Several interesting articles in Singaporean newspapers:
[1] Article about Claire Barnes and the Apollo fund managed by her, one of the best performing funds in Asia. Warren Buffett often warned investors in Berkshire Hathaway that the performance of the previous years would not be able to sustain. This humility is typical of good fund managers and Claire Barnes is no exception, she explains the stellar performance of her fund for a good part on the initial years which coincided with the Asian crisis, when some unbelievable bargains were available. Peter Lynch was a successful fund manager for Fidelity, but he was very much disappointed once he found out that investors on average had actually lost money in his fund. The reason was that much more money was invested when the index had gone up a lot, and money was withdrawn when the index had gone down a lot. The Apollo Fund has closed on occasions, when Claire Barnes had problems finding value. This seems to make perfect sense.
[2] Article about AirAsia X CEO Azran Osman Rani and his entrepreneurial background. Great story, also touching on his twitter against racism. I have issues with Corporate Governance in both AirAsia and AirAsia X and have written several times about them, but I do admire the people who run these businesses.
[3] Article about BFM 89.9 founder and CEO Malek Ali and his entrepreneurial journey, another great story. However, also a less great paragraph, Malek was summoned to Malaysia's Communications & Multimedia Commission (MCMC) where he had to explain why his radiostation invited someone from the Economist Intelligence Unit (EIU) to discuss its Global Democracy Index. More about this index can be found here and here. Malaysia was classified as a "flawed democracy", which is less bad than it sounds, it means Malaysia is in the 2nd category out of 4, and ranked 71st out of 167 countries. Apparently the results from the EIU were deemed to be not favourable enough for the powers that be, hence the need to call Malek, a very worrisome development.
[4] Article in The Business Times about the important role that short sellers play in governance, highlighting the case of China Metals Recycling (CMR), which is the latest China company to come under official scrutiny amid allegations involving inflated accounts:
"What's interesting from a markets and governance perspective is that the allegations about CMR's finances first surfaced in January when US short-selling firm Glaucus Research Group published a report recommending a "strong sell" because, among various reasons, CMR's claim (on its website) that it is China's largest scrap metal recycler was a "lie" and that "many of the company's key financial and operational metrics deviate so significantly from other scrap metal recyclers that its reported performance defies credibility".
"Those which act responsibly like Glaucus by providing full disclosure can complement regulatory efforts and should be viewed as an important component of the governance framework."
[5] Everything was going nicely with MISC, minority investors rejected the low offer from PETRONAS (a nice and rather rare victory for shareholder activism in Malaysia) and the share recovered to a price that was higher than the offer price (again, indicating that the offer was really not sufficient). But things have changed quickly, PETRONAS wants to ship the liquid gas themselves. With PETRONAS controlling MISC (whose main source of input is the transport of liquid gas), a clear conflict of interest situation will be created. I hope that PETRONAS will reconsider their plans, this new development doesn't sound like a good idea at all. KiniBiz's "Tiger" asked the following pertinent questions:
• Is it Petronas’ intention to deliberately undermine MISC’s prospects so that the price can be depressed for another future takeover offer by Petronas?
• If it is, is it the right way for Petronas to behave as a national oil corporation which has or should have high standards of corporate governance?
• Is this what we can expect from Petronas in terms of its other listed subsidiaries — go to the market, get investors, try and privatise for a low price and if that fails, deliberately sabotage that listed company so as to mount another takeover on it?
• Is this an act of vengeance that the misguided management is trying to impose on minority shareholders for rejecting the offer, even if the move will ultimately undermine and perhaps even destroy its very own subsidiary?
[6] My article "Maemode: accurate predictions by Ze Moola, but why did nobody notice?" received quite a lot of web traffic. I uncovered some more issues and hope to revisit this subject in the future in more detail.
