Maxbiz CEO: “RM 50 million is nothing to shout about” (2)

I wrote before about this subject. Two of the many red flags I mentioned:


[2] Maxbiz and five directors received public reprimands and fines:

• MAXBIZ had breached paragraph 9.16(1)(a) of the LR for failing to ensure that the 4th quarterly report for the financial year ended 31 December 2008 ("4th QR 2008") which was announced on 2 March 2009 took into account the adjustments as stated in the Company’s announcement dated 4 May 2009.
• MAXBIZ had reported an unaudited loss after taxation and minority interest of RM6.227 million for the financial year ended 31 December 2008. However, the Company had on 30 April 2009 reported an audited loss after taxation and minority interest of RM76.926 million.
• Bursa Securities also found that the directors of MAXBIZ to be in breach of paragraph 16.11(b) of the LR for permitting knowingly or where they had reasonable means of obtaining such knowledge the Company to commit the above breach.

[4] Directors own not even a single share:

The Securities Commission has now charged one of the above directors, this time for (allegedly) insider trading.


Securities Commission Malaysia (SC) today charged Dato’ Vincent Leong Jee Wai (Dato’ Vincent Leong) for insider trading of shares of Maxbiz Corporation Berhad (Maxbiz).

Dato’ Vincent Leong, 58, was charged at the Kuala Lumpur Sessions Court this morning with two counts of communicating material non-public information between November 2010 and January 2011 to one Leong Wye Keong when he should have known that Leong Wye Keong would tend to dispose shares of Maxbiz Corporation Berhad (Maxbiz). Dato’ Vincent Leong was at the material time the Managing Director of Maxbiz.

The material non-public information for the first charge relates to the decrease in Maxbiz’s shareholders’ equity which was close to Maxbiz being classified as financially distressed. The second charge concerns the classification of Maxbiz as a Practice Note 17 (PN17) company.

Dato’ Vincent Leong claimed trial to both charges. Kuala Lumpur Sessions Court Judge, Puan Azian binti Othman fixed bail at RM250,000 with one surety.  Dato’ Vincent Leong was also ordered to surrender his passport to the court.

Insider trading is punishable under section 188(4) of the CMSA, with an imprisonment term not exceeding 10 years and a fine of not less than RM1 million.


A certain "Leong Wye Keong" is mentioned in this court case (most likely as an aggrieved investor in a fund managed by SJ Asset Management). I am not sure if it is the same person, but it could very well be so, the name is not very common. The court case is against SJ Asset Management (and other parties).

I wrote before:


A strange coincedence is the fact that SJ Asset Management was the 2nd largest shareholder of Maxbiz, an asset management company being examined closely by the Securities Commission (SC) due to irregularities in its accounts.


It is a small world, isn't it?

The Securities Commission is quite active in enforcement regarding insider trading these days. Unfortunately, the cases seem all rather old, the alleged events often took place 6-8 years ago. Does it really need to take such a long time before somebody can be charged?

Warrant of arrest for SJAM head

We posted before about SJAM and its rather curious investment in Maxbiz. Finally after almost two years the Securities Commission issued a warrant of arrest for the head of SJ Asset Management (SJAM):

Why did it take the Securities Commission so unbelievable long to issue this? It looked crystal clear from the start of the investigation (July 2010) that something was very, very wrong here.

Interestingly, the Securities Commission had already warned before about SJAM on its own website, in words that could not be more clear "a scheme to defraud":

Both this list of unauthorised websites/investment products/companies and individuals and the referral list by IOSCO are, by the way, highly recommended, great service in a country where so many cheating schemes (especcially pyramid schemes) seem to thrive. With very limited and slow enforcement, people should stay alert themselves. I hope the lists will be updated regularly.

Some more information about the rather mysterious ties between SJAM and Maxbiz can be found here and here.

Interesting quote from Tan Whai Oon: "For a listed company, we don't normally ask for board representation. there is supposed to be much more transparency in listed companies, there is supposed to be corporate governance and independent board members".

This sounds all rather naive, to hear this from a fund manager in the Malaysian context, may be that is why he is rumored to have gone to Nepal?

