Sunday 29 October 2017

Hiap Teck untimely announcement by substantial shareholder

Hiap Teck made the following announcement:

One year and four months late, Shougang International gives a whole new meaning to the definition of "timely disclosure".

From the 2016 annual report:

Shougang International is still listed as a substantial shareholder, is that still correct?

I have written several times already about this issue, it should be relatively easy to automate these types of announcements regarding shareholding by directors and substantial shareholders. Why has that not yet happened?

Monday 16 October 2017

CNLT, where is the enforcement?

From kehakiman's website regarding CNLT (Far East) Bhd, a company formerly listed on Bursa:

11. The Employees’ complaint of fraudulent trading straddled 8 allegations of fact that allegedly occurred between 2006 and 2008.  They were as follows:

(a) CNLT, primarily through its managing director, the Appellant, prepared or issued fictitious invoices in 2007 to an entity known as MTI (Far East) Sdn Bhd amounting to RM4,271,745.06 with a view to inflating or overstating its revenue, such that CNLT would appear to be a ‘going concern’, or at the very least, not as insolvent as it actually was;

(b) Overstating the value of the plant and machinery of CNLT;

(c) Siphoning of CNLT’s funds by way of payment of rental to Golden Privilege Sdn Bhd when there was no such tenancy agreement.  This company was controlled by the Appellant and the 7th defendant;

(d) CNLT’s assets in the sum of USD1,250,000 were dissipated or channelled to CNLT’s largest shareholder, JCT Limited, the 8th defendant after CNLT had been listed as a PN17 company;

(e)  CNLT, through inter alia, the Appellant caused 3 cheques in the sum of RM160,000.00 to be issued on 11 September 2007.  These cheques were encashed on 12 September 2007;

(f) Failure to cause CNLT to remit contribution to Employees Provident Fund (“EPF”) and Social Security Organization (SOCSO), both employer and employee despite deducting the requisite employee contribution since August 2007.  Neither was income tax paid, despite the requisite deductions having been made;

(g) The Appellant’s action in dissipating assets out of the reach of provisional liquidators in May 2008; and

(h) Payments were made out to preferred unsecured creditors, as well as some shareholders in the sum of not less than RM2,841,696.00 without validation at the time the restraining order dated 26.10.2007 was in force.

12. It was the Employees’ case that by reason of the foregoing matters the business of CNLT was carried on from 2006 onwards until it was wound up in January 2009 with intent to defraud creditors of the company, or for a fraudulent purpose.  For the purpose of the application of section 304 of the Act in this suit the creditors contemplated here were the Employees.

13. By this action, the Employees sought inter alia the following orders:

(a) a declaration that the business of CNLT had been carried on by the defendants with intent to defraud creditors of CNLT, in particular the Employees pursuant to section 304 of the Act;

(b) a declaration that the defendants shall be jointly and/or severally liable and personally responsible, without any limitation of liability for all of the debts or other liabilities of CNLT; and

(c) an order that the defendants, jointly and/or severally do pay the outstanding debt due and owing to the Employees by CNLT.

Very heavy accusations, and what did the judge decide?

18. At the end of the trial, the learned trial judge held that the Employees had proved 7 out of 8 allegations.  It was held that allegation (c), the siphoning of  CNLT’s funds by way of payment of rental to Golden Privelege Sdn Bhd, was not made out.  The learned trial judge found that payments to JCT limited were void as they were against the law prohibiting undue preference.

19. The learned trial judge accordingly held that the business of CNLT was carried on by the Appellant with intent to defraud the creditors of CNLT including the Employees pursuant to section 304 of the Act.  A declaration was made to that effect by the court.  There was however no such declaration granted in respect of the other directors of CNLT.  The court also held that the Appellant was personally liable to the Employees, to pay the Employees the sum of RM2,910,201.78 as claimed with interest.

Most of the proven allegations happened more than ten years ago.