[7] There has been speculation in the press of an IPO of POSH Semco, a subsidiary of POSH in which Maybulk has invested close to RM 1 Billion. I don't like to react on speculation (which has been proven so often to be wrong), I just like to point out that POSH itself (the mother company of POSH Semco) was supposed to be listed within 5 years, a term that will expire before the end of this year. Also, there is still a put option by Maybulk to sell back their stake in POSH at a premium of 25% to their purchase price. I have written many times about the extremely pricey purchase of POSH by Maybulk during the depth of the global crisis, especially regarding the questionable valuation report and the biased independent report. I hope that the minority investors are given the right to decide if the put option will be exercised or not, and that the majority investors will abstain from voting, although I doubt this will actually happen.
[8] And lastly some good news reports KiniBiz, which can be seen as another victory for shareholder activism in Malaysia:
"Final ‘voluntary termination’ payments were issued today in a media conference called by the management company of the beleaguered Country Heights Grower Scheme.....
Today’s payment by the management company of the scheme, Plentiful Gold-Class to CIMB Commerce Trustee comprised a 90% capital refund of RM182.9 million, unclaimed monies with regard to the first 10% capital refund and a goodwill payment of RM25 million by Lee Kim Yew, the founder and head of the Country Heights Grower Scheme."
Showing posts with label Country Heights. Show all posts
Showing posts with label Country Heights. Show all posts
Tuesday, 6 August 2013
Monday, 11 February 2013
Weekly roundup: MISC, growers scheme, RBTR
Wishing all readers happy holidays.
Petronas & MISC
More and more pressure is mounted on Petronas to increase their offer price and on EPF to reject the current offer on the table.
P Gunasegaram wrote about the issue in Malaysiakini, the article can be found here for free. The article is very good, I strongly recommend it to the readers, nothing more to add.
MSWG has also entered the battle, in "The Observer" dated February 7, 2013 they write (emphasis mine):
"As the offeror already held 62.67% of total MISC shares, it requires another 27.33% to reach not less than 90% to have MISC delisted. However to compulsorily acquire MISC the threshold level must reach 96.3%. And to ensure the privatisation is successful and accepted by the minorities a better price should be offered.
In addition, the points to note for readers are as follows:
1. Shipping is mired with many challenges and low freight rates. More importantly we need to understand the long term contracts at good rates versus that of spot transactions which are subjected to competitive rates.
2. MISC disposed the loss-making liner business, thus the situation should look more promising for the company.
3. Last but not least MISC had issued rights issue at RM7.00 in 2010 for every 5 shares held. Based on this the average cost per share was about RM8.25 and with the offer price of RM5.30 per share, investors who had subscribed would suffer a significant loss.
We will look at it again the fairness of the offer upon the issuance of the offer document."
As usual, I have nothing against a General Offer, in the contrary, but I hate those accompanied by a "delisting and compulsory acquisition threat", against which minority shareholders have hardly any chance. In this particular case, should minority shareholders who decided not to sell when the MISC shares were going for around RM 8 (between 2005 and 2011) be pressured to sell at a much lower price?
EPF claimed it is actively fighting for its rights, this case might be good to prove it means business.
Country Heights Grower Scheme
"All's well that ends well."
Many questions are still not answered, like:
Still a good moment for the authorities to relook at the whole saga, if things can be improved regarding these alternative investment schemes.
For a long list of related articles, please visit MSWG's website on this subject.
RBTR
The Securities Commission has filed a suit against RBTR and seven other defendants:
RBTR ASSET MANAGEMENT BERHAD
AL ALIM BIN MOHD IBRAHIM
VALENTINE KHOO
LOCKE GUARANTY TRUST (NZ) LIMITED
LOCKE CAPITAL INVESTMENTS (BVI) LTD (British Virgin Islands)
ISAAC PAUL RATNAM
NICHOLAS CHAN WENG SUNG
JOSEPH LEE CHE HOCK
The details can be found on the website of the SC. I have written about this case before.
