Sabana Reit: shareholder activism

Shareholder activism is still very rare in Singapore (or Malaysia for that matter), so if it happens, we have to take note.

Some disgruntled shareholders of Sabana Reit have started a blog, voicing their discontent with the high fees that the company is paying, and proposing a restructure (bringing the management inside the listed company), which deals with the current conflict of interest between the management and the shareholders of the Reit.

Two snippets:


The Total Fees paid to the External Manager/Property Manager was $8,513,000 in 2013, $9,683,000 in 2014 and $9,288,000 in 2015!!!

On the other hand, the Annual Distribution per Unit paid to us DROPPED FROM 9.38 CENT TO 6.85 CENT in the same period.  We need to do something fast!!!



The share price of Sabana, which has performed badly:

The share price fell further after recently a rights issue was announced. With the money form the proposed rights issue new properties will be acquired which will (I assume) increase the management fees even further.

Activist investors in Singapore

From Bloomberg: "Activists Take Aim at Singapore's 'Buy, Pray, Hope' Model"

Some snippets:


Activist investors, having targeted companies in Japan and South Korea in recent years, have discovered a new playground in Asia.

In Singapore, where activist investing was virtually unheard of until now, two companies have found themselves in the crosshairs in the past month alone. Quarz Capital Management Ltd. urged retailer Metro Holdings Ltd. to return excess cash to investors and Dektos Investment Corp. pushed Geo Energy Resources Ltd. to change its debt structure, saying the coal-miner’s shares are undervalued by as much as 60 percent.

The investors are challenging a clubby, consensus-driven corporate culture where shareholder interests have traditionally taken a back seat. In doing so, they’re shining a light on a swathe of small companies that are undervalued, flush with cash and often ignored by analysts.

“We are on the cusp of change here,” said Lawrence Loh, associate professor at the National University of Singapore and director of the Centre for Governance, Institutions and Organisations at the NUS Business School. “Singapore is probably one of the best-kept secrets, it’s a very fertile ground for digging by activist investors.”

Engaging companies publicly came late to the market because generally, “boards and senior management prefer a collaborative approach, which is in line with Asian culture,” said David Gerald, president of the Securities Investors Association of Singapore, an industry group representing shareholders.

That may be starting to change as investors realize that reliability and transparency of local accounting and regulatory frameworks can work in their favor. Activist investors and short sellers are encouraging Singaporean shareholders to speak out at annual meetings and in discussions with management, said Dektos founder Roland Thng.

“In the past in Singapore, it was just a case of ‘I am a shareholder, I buy, I pray, I hope,”’ Thng said. “Now it’s a case of ‘I let my money really work hard for me. But with my voice, I can make it faster.”’

The more critical approach is spreading to retail investors -- a development that will ultimately benefit Singapore, according to Thng.

“Local investors are getting more daring, at least they know that they have the right to do that,” he said. “And that will give a boost to Singapore’s corporate landscape which still is a bit staid and more focused on consensus than in the U.S.”


This blog is all in favour of increased shareholder activism.

How about the situation in Malaysia, will activist investors take on the Board of Directors as well? The "clubby, consensus-driven corporate culture where shareholder interests have traditionally taken a back seat" corporate culture is even more prominent in Malaysia than in Singapore.

Would anybody dare to take on one of the "sleepy", underperforming GLCs, or would that be seen as "efforts to undermine the Malaysian economy". Those scary, threatening words (used to contain any critical remark) are heard more often lately.

Time will tell ....

Revenge of the Small Shareholders

This blog often writes about the very limited chances that minority investors have against the major shareholders.

But sometimes, very rarely, they are in control.

Not so much in the case of RPTs (major shareholders will almost often make sure they have enough "friendly" parties to push the deal through), but when the major shareholders screw up.

And that is exactly what seems to have happened at the AGM of Wuyi Pharma.

David Webb wrote:

Wuyi Pharma (1889): everything failed at our AGM

Company announcement, 2-Jun-2016 

With a voting turnout of just 0.63%, all the resolutions were defeated, because the brothers who control the company failed to vote. Incidentally, this Cayman-incorporated company, which has no mainland listing, held its AGM in Fuzhou, making it hard for HK shareholders to attend. Serves them right.


According to the announcement:

• The audited financial statements were not received and considered
• Three directors were not re-elected
• The auditor was not re-appointed
• A general mandate to issue new shares was not given

Why were the small shareholders so angry and/or disappointed?

Besides holding the AGM in a remote location, the below share graph might also have a lot to do with that:

Kian Joo: the deal is getting cheaper and cheaper ....

Kian Joo announced a good set of results for its second quarter:

Both revenue and profit are nicely up.

To recall, there is a RPT in which Kian Joo would sell all of its business to Aspire Insight (owned by the the former MD of Kian Joo and EPF), which translates to RM 3.30 per share.

That deal has taken quite some time due to legal reasons, but Bursa has allowed an extension until September 30, 2015.

However, in the mean time no dividend has been paid since 2013, which means that the net assets have grown nicely. The deal looked already cheaper, now even more so.

