SCAN”) wishes to announce that the Investigative Committee had on 16 February 2017 concluded that Mr Yeoh Eng Kong (“YEK”) was in breach of his duties as a Director of the Company.

After considering the statement/representation given by YEK, the Board agreed to uplift the suspension of YEK as Director of the Company with effect from 17 February 2017 and he shall resume his role as a Director on the same date.

The Company shall not take any further action against YEK as his suspension period is adequate and deemed to serve the purpose.  


Can we please get some more information regarding this breach and the whole affair? The above sounds all very vague.

At one moment in time shareholders have to vote on YEK's directorship, if they want him to continue being a director of the company or not, surely they deserve to know how serious the matter was and if indeed the suspension period was adequate and served the purpose.

"Snap", the sound of voting rights

Article in The Star:

Snap arrives in London to woo sceptical investors ahead of IPO

Some snippets (emphasis mine):


Snap Inc, owner of popular messaging app Snapchat, kicked off its first investor roadshow on Monday, looking to persuade London money managers to back its initial public offering in the face of concerns about its growth prospects, valuation and corporate governance.

The U.S. company, which has yet to make a profit, is targeting a valuation of between $19.5 billion (£15.6 billion) and $22.3 billion from listing on the New York Stock Exchange, after cutting its initial target of $20 billion-$25 billion last week following investor feedback.

Some fund managers have said they will stay away from Snap given its decision to adopt a three class share structure - the first of its kind - that will mean shareholders who buy in through the IPO will not have any voting rights.


Yes, dear readers, mayhem has descended on us: people are asked to fork out billions of USD for a company with a history of losses and will receive no voting rights in return for that.

While all forms of engineering have made strong progress throughout the years resulting in a more safe and efficient world, financial engineering has been the one and only exception.

Time trusted principles (like one share, one vote) are abandoned in place of sheer madness, just for the sake of coming up with more extreme solutions, for which the consultants can charge handsome commissions.

One manager offered some "comforting" words:


"Snapchat offers a cocktail of hype, insane valuations, dubious fundamentals and weak governance. However, the same was said about companies like Google and Facebook when they listed," said Geir Lode, head of global equities at Hermes Investment Management.

APFT: why the generous options for directors?

This is the share graph of APFT over the last five years:

And here are the financial results for the last five years:

Next to that, the latest audited accounts have an "emphasis of matter", quoting:

".... there are material uncertainties that may cast significant doubt on the ability of the Group to continue as a going concern."

In short, things have been pretty tough, both for the company and its shareholders.

But still the company announced that Directors would receive millions of options:

The usual reasoning for these kind of options is to allign the interests of shareholders and directors, but that seems to have been lost in the case of APFT.

Are there really no concealed placements to nominees of major shareholders in Malaysia?

From Hong Kong:

SFC seeks court orders against former chairman of Kong Sun Holdings Limited and China Sandi Holdings Limited


The Securities and Futures Commission (SFC) has commenced legal proceedings in the Court of First Instance to seek disqualification and compensation orders against Mr Tse On Kin, former chairman and executive director of Kong Sun Holdings Limited (Kong Sun) and China Sandi Holdings Limited (China Sandi), for devising a scheme to conceal his interests in the companies’ share placements in 2009 (Notes 1 & 2).

The SFC alleges that Tse, who was the chairman of the two companies at the material time, used a nominee company to subscribe for their placement shares, which were intended only for independent placees.

Tse also allegedly concealed his interests in the placement shares from the companies’ boards and shareholders in order to obtain them at discounts for which he should not have been eligible.

As part of the proceedings, the SFC is seeking orders to compel Tse to account for the profit he made from the sale of the placement shares in Kong Sun and to pay compensation to Kong Sun for the secret profit he made (Note 3).


In Malaysia both shares being held by nominees and the issue of private placements are a rather common practice (in the very large majority of private placements we will never know the names of the persons or companies that will receive the placement shares).

I am therefore almost sure that the above scheme to conceal interests must have happened at Bursa listed companies, probably frequently.

But why has there been hardly any enforcement at all in this area? Are the enforcement agencies not pro-active enough, doing some investigations, looking for clues, connecting the dots, following the money trail?

I don't suggest enforcement of this is easy, but a few successfully prosecuted cases would at least give some confidence that action is being taken and that perpetrators are at a risk.

Sabana Reit: shareholder activism (2)

It seems that the activism (I wrote about it before) is progressing quite well, an interesting case to follow.

A new development was reported by The Edge:

Disgruntled Sabana REIT unitholder lodges complaint with CAD over valuation of Changi South property

A disgruntled Sabana REIT unitholder has lodged a complaint to the white-collar crime department of the Singapore police against the property valuation houses of Colliers, Savills and Knight Frank.
This is in relation to the valuation reports the three houses have done to support the acquisition of 47 Changi South Ave 2 by Sabana REIT from its sponsor Vibrant Group.

Colliers was engaged by Vibrant while Knight Frank and Savills were engaged by Sabana REIT's manager. The transaction requires the permission of minority unitholders at an EGM, which is yet to be scheduled.

Colliers, Savills and Knight Frank separately and independently did a valuation on the Changi South property using the Capitalization Approach and Discounted Cash Flow Analysis (DCF).

All three concluded that the property was worth exactly $23 million, which is also the price at which Vibrant will sell the asset to Sabana REIT.