“We are concerned that no further action was taken because the case involves Bank Rakyat chairman Tan Sri Dr Syed Jalaludin Syed Salim and Bank Rakyat managing director Datuk Kamaruzaman Che Mat,” he added. Bank Rakyat had once held a 20 per cent stake in RBTR and lent its “Rakyat” name and logo to RBTR, then called Rakyat BTR Capital Partners Sdn Bhd, when RBTR had solicited funds from the public from mid-2007 till mid-2008. Syed Jalaludin and Kamaruzaman were directors of RBTR before Bank Rakyat sold its stake in 2008.
Searching for "Rakyat" in the statement of claim gives the following three hits:
26. In early 2007, Isaac was introduced to Al Alim by one Tan Sri Dato’ Dr. Syed Jalaludin Syed Salim, the then Chairman of Bank Rakyat Berhad and Director of RBTR, to explore new business opportunities.
43. At all material times during the marketing and/or promotion of the EDI Scheme to Malaysian investors , RBTR described it self as “Rakyat BTR”, an “associate of Bank Rakyat Group’. SC contends that RBTR therefore deliberately gave the impression to the Malaysian investing public that its products were in fact associated with and/or were endorsed by Bank Rakyat, which representation was in fact untrue. SC further contends that this representation was critical towards inducing the Malaysian investing public to invest in the EDI Scheme.
107. Particulars of Breach: (d) (i)
using the “Bank Rakyat” logo and describing itself as an “Associate of Bank Rakyat” in the EDI Scheme Promotional Material without the knowledge or acquiescence of Bank Rakyat knowing that this was likely to be material in inducing investors to participate in the EDI Scheme;
We need to wait for details from the civil suit to find out more details regarding this case and Bank Rakyat and its directors, enough questions remain. For instance:
Petronas & MISC
More and more pressure is mounted on Petronas to increase their offer price and on EPF to reject the current offer on the table.
P Gunasegaram wrote about the issue in Malaysiakini, the article can be found here for free. The article is very good, I strongly recommend it to the readers, nothing more to add.
MSWG has also entered the battle, in "The Observer" dated February 7, 2013 they write (emphasis mine):
"As the offeror already held 62.67% of total MISC shares, it requires another 27.33% to reach not less than 90% to have MISC delisted. However to compulsorily acquire MISC the threshold level must reach 96.3%. And to ensure the privatisation is successful and accepted by the minorities a better price should be offered.
In addition, the points to note for readers are as follows:
1. Shipping is mired with many challenges and low freight rates. More importantly we need to understand the long term contracts at good rates versus that of spot transactions which are subjected to competitive rates.
2. MISC disposed the loss-making liner business, thus the situation should look more promising for the company.
3. Last but not least MISC had issued rights issue at RM7.00 in 2010 for every 5 shares held. Based on this the average cost per share was about RM8.25 and with the offer price of RM5.30 per share, investors who had subscribed would suffer a significant loss.
We will look at it again the fairness of the offer upon the issuance of the offer document."
As usual, I have nothing against a General Offer, in the contrary, but I hate those accompanied by a "delisting and compulsory acquisition threat", against which minority shareholders have hardly any chance. In this particular case, should minority shareholders who decided not to sell when the MISC shares were going for around RM 8 (between 2005 and 2011) be pressured to sell at a much lower price?
EPF claimed it is actively fighting for its rights, this case might be good to prove it means business.
Country Heights Grower Scheme
"All's well that ends well."
Many questions are still not answered, like:
- Were the investors properly informed about the marketing expenses?
- Were the investors timely informed about the situation of the low yields at the plantation?
- Was the independent report of sufficient quality, highlighting all important issues?
- Why the hurry, with all being scrambled just before CNY?
Still a good moment for the authorities to relook at the whole saga, if things can be improved regarding these alternative investment schemes.
For a long list of related articles, please visit MSWG's website on this subject.