Some high net worth customers of CIMB were referred to SJAM, as this article from PWM (Professional Wealth Management) shows: CIMB striving to stand out from the Malaysian crowd. CIMB will definetely stand out from the crowd through this recommendation, but not for the good reasons, their "holistic approach to wealth management" didn't seem to work, at least in this case:

Many, many questions remain in this case:

• How much of their money will clients from SJAM receive back?
• How long was this scheme going on (from The Star: "Subsequently, a senior finance executive of the company spilled the beans on the accounts that have apparently been cooked since 2001")?
• Which company was responsible for auditing the accounts of SJAM?
• Where were the regulators all those years?
• When will finally some justice be done?
• When will all the issues surrounding Maxbiz and Geahin be clarified?
• Etc, etc, etc.

Maybulk, Maxbiz, PMI, AirAsia

Maybulk's share price has risen fast in the last month, in high volume:

Bursa Malaysia issued a "Unusual Market Activity" (UMA) alert, on which Maybulk responded:

"We refer to Bursa Malaysia’s query today in respect of the recent interest in Maybulk shares and wish to announce that the Company is not aware of any reasons or any corporate exercise that may have contributed to the increase in share price and high trading volume of Maybulk shares."

What definitely has changed lately is that the relentless selling by EPF has finally stopped. Up to December 30th 2011 the EPF routinely sold 2 million shares a day at a price around RM 1.50. Many of these shares were bought at double the price in 2009. Hopefully somebody can explain the logic behind this trading.

I have written a lot about Maybulk in the past regarding the controversial Related Party Transaction that took place in 2008, buying POSH shares at a very high price (more than four times the Net Asset Value) in the midst of the global recession:

http://cgmalaysia.blogspot.com/search/label/Maybulk

I have withdrawn my complaint with the authorities (SC & BM) out of protest against the highly unsatisfactory and even unethical way they have handled it. The only thing they have done really well in this case was dragging their feet.

Even up to today, minority investors have not been informed properly about important issues regarding the Related Party Transactions, either the POSH acquisition in 2008 or the (relatively less important) purchase of a vessel in 2009. In its latest year report less than one page (out of 81 pages) is dedicated to POSH, while about half of Maybulks shareholders equity is invested in it.


Maxbiz announced it is expecting profit margins of between 5% and 15% from its fiber network connection project.

http://www.theedgemalaysia.com/business-news/200086-maxbiz-expects-5-to-15-profit-margin-from-fibre-network-connection-project.html

It also made some clarifications in an announcement to Bursa Malaysia about some other projects.

The share price has lately retreated, from a high of RM 0.195 to RM 0.11.

A previous write-up of this blog stated "It is hard to find a company with more red flags than Maxbiz". It would be an immense effort if Maxbix can even stay afloat.

http://cgmalaysia.blogspot.com/search/label/Maxbiz


Pan Malaysian Industries (PMI) is forced to comply with the following: "compensate entitled shareholders of PMI who had sold their PMI Shares between 9.00 a.m. on 24 August 2011 and 5.00 p.m. on 25 August 2011 (“Compensation Period”) for the differential amount between the offer price of RM0.045 per Offer Share and the price at which their PMI Shares were sold during the Compensation Period"

http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/LsvAllByID/06D37FCB8672B1BC4825799200390931?OpenDocument

Apparently there was a timing difference between the moment the General Offer was announced and the moment is should have been announced. Good for shareholders who sold their shares below RM 0.045 during those days, although it will be only a small amount of money, I think, and most of the shareholders will be selling their shares anyhow at huge losses. 

Frankly, this ruling by the SC should be the least worry to PMI. I think there are many, much more serious Corporate Governance issues at stake here:

http://cgmalaysia.blogspot.com/search/label/PMI


The Edge Malaysia reported that AirAsia's airfare issue with the Australian Consumer watchdog (ACCC) has been resolved.

http://www.theedgemalaysia.com/business-news/199990-airasias-airfare-issue-with-australia-consumer-watchdog-resolved.html

"The problem could have been due to an IT issue, and it has been corrected."

However, the website of the ACCC has not yet issued a statement that the issue has been resolved:

http://www.accc.gov.au/content/index.phtml/itemId/2332 

I hope that AirAsia will treat Malaysian consumers as if they were protected by a powerful consumer watchdog similar to the ACCC.

Maxbiz CEO: “RM 50 million is nothing to shout about”

“Frankly, earning about RM 50 million over five years is certainly nothing to shout about for a public listed company”

Where these words uttered by one of the Malaysian captains of industry, whose companies routinely make billions a year? Not exactly, the words are from Datuk Vincent Leong, CEO of Maxbiz.