Jerry Low Chin Yee, the unitholder of Sabana REIT who complained to the CAD, is questioning how Colliers, Savills and Knight Frank could have arrived at exactly the same valuation for the property. “In order for all three to come up with the exact valuation figure, they must have used the same future rental income, same assumed discount rate, same forecasted 30 years rent renewal payable and the same estimated terminal value etc," he says in his complaint to the CAD, a copy of which The Edge Markets has seen.

“Colliers, Savills and Knight Frank all agree that the Changi South property is worth exactly $23m. I can only hypothesize that they were given the same exact figures to value the property,” alleges Low.
If this is true, it begs the question of objectivity and independence of these and past valuation reports, says Low.

“It will be worst if all of them (including the vendor and the manager of Sabana REIT) actually conspire to come up with the exact $23m figure so that the property can be “properly” sold to the REIT at $23m in accordance to the code of collective investment scheme pertaining to Related Party Transaction,” adds Low.

Low says he does not have any evidence of wrongdoing but believes the matter warrants scrutiny “purely on the fact that for all three valuation houses to separately and independently come to a valuation of exactly $23m for a property with so many variables, is too much of a coincidence unless they are using the same input provided by either the Vendor or the REIT Manager. And the price of $23m was by design rather than by valuation.”


I hope the complaint will be dealt with soon, I agree that the matter warrants serious scrutiny.

In the Malaysian context, I have often seen strange valuations and independent valuers agreeing with them:

• regarding RPTs: major shareholders injecting their private companies at skyhigh valuations in their listed vehicles
• regarding privatisations: companies taken private for a song,

I have written about several cases, and complained in a few to the authorities, to no avail (no surprises there), although I was proven right at the end.

The only positive message is that things seem to have improved somewhat lately in Malaysia. Not much comfort though for the minority investors who were disadvantaged in the past for huge amounts of money.

Multi Sports: new allegations

I wrote before about Multi Sports.

Although the number of Bursa listed companies from China is only a bit more than one percent of the total, they are experiencing a hugely disproportionate part of the irregularities reported.

That is what more or less could have been expected, for instance based on the experience at the SGX.

Multi Sport is one of those Chinese listed companies on Bursa, beside the problems they already have, they announced new ones:


The Board in Malaysia has also just received details of alleged unreported finance transactions and litigation involving the Company’s operating subsidiary in China, Jinjiang Baixing Shoe Materials Ltd, and the Senior Management of the Company. Should the allegations be validated, such information would be material and would need to be incorporated into the Outstanding Annual Report.


When it rains it pours .....

SC sues Stone Master executive (2)

Some updates in this case.

From The Edge: Stone Master deputy MD fails to strike out Securities Commission's civil suit

A few snippets:


Stone Master Corp Bhd deputy managing director Datin Chan Chui Mei failed in her application to strike out the Securities Commission's (SC) claims against her for allegedly causing wrongful loss to the company.

Following the decision by High Court Judge Datuk Has Zainah Mehat, the hearing of SC’s application for an injunction restraining her from dealing with monies in her bank account up to the amount of RM11.54 million, pending the disposal of the trial, is set for decision or clarification on March 20.  

In September 2016, SC obtained an ex-parte injunction against Chan.

Chan was charged under sections 179 and 317A (1) of the Capital Markets and Services Act 2007 (CMSA). She received RM11.54 million out of RM11.59 million meant to be paid by Stone Master to local representatives of 23 foreign companies, relating to the exclusive rights to market and promote their products in Malaysia and Singapore.

Section 179 of the CMSA prohibits a person from using any manipulative device for subscription, purchase or sale of any securities.

Under section 317A, a director or an officer of a listed corporation is prohibited from doing anything with the intention of causing wrongful loss to the listed corporation.

The SC wants Chan to pay the regulator the sum of RM11.54 million, which is to be held in trust for Stone Master, and for Chan to be barred from being a director of a public-listed company for a period of five years.

In addition, the SC is also seeking a civil penalty of RM1 million against Chan.

Despite facing the charges, Chan remains as Stone Master's deputy managing director.


That last sentence sounds very strange, of course the deputy MD should have been suspended immediately, at least temporarily. It seems to me that the other Directors of the company also have a responsibility in this matter.

Also, it seems surprising (given the seriousness of the allegations of the SC) that things have not yet moved to the criminal court, apart from the civil penalty sought by the SC.

Stone Master issued its Annual Report 2016.

If one would read the Chairman's statement, one would not get a very accurate picture of what is really going on with the company. For that one would have to dive into the notes that accompany the accounts.

Note 26 (page 107 contains numerous Related Party Transactions. For instance Starfield Capital, a company related to the deputy MD, made a loan to the company of RM 18 Million.

Note 32 (page 117) details significant events during and after the financial year, a whopping 27 pages packed with information, some of it simply astonishing. Amounts in the Billions of RM are mentioned, and this for a company with a current market cap of only RM 9 Million (and consistently losing money).

If anybody would like to jump into the action, based on those Billions mentioned, one should first read the following paragraph (the current share price of Stone Master is RM 0.10):

My question: was the original business model based on the Exclusive Agencies and mentioning those Billions of RM really ever viable?

Also the action by the Securities Commission and the current PN17 status are mentioned in the annual report. And on page 146 one can find the disclaimer of opinion by the auditor, another clear red flag.