RBTR
The Securities Commission has filed a suit against RBTR and seven other defendants:
RBTR ASSET MANAGEMENT BERHAD
AL ALIM BIN MOHD IBRAHIM
VALENTINE KHOO
LOCKE GUARANTY TRUST (NZ) LIMITED
LOCKE CAPITAL INVESTMENTS (BVI) LTD (British Virgin Islands)
ISAAC PAUL RATNAM
NICHOLAS CHAN WENG SUNG
JOSEPH LEE CHE HOCK
The details can be found on the website of the SC. I have written about this case before.
“We are concerned that no further action was taken because the case involves Bank Rakyat chairman Tan Sri Dr Syed Jalaludin Syed Salim and Bank Rakyat managing director Datuk Kamaruzaman Che Mat,” he added. Bank Rakyat had once held a 20 per cent stake in RBTR and lent its “Rakyat” name and logo to RBTR, then called Rakyat BTR Capital Partners Sdn Bhd, when RBTR had solicited funds from the public from mid-2007 till mid-2008. Syed Jalaludin and Kamaruzaman were directors of RBTR before Bank Rakyat sold its stake in 2008.
Searching for "Rakyat" in the statement of claim gives the following three hits:
26. In early 2007, Isaac was introduced to Al Alim by one Tan Sri Dato’ Dr. Syed Jalaludin Syed Salim, the then Chairman of Bank Rakyat Berhad and Director of RBTR, to explore new business opportunities.
43. At all material times during the marketing and/or promotion of the EDI Scheme to Malaysian investors , RBTR described it self as “Rakyat BTR”, an “associate of Bank Rakyat Group’. SC contends that RBTR therefore deliberately gave the impression to the Malaysian investing public that its products were in fact associated with and/or were endorsed by Bank Rakyat, which representation was in fact untrue. SC further contends that this representation was critical towards inducing the Malaysian investing public to invest in the EDI Scheme.
107. Particulars of Breach: (d) (i)
using the “Bank Rakyat” logo and describing itself as an “Associate of Bank Rakyat” in the EDI Scheme Promotional Material without the knowledge or acquiescence of Bank Rakyat knowing that this was likely to be material in inducing investors to participate in the EDI Scheme;
We need to wait for details from the civil suit to find out more details regarding this case and Bank Rakyat and its directors, enough questions remain. For instance:
- Bank Rakyat must have noticed that RBTR was promoting the EDI Scheme with the Bank Rakyat logo on it, did it take immediate and decisive action?
- Did Bank Rakyat have a 20% stake in RBTR, if so when did it dispose of it?
- Who were the directors of RBTR from mid-2007 until now, are they all included in the civil suit, if not why?
Sunday, 27 January 2013
Weekly roundup: Country Heights, gold trading, Protasco, CDS information leaked
MSWG has tackled the "Country Heights Grower Scheme", according to this article in The Star:
“Why the rush to terminate when the prevailing average crude palm oil (CPO) price is still hovering around RM2,300 per tonne, which is above the minimum RM800 per metric tonne?”
Rita pointed out that Ferrier Hodgson, the independent adviser, had stated that a shortfall between the grower's fee payable of RM215mil (contributed by the subscribers) and the underlying value of the land at RM129mil cast doubt on the recoverability of the grower's fee.
“Would CHGS be able to refund the capital of about RM215 million in this two years?” questioned Rita.
“If the net yield payments were not made, would it not be deemed as a breach of the terms and conditions of the agreement signed between the subscribers and CHGS?”
“Why is there a difference, ie, RM86mil, ie, RM215mil and the value of the land, ie, RM129mil? Why was there no professional valuation carried out for the said land?”
The first grower scheme in the country will be seeing its general meeting next month on Feb 8.
“In addition, what was the reason for fixing the general meeting date a day before the Chinese New Year's celebration, given the expected long break holiday?”
