MyEG shares jump after juicy government contract (3)

I wrote before about this issue, here and here.

Bursa announced the following enforcement:


Bursa Malaysia Securities Berhad (635998-W) (Bursa Malaysia Securities) has publicly reprimanded My E.G. Services Berhad (“MYEG” or “the Company”) and its Managing Director, Wong Thean Soon for breaching the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (Main LR).  In addition, the Managing Director has been fined RM50,000.

MYEG is publicly reprimanded for breaching paragraph 9.08(2) of the Main LR which prescribes that a listed issuer must ensure that no disclosure of material information is made on an individual or selective basis to analysts, shareholders, journalists or other persons unless such information has previously been fully disclosed and disseminated to the public (i.e. to Bursa Malaysia Securities pursuant to paragraph 9.08(5) of the Main LR).  In the event that material information is inadvertently disclosed on the occasion of any meeting with analysts, shareholders, journalists or others, it must be publicly disseminated as promptly as possible.

MYEG had at the CIMB Conference on 6 January 2015 disclosed the government’s decision for MYEG to implement the fully online renewal of foreign workers’ permit from 2015 onwards (“the New Renewal of Foreign Workers Permit Arrangement”) as well as impact of the same to the Company (e.g. market share and market potential).

However, the announcement on the New Renewal of Foreign Worker Permit Arrangement was made to Bursa Malaysia Securities only on 9 & 12 January 2015 and even so, without any disclosure of details of its impact / implication on MYEG’s financials which was disclosed in MYEG’s presentation to the fund managers at the CIMB Conference.

The New Renewal of Foreign Workers Permit Arrangement was material / significant to the Company’s business and prospects as well as financials to MYEG particularly as the arrangement would increase the Company’s market share on renewal of foreign work permits from 8% (based on MYEG’s representation at the CIMB Conference) to 100%.

There was a significant increase of up to 26% in the Company’s share price from 6 January 2015 to 9 January 2015 with high volume traded following MYEG’s presentation at the CIMB Conference on 6 January 2015, the CIMB Equities research report issued on 7 January 2015 which had, amongst others, stated that the target price for MYEG was to be RM7.80 (from RM5.28) and The Star article on 9 January 2015 which had reported on the New Renewal of Foreign Workers Permit Arrangement. 

Wong Thean Soon, the Managing Director of MYEG is publicly reprimanded and fined RM50,000 for breaching paragraph 16.13(b) of the Main LR where he had permitted the Company’s breach of paragraph 9.08(2) of the Main LR.  He had selectively disclosed information on the New Renewal of Foreign Workers Arrangement in making the presentation for MYEG at the CIMB Conference on 6 January 2016.

In addition to the public reprimand, MYEG is required to undertake or arrange for the necessary training programme(s) in relation to compliance with the disclosure obligation under the Main LR and ensure its directors and relevant personnel of the Company attend the same.
Bursa Malaysia Securities views the contravention seriously as the disclosure obligations are fundamental obligations of listed companies to preserve and sustain market integrity and investor confidence.

Bursa Malaysia Securities has reminded MYEG and its Board of Directors on their responsibility to maintain the appropriate standards of corporate responsibility and accountability to its shareholders and the investing public.


The above enforcement was expected, it is reasonably fast and gives the right amount of detail in the above press release, both regarding the impact of the contract on the business of MyEG and on the share price.

However, the size of the fine (only RM 50K) looks very low, is this really an adequate deterrent? Especially since Wong Thean Soon settled only a few months before the highest regulatory amount in the history of the SC:


"On 26 September 2014, Wong Thean Soon (“TS Wong”), entered into a settlement with the Securities Commission Malaysia (“SC”) in the sum of RM7,000,000 when he agreed without admission or denial of liability, to settle a claim that the SC was proposing to institute against him and 13 others for the manipulation of MyEG Services Berhad shares between 16 January 2007 and 24 April 2007, contrary to section 84(1) of the Securities Industry Act 1983."

MyEG shares jump after juicy government contract (2)

I wrote before about this issue.

MyEG announced on January 14, 2015 (emphasis mine):


The Board of Directors of MY E.G. Services Berhad (“MYEG”) wishes to clarify that there were no delay in announcing the online renewal of foreign maid and foreign worker permits (also known as “Pas Lawatan (Kerja Sementara) (“PL(KS)") as the service has been available to the public on MYEG’s portal at www.myeg.com.my since 2011 with the launch of the online renewal of foreign maid PL(KS) followed by the launch of the online renewal of foreign worker PL(KS) in 2013.