A forensic report was made, with many observations similar to the above. The company however denied all in an announcement to Bursa. Since the judge held that seven allegations have been proved, the truthfulness of the contents of that announcement should be reviewed.

The above court case was a private affair by the employees who were disadvantaged. It seems they are winning their case, good for them, it must have been a quite costly and lengthy affair.

But what have the authorities done so far, for instance in regards to the minority investors who have been disadvantaged? From what I could find, not much.

Bursa reprimanded the company (I don't think anybody will be bothered by that) and delisted it (basically disadvantaging the minority investors by depriving them an opportunity to trade their shares). No action whatsoever was taken against any individual.

SSM obtained a conviction: "The Kuala Lumpur Sessions court today convicted Dato’ Prem Krishna Sahgal (‘Dato’ Prem’) for committing an offence under section 364 (2) of the Companies Act 1965. Dato’ Prem was sentenced to pay a fine of RM40,000.00 in default 6 months imprisonment."

It continues "SSM hopes the above decision will send out a clear message". I doubt that, I find the punishment very light, especially given the small chance of getting caught.

Where is the enforcement for any of the other (very serious) allegations, why have Bursa and/or SC still not taken any action in this matter?

Justice delayed is justice denied.

Friday 13 October 2017

MUFG acquiring banks, but why sell CIMB?

Article from Bloomberg:

MUFG Seeks to Spend $900 Million on Acquisitions in U.S, Asia

One snippet:

Mitsubishi UFJ Financial Group Inc.’s lending arm is seeking acquisitions of about 100 billion yen ($890 million) in Asia and the U.S. to bolster its global operations, its top executive said.

Bank of Tokyo Mitsubishi UFJ Ltd., to be renamed MUFG Bank in April, would consider taking majority stakes in banks in countries such as Indonesia or India in addition to the U.S., Chief Executive Officer Kanetsugu Mike said in an interview. 

While Japan’s biggest bank has previously signaled interest in buying lenders in the countries, it’s the first time a senior executive has indicated how much it might spend. Mike, 60, said any decision would be based on strategic fit, price and profitability, while noting that U.S. targets are “expensive” at the moment.

Japan’s biggest banks are expanding abroad to make up for declining loan profitability and a shrinking population at home. In the U.S., MUFG owns a bank with a heavy presence in California, and is the largest shareholder in Morgan Stanley. It bought stakes in banks in the Philippines, Thailand and Vietnam in recent years.

Overseas business remains “a driver of growth for both the bank and the group,” Mike told a group of reporters at the lender’s Tokyo headquarters.

This seems like a rather clear intention, it wants to expand overseas by buying stakes in other banks.

But this is in rather stark contrast to MUFG selling its stake in CIMB only half a year ago, so why exactly did it do that?

Saturday 7 October 2017

The "wonderful" world of QE

From Almost Daily Grant's, October 5th 2017 edition:

Irish buys are smiling

Yesterday, the Republic of Ireland issued €4 billion worth of five-year debt, priced to yield negative-0.008%, in a deal that was 2.5 times oversubscribed. 

That feat, remarkable on its face, is made even more so in contrast to the Republic’s pronounced struggles during the 2011 European sovereign debt crisis.  Amidst an ailing banking system that lead to the demise of the 134-year old Irish Nationwide Building Society and forced the government to supply bailout funds to Bank of Ireland and Anglo Irish Bank to forestall a similar fate, Irish sovereign borrowing costs spiked to panic-type levels.  Yields on 10-year government debt jumped above 14% in the summer of 2011, with five-year yields reaching even higher to nearly 17%. Just over six years later, investors are clamoring to lose money (it’s a sure thing if the bonds are held to maturity) by financing the same country. 

Then again, buyers of this deal have an ace up their sleeve.  Perhaps a non-economic quasi-governmental entity which has bought more than €1.7 trillion of government bonds this cycle (per the FT) might be willing to buy them out a premium.