These seem to be all very valid questions. Although Country Heights is a listed company, the details of this kind of investment scheme can not be found on the website of Bursa Malaysia.
On MSWG's website Rita writes:
"It is time market regulators re-examine all such schemes, its structure and marketing taglines to ensure that subscribers/investors are protected"
This scheme is attracting a lot of attention in the forums, for instance on lowyat.
An old link from a Bloomberg interview with Country Heights's Lee about the Grower scheme:
``It's like money dropping from the tree,'' Lee, managing director of developer Country Heights Holdings Bhd., said July 2. ``I'm a very conservative guy. The only risk they take is the price of the palm oil.
Bee Garden Holdings Sdn., owned by Lee's wife and which runs the project, has sold 8,000 of the available plots, and expects to sell the rest by the end of the year, said Lee.
"Under the so-called Country Heights Grower Scheme, plot buyers will receive 12 percent each year on the amount invested if palm oil averages above 2,100 ringgit a ton from the fourth year onward, and a further 5 percent depending on the plantation's output. If palm oil prices are lower, the annual return drops on a sliding scale, paying 1 percent if the price of palm oil is between 901 ringgit and 1,100 ringgit a ton. There is no return on a price below 800 ringgit. ``It's very difficult for the price to drop below 800,'' Lee said. ``The potential is so great on palm oil.'' In total, annual returns will probably range from 11 percent to 17 percent from the fourth year onwards, the project's prospectus says."
With palm oil around RM 2,300 per ton, annual returns should be good, so MSWG's concerns regarding the termination of the contract seem to be correct.
A more general article about Malaysian investors hungry for yield and the rise of unregulated investment schemes can be found on Bloomberg.
In Singapore another gold trading company, Gold Guarantee, has apparently run into problems, the newspaper article is mentioned here.
I would caution investors to participate in these kind of schemes. If an investor is bullish about gold, he could invest in one of the large, listed mining companies in the US, Canada or Australia. If an investor is bullish about palm oil, he could consider investing in any of the listed plantation companies. And for property there are the REIT's. Information on these companies is much better and can (for Malaysian companies) easily be found on Bursa Malaysia's excellent announcements website.
On my posting "Protasco's Puzzling Purchase", "anonymous" suggested that the purchase might have to do with the recent change in directors and shareholding. "Ronnie" mentioned that "MSWG is doing a fine job given its limited resources. Hopefully they will do something or raise the alarm.", with which we agree.
The red flags are too numerous to count, and the announcement was of extremely poor quality. Not a single reason (production numbers, proven/probable/possible reserves of oil or gas, large historic profit numbers) was given why PT ASI would be worth that much money. A valuation would be done, but is it not the normal way first to do research before one buys a part of a company?
And then there was the saga of CDS account information possibly having being leaked. The Star's editor Risen Jayaseelan suggests to make the list of the largest 1000 shareholders available, for a price:
News editor Risen Jayaseelan reckons that if made available, the latest shareholder list of companies like Hong Leong Capital Bhd would be a sought-after item, as it would shed light on who is really buying the shares at prices above the takeover offer.
Bursa Malaysia was initially reluctant to investigate, hiding itself behind the excuse that it had not received any complaint. If information is credible (which it appeared to be, from different sources), then Bursa should just act and not use these kind of excuses, but act pro-actively and fast. Luckily, a few days later did it had indeed started an investigation into this matter, according to The Edge.
Busy days for the regulators.
“Why the rush to terminate when the prevailing average crude palm oil (CPO) price is still hovering around RM2,300 per tonne, which is above the minimum RM800 per metric tonne?”
Rita pointed out that Ferrier Hodgson, the independent adviser, had stated that a shortfall between the grower's fee payable of RM215mil (contributed by the subscribers) and the underlying value of the land at RM129mil cast doubt on the recoverability of the grower's fee.
“Would CHGS be able to refund the capital of about RM215 million in this two years?” questioned Rita.