In the Malaysian context it is very hard to fight these kind of deals. But Datuk Anthony See has a decent stake of about 8.6%, he doesn't like the offer and may be is able to rally the minority shareholders to hold out for a better bid.

The next six weeks will be interesting, both for the minority investors in Kian Joo, and for shareholder activism in Malaysia in general.

Tanjung Offshore: special auditor's report

Three announcements (here, here and here) by Tanjung Offshore regarding the report that was finalized by the special auditor, looking into several possible irregularities.

The first announcement writes that "....the Special Auditor is of the view that there does not appear to be any conflict of interest or related breach of duty with respect to Tan Sri Tan Kean Soon and Muhammad Sabri Ab Ghani.".

Although important news, that was a rather limited announcement, so the company followed up one week later with more detail:

First of all, good news for shareholders activism in Malaysia, because of the complaints by the minority shareholders the ball started rolling.

Six deals were being reviewed, unfortunately not the sale of their main business to Ekuinas, about which I wrote before.

The forensic report does not find any problem regarding the Bourbon deal, since anyhow the company "was legally not in a position to pursue due to the Non-Compete Clause" (which the company signed when it sold its business to Ekuinas.

That might very well be the case, but it is still rather strange, since the non-compete clause was all the time there, it didn't suddenly pop-up. It was also not mentioned in their announcement on June 5, 2014, which does not seem right, surely it should have been explicitly mentioned as condition precedent to the deal that the non complete clause had to be waived by Ekuinas for the deal to proceed.

The Gastec deal is under investigation with the MACC.

The UK property acquisition will be valued. There seems to be an issue with the refurbishment regarding non-performance.

The EPDM project does not appear to have followed the correct procedures.

Regarding the chromite mine, there are several breaches.

Lots of work to do, this is only a first stage of investigation, lawyers, Bursa, MACC and possible other agencies have their work cut our for them.

Japan embracing shareholder activists

Two interesting stories from The Economist regarding the low level of Corporate Governance in Japan, and efforts to make some improvements in that:

Meet Shinzo Abe, shareholder activist
Winds of change

Some snippets:


“Stupid, greedy, adulterous, irresponsible and threatening.” At least the Japanese vice-minister for the economy, speaking about equity investors in 2008, was being honest. Indeed, he could not have summed up most Japanese politicians’ contempt for shareholders any more pithily. But as Shinzo Abe, the prime minister, tries to boost a flaccid economy, official attitudes are changing at last.

Japan’s companies are sitting on ¥231 trillion ($1.9 trillion) in cash, an amount nearly half the size of the economy itself. Mr Abe wants that hoard to boost capital expenditure or wages, or to be returned to investors, who could put it to better use. He thinks a dose of shareholder capitalism will do the trick. Government bigwigs, including Mr Abe himself, now offer meetings to foreign activist investors. A new governance code, which came into force this week, seeks to break open the cosy world of the Japanese boardroom by requiring firms to appoint at least two outside directors.

Big deal, say the sceptics. Japan’s corporate-governance revolution has had many false dawns. However keen the politicians now are on a bit of Anglo-Saxon greed and menace, firms themselves retain a deeply insular culture. Only 274 of some 40,000 directorships are held by foreigners. A mesh of shareholdings still binds big firms together. Japan’s business lobby group, Keidanren, fought to dilute the new reforms. The banks still keep weak companies afloat: the fact that not one of Japan’s listed firms went bankrupt last year, for the first time since 1991, reflects not just a zippier economy, but also lenders’ clubby ties to borrowers. For all his reformist zeal, Mr Abe has yet to embrace measures that make it easier for firms to hire and fire. Hobbesian, Japan is not.

Even so, there are three reasons to think that real change is under way:

• The first is that market pressure is adding to the political pressure.
• Some of Japan’s most prominent companies are also changing their stripes.
• Third, the need for firms to absorb hard-to-employ Japanese workers is diminishing.

Hanergy report

I noticed a report about Hanergy that is interesting enough to mention here.

David Webb noted regarding the SFC investigation: "this refers to an investigation "into the affairs of" Hanergy, not just into dealings in its shares. In our view the suspension of the stock is now likely to continue for quite a while."  

And writing about David Webb, there seems to be a call for more "David Webbs", lets hope this call will be answered:


Financial circles have mixed perceptions about activist investors like David Webb. Individual players hail him as their hero, as he is always there to press corporate management to share profits with minority shareholders.

Surely corporate decision makers and major stakeholders find him annoying. Who would like to have a “troublemaker” like Webb meddling in their business?

But a consultation paper from the Securities and Futures Commission on the Principles of Responsible Ownership is encouraging more Webb-like shareholders, especially institutional ones, to take part in and supervise the day-to-day operations of the firms they invest in.

Weekly roundup

Regarding Cliq: The Edge wrote an article "Potential adjustment to price of Cliq’s QA". Some snippets and comments:


Ahmad Ziyad said that if a disparity between the oil price and the purchase price still exits in March, the assets’ price tag may be adjusted by 5% of the current amount, or no less than US$218.5 million.