The Board of Directors also wishes to clarify that the online renewal of foreign maid and foreign worker PL(KS) are part of MYEG’s ordinary course of business involving development and implementation of E-Government services and the provision of other related services for the E-Government initiatives.

Further, the Board of Directors would also like to clarify the following:-

1)     The original scope of service was to enable the public to renew their foreign maid and foreign worker PL(KS) online which has not changed with the recent cessation of PL(KS) renewal at Immigration Department’s counter. Nevertheless, the Government mandated for MYEG to compile the database of foreign worker which is to be accessed by the Government without increasing the fee to be collected by MYEG.

2)     Previously, PL(KS) can be renewed through the Immigration Department’s counter or through MYEG’s portal. The recent announcement by the government to only allow foreign maid and foreign worker PL(KS) to be renewed online through MYEG’s portal is at the prerogative of the Government which MYEG cannot make any announcement on behalf of the Government. The online renewal of foreign maid and foreign worker PL(KS) contributed approximately 5% of MYEG group’s revenue for the first quarter of financial year ending 30 June 2015, before the cessation of PL(KS) renewal at the counter. The cessation of PL(KS) renewal of foreign maid and foreign worker at the counter is expected to contribute positively to the earnings of MYEG’s group in the future, but we are not able to ascertain the exact impact at this point in time.

3)     The convenience fee approved by the Government was RM38 which has been imposed since the start of the online renewal of foreign maid and foreign worker PL(KS) in the years 2011 and 2013 respectively. There was no revision to this amount even with the cessation of PL(KS) renewal at Immigration Department’s counter and the expansion of the scope of service requested by the Government as stated in Section (1) above.


Is the announcement that PL(KS) can only be renewed through MyEG's portal material information?

If so, should it have been disclosed by MyEg in a timely matter to Bursa's announcements website?

I guess that Bursa and SC will look into this matter.

The Edge Malaysia wrote in their weekly publication of January 19, 2015:


".... But this is material information that would brighten its earnings prospects and timely announcement is necessary for the investing public to make informed decisions.

If such information is not revealed to the public, would it be considered insider trading if those investors who were privileged to get hold of the news at a conference two weeks ago traded in MyEG's shares?

Indeed, MyEG's shares soared following CIMB Research's report on the development after the conference.

No doubt, the company cannot speak on behalf of the government, in this case the Immigration Department, as it is not owned or controlled by the government. Yet, its top executives chose to reveal the information to a small group of fund managers at an investment roadshow.

Perhaps, it is time for the government departments to be mindful of prompt disclosure - a practice prized by Bursa Malaysia and the Securities Commission."


Page 40 of Bursa's Corporate Disclosure Guide:

 

And page 54:

 

 

 



MyEG shares jump after juicy government contract

Article in The Star, some snippets:


Shares of MyEG Services surged at mid-morning on Wednesday after it was appointed by the government to compile and maintain database on the country’s foreign workers.

CIMB Research in a note said that it has raised MyEG's target price from RM5.28 to RM7.80.

It said the database will come from employers of foreign workers that must use MyEG’s online foreign workers work permit renewal services (FWPR) from 2015 onwards.

“We bump up our EPS forecasts by 38%-63% to reflect higher earnings mainly from the FWPR...."


Looks like MyEG got a pretty juicy contract here. According to CIMB Research the company was suddenly about 50% worth more, just because of this single contract.

Good news also for major shareholder Wong Thean Soon, who owns 44 million shares directly and 197 million shares indirectly. If the estimate of CIMB is correct than his worth has increased by more than half a billion RM.

Suddenly the highest regulatory settlement in the history of the Securities Commission doesn't look that large anymore:


"On 26 September 2014, Wong Thean Soon (“TS Wong”), entered into a settlement with the Securities Commission Malaysia (“SC”) in the sum of RM7,000,000 when he agreed without admission or denial of liability, to settle a claim that the SC was proposing to institute against him and 13 others for the manipulation of MyEG Services Berhad shares between 16 January 2007 and 24 April 2007, contrary to section 84(1) of the Securities Industry Act 1983."