“If the net yield payments were not made, would it not be deemed as a breach of the terms and conditions of the agreement signed between the subscribers and CHGS?”
“Why is there a difference, ie, RM86mil, ie, RM215mil and the value of the land, ie, RM129mil? Why was there no professional valuation carried out for the said land?”
The first grower scheme in the country will be seeing its general meeting next month on Feb 8.
“In addition, what was the reason for fixing the general meeting date a day before the Chinese New Year's celebration, given the expected long break holiday?”
These seem to be all very valid questions. Although Country Heights is a listed company, the details of this kind of investment scheme can not be found on the website of Bursa Malaysia.
On MSWG's website Rita writes:
"It is time market regulators re-examine all such schemes, its structure and marketing taglines to ensure that subscribers/investors are protected"
This scheme is attracting a lot of attention in the forums, for instance on lowyat.
An old link from a Bloomberg interview with Country Heights's Lee about the Grower scheme:
``It's like money dropping from the tree,'' Lee, managing director of developer Country Heights Holdings Bhd., said July 2. ``I'm a very conservative guy. The only risk they take is the price of the palm oil.
Bee Garden Holdings Sdn., owned by Lee's wife and which runs the project, has sold 8,000 of the available plots, and expects to sell the rest by the end of the year, said Lee.
"Under the so-called Country Heights Grower Scheme, plot buyers will receive 12 percent each year on the amount invested if palm oil averages above 2,100 ringgit a ton from the fourth year onward, and a further 5 percent depending on the plantation's output. If palm oil prices are lower, the annual return drops on a sliding scale, paying 1 percent if the price of palm oil is between 901 ringgit and 1,100 ringgit a ton. There is no return on a price below 800 ringgit. ``It's very difficult for the price to drop below 800,'' Lee said. ``The potential is so great on palm oil.'' In total, annual returns will probably range from 11 percent to 17 percent from the fourth year onwards, the project's prospectus says."
With palm oil around RM 2,300 per ton, annual returns should be good, so MSWG's concerns regarding the termination of the contract seem to be correct.
A more general article about Malaysian investors hungry for yield and the rise of unregulated investment schemes can be found on Bloomberg.
In Singapore another gold trading company, Gold Guarantee, has apparently run into problems, the newspaper article is mentioned here.
I would caution investors to participate in these kind of schemes. If an investor is bullish about gold, he could invest in one of the large, listed mining companies in the US, Canada or Australia. If an investor is bullish about palm oil, he could consider investing in any of the listed plantation companies. And for property there are the REIT's. Information on these companies is much better and can (for Malaysian companies) easily be found on Bursa Malaysia's excellent announcements website.
On my posting "Protasco's Puzzling Purchase", "anonymous" suggested that the purchase might have to do with the recent change in directors and shareholding. "Ronnie" mentioned that "MSWG is doing a fine job given its limited resources. Hopefully they will do something or raise the alarm.", with which we agree.
The red flags are too numerous to count, and the announcement was of extremely poor quality. Not a single reason (production numbers, proven/probable/possible reserves of oil or gas, large historic profit numbers) was given why PT ASI would be worth that much money. A valuation would be done, but is it not the normal way first to do research before one buys a part of a company?
And then there was the saga of CDS account information possibly having being leaked. The Star's editor Risen Jayaseelan suggests to make the list of the largest 1000 shareholders available, for a price:
News editor Risen Jayaseelan reckons that if made available, the latest shareholder list of companies like Hong Leong Capital Bhd would be a sought-after item, as it would shed light on who is really buying the shares at prices above the takeover offer.
Bursa Malaysia was initially reluctant to investigate, hiding itself behind the excuse that it had not received any complaint. If information is credible (which it appeared to be, from different sources), then Bursa should just act and not use these kind of excuses, but act pro-actively and fast. Luckily, a few days later did it had indeed started an investigation into this matter, according to The Edge.
Busy days for the regulators.
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