Five percent adjustment is not that much, the impact of the lower oil price on the price should be much higher, in my opinion.


When asked why Phystech was willing to sell its assets, Ahmad Ziyad said: “They think that all this while they have not realised the full potential of the field.”


That is not what I hoped to read, better something like: "there is enormous potential, but the company has not enough funds to explore, so Cliq will purchase new shares in the new SPV with which new exploration wells will be drilled, old machinery will be replaced by new, efficient ones".


I have been very critical of SPACs from the start, I am afraid I have not yet seen any reason to change my mind in this matter.


MSWG wrote in their newsletter of March 27, 2015:

That is indeed good news. However, I like to note that Amin is a large shareholder of Integrax. For small shareholder (in the absence of large shareholders fighting to get a better deal) there should also be enough venues to participate in shareholders activism. In some countries I have noted class action suits, taken up by an organisation similar to MSWG, with large amounts of minority investors chipping in. That scenario still appears far away in the Malaysian context.


Kinibiz wrote: "At SP Setia, a conflicted ex-chief judge", a snippet:


Can the chairman of a public-listed company rightly hold shares in another public-listed company — a direct rival at that?

Common sense says no. In fact the law also says this should not be. But this scenario is exactly what has unfolded with regards to SP Setia chairman Zaki Azmi.

Zaki, a former chief justice, holds 19.12 million shares in Eco World Development Group as of Jan 22, according to the latter’s latest annual report. On that date this corresponded to 3.77% of Eco World’s outstanding shares base, making him the third largest shareholder, and was worth RM37.2 million at Friday’s closing price of RM1.95 per share.

And it was not just Zaki. Eco World’s latest annual report also reveals that SP Setia’s two foremost management executive — acting CEO Khor Chap Jen and acting COO Wong Tuck Wai — holding 2.29 million and 1.53 million shares respectively as of Jan 22 this year. The shareholdings come to 0.45% and 0.3% respectively of the outstanding shares base at that point.

This raises pressing questions of conflict. Foremost is why Zaki and company are apparently turning their backs on the obligation for company directors to actively avoid positions of conflicting interests under Section 132 of the Companies Act, which stipulates that directors must use “reasonable diligence” in the discharge of his duties.

Worse, this rubs salt onto SP Setia’s festering wounds after a massive talent drain to Eco World, which is now counting a legion of former SP Setia men — all the way up to the top — as among its directors, top executives and most of its workforce.


It is indeed rather strange and worrisome, the investments in Eco World of the persons mentioned above are substantial. Will that have an impact in their acting in the best interest of SP Setia?

'No' to Versatile delisting

Article from The Star, shareholder activism taking place in Versatile Creative Bhd, successfully rejecting plans to delist the company. Some snippets:


Minority shareholders in Versatile Creative Bhd (VCB), citing the exit offer of 50 sen per share was not reflective of the company’s true value, have rejected the company’s delisting plan.

“The minority shareholders rejected the delisting because they argued that Versatile is worth more than the current share price (which was taken to fix the exit offer price), taking into account its land and factory assets,” said a minority shareholder.

VCB has two pieces of industrial land – in Pandan Indah, Kuala Lumpur and Balakong, Selangor – which site its factory buildings. As at Dec 31, 2012, both assets were valued at a net book value of RM27.4mil while the company’s market capitalisation is RM55.32mil based on yesterday’s closing price of 50 sen per share.

VCB’s net asset per share is 64 sen for the financial year ending Dec 31, 2013 compared with 56 sen a year earlier.

However the company made a loss of RM3.16mil last year against a profit of RM2.14mil in 2012, with a negative cashflow of RM3.1mil as at end-2013. It was also in the red in financial years 2011, 2010 and 2008.

Apart from the land, VCB has a 6.2% stake in Iris Corp Bhd. The value of this stake has doubled since November last year after Felda Investment Corp took a 26.7% stake in the technology company.

The net book value of this stake or 126.42 million Iris shares is RM62.58mil, based on Iris’ closing market price of 49.5 sen as at the latest practicable date, the shareholder said.

Tanjung Offshore: some shareholder activism

Update: please check out this blog for all oil & gas related matters.


Tanjung Offshore has been in the news lately.

First of all there is an article in The Star: "A tale of two waivers".


Waivers should only be granted in exceptional and extenuating circumstances. One wonders what is the basis for Tanjung Offshore Bhd asking for two significant waivers: one from Ekuiti Nasional Bhd (Ekuinas) against a non-competing clause and another from the Securities Commission (SC) to waive the requirement for Tanjung Offshore’s new shareholders from having to make a mandatory general offer (MGO) despite buying up more than 33% of the company.

To recap, Tanjung Offshore has reportedly already asked Ekuinas to waive the clause (that was inked back in 2012 when the fund bought the offshore support vessels business from Tanjung Offshore) that prohibits Tanjung Offshore from getting into a similar business until mid