I found the above quote in The Edge of January 9, 2012 “Will Maxbiz make it this time around?”

Many shareholders of Maxbiz must have lost money, I am sure they would have wanted to see Mr. Leong actually making RM 50 million profit for the company, instead of just talking about it.

Maxbiz is a garment manufacturer with a rather patchy past, it has lost money in each of its last seven years, has huge accumulated losses (RM 107 million to be precise). It tries to turn around its business through a fibre–optic connection project, projected at RM 510 million. Next to that, it also plans to go in property development. Rather ambitious ideas for a garment maker.

I had a look at its latest 2010 year report.

Unfortunately, the cover is the only nice part of the whole report.

An errata of six pages is added containing dozens of corrections, not exactly the hallmark of a company that takes pride in its work.

It is hard to find a company with more red flags than Maxbiz:

[1] Personal changes:

• Lots of changes in the Board of Directors and especially in the audit committee throughout the years
• The previous internal auditor did not resume his position as internal auditor and quit on 25 February 2011
• The (extrernal) auditor also changed in January 2011.

[2] Maxbiz and five directors received public reprimands and fines:

• MAXBIZ had breached paragraph 9.16(1)(a) of the LR for failing to ensure that the 4^th quarterly report for the financial year ended 31 December 2008 ("4^th QR 2008") which was announced on 2 March 2009 took into account the adjustments as stated in the Company’s announcement dated 4 May 2009.
• MAXBIZ had reported an unaudited loss after taxation and minority interest of RM6.227 million for the financial year ended 31 December 2008. However, the Company had on 30 April 2009 reported an audited loss after taxation and minority interest of RM76.926 million.
• Bursa Securities also found that the directors of MAXBIZ to be in breach of paragraph 16.11(b) of the LR for permitting knowingly or where they had reasonable means of obtaining such knowledge the Company to commit the above breach.

[3] The company is involved in numerous court cases.

[4] Directors own not even a single share:

[5] The accounts of Maxbiz are qualified (both off the company itself and some of its subsidiaries), just two statement from the auditors:

• “In the event that full impairment and full provisions of the above matters raised, the full impact on the Group for year ended 31 December 2010 would be RM25,936,874 as additional losses, hence the Group losses would have increased from RM2,394,234 to RM28,331,108.”
• “As at 31 December 2010, the Group and Company’s current liabilities exceeded its current assets by RM16,394,682 and RM7,080,516 respectively.”

[6] Maxbiz appointed Ferrier Hodgson MH Sdn. Bhd. As Investigation Advisor (IA) on 24th February, 2010 to investigate if there were any irregularities and anomalies during the Geahin debt restructuring exercise.

The first of 4 parts of the report was presented to the Audit Committee and the Board of Directors on 28th April, 2010. As announced to Bursa Malaysia Securities Berhad on 30th April, 2010, the contents of the report from Ferrier Hodgson MH Sdn. Bhd. indicates that there is fraud, deception and misrepresentation.

[7] Maxbiz has a “special status” in several ways, but not the ones you like to see:

• On 18 January 2011 the Company announced that pursuant to Paragraph 2.1(a) of PN 17 of the Main Market Listing Requirements, the Company is considered a PN 17 Company.
• On October 7 2005 the Company defaulted on its RULS, since then it is considered a PN 1 Company.
• The company recently received a winding-up petition, its subsidiary had received one on the past.

"Ze Moola" wrote a few interesting articles about MaxBiz:

http://www.whereiszemoola.blogspot.com/search/label/Maxbiz 

Yet, dispite all the gloom, the share price suddenly took off:

The buyers must be quite positive about the future of this company. If this is based on any realism, time will tell …..

A strange coincedence is the fact that SJ Asset Management was the 2^nd largest shareholder of Maxbiz, an asset management company being examined closely by the Securities Commission (SC) due to irregularities in its accounts.

http://biz.thestar.com.my/news/story.asp?sec=business&file=/2010/7/7/business/6618258

“It was reported by a weekly that SJAM managing director Whai Onn Tan had gone missing, together with several million ringgit from the company.”

It is rather strange to see an asset manager investing in a company like Maxbiz with such poor fundamentals.

When things were still going better with SJ Asset Management, its boss joined in a charity raising event:

http://vimeo.com/8536328

Event Highlight Video l Live To Love Charity Event from U Arte`House 優藝製作 on Vimeo.