From Yields of 17% in 2011 to the current -0.008% (yes, that starts with a minus sign) in 2017, what a difference! Welcome to the "wonderful" world of QE (also known as "money printing") in which everything is possible and assets continue to rise in price. Ireland, once a member of the infamous "PIIGS" group, must be laughing all the way to the bank.

One day this will all end badly and buyers of these (any many other) bonds will scratch their head in disbelief why the heck they bought these instruments in the first place. But when that will happen, who knows?

Monday 2 October 2017

Empire City land: why the huge difference?

Article from The Edge: Empire City Damansara 2 land up for sale

One snippet:

.... it appears that these plots are the parcels purchased by Mammoth Empire in 2010 and 2011. Records showed that in 2010, Mammoth Empire had bought a 41-acre site and a 16.83-acre site on Jalan PJU8/8 from Saujana Triangle Sdn Bhd.

Saujana Triangle is a wholly-owned subsidiary of MK Land Holdings Bhd. Both parcels were purchased for an estimated RM130 million. The price of the larger parcel was an estimated RM55 per sq ft, and the smaller one at RM40 per sq ft.

In 2011, Foster Estate purchased another parcel of land along Jalan PJS 8/8. This 6.33-acre parcel was purchased from Crest Builder Sdn Bhd, a unit of Crest Builder Holdings Bhd, at RM57.53 million or RM208 per sq ft.

RM 40 per sq ft versus RM 208 per sq ft, why is the land bought from Crest at a price 5.2 times as high as the land bought from MK Land, roughly at the same time?

The difference looks extreme, minority shareholders of MK Land should query their company if the land was sold too cheap.

Sunday 1 October 2017

Former Protasco director charged with RM 68 Million fraud (2)

Almost five years ago, Protasco announced what arguably is one of the most puzzling announcements I have seen of any Bursa listed company.

It was made during the XMas holiday as if to escape any attention, which (if intended) did indeed succeed, there was hardly anything written about the deal in the papers, while Bursa did not issue any query which is remarkable given the lack of details given.

I received an anonymous tip about it, and wrote "Protasco's Puzzling Purchase", and followed it up by about 30 other blog postings.

At the start of 2016 things finally seemed to move forward, I wrote "Former Protasco director charged with RM 68 Million fraud".

Now, after another two years, according to a recent article in The Star, "Ex-directors discharged from cheating case":

Two former company directors who were charged with cheating the board of directors, making a false declaration and criminal breach of trust involving more than RM80mil have been discharged from the case.

However, Datuk Ooi Kock Aun, 49, and Datuk Tey Por Yee, 40, have not been acquitted by the court

The order to discharge but not acquit them was given by Kajang Sessions court judge Surita Budin after deputy public prosecutor Muhammad Ilmami Ahmad made a proposition to withdraw the case.
The DPP said the Attorney-General’s Chambers had reviewed all the evidence in totality before deciding to withdraw the case.

Ooi and Tey were accused of cheating Protasco Bhd’s board of directors and its officers by withholding information that he had direct involvement with PT Anglo Slavic Utama, a company incorporated in Indonesia.

The offence, under Section 420 of the Penal Code for cheating, was allegedly committed at Protasco’s office at Level 2, Corporate Building Unipark Suria, Jalan Ikram-Uniten, Kajang, between November 2012 and Jan 30, 2014.

Both of them were also charged with making a false declaration to a Commissioner for Oaths in Jalan Metro Pudu, off Jalan Yew, on July 25, 2014.

Other papers have been very quiet about this discharge.

Where does this leave the minority investors of Protasco, which lost almost RM 100 Million in this case and a (possibly related) other investment in Indonesia?

Until now hardly any information has been provided, the most basic questions have been unanswered, for instance: who was the seller of the PT Anglo Slavic shares (in other words, the owner(s) of the BVI company)? And was he/she in any way connected to any of the then acting directors of Protasco?

It seems very unclear what the current status is, both from the regulators point of view or from Protasco's side. A very unsatisfactory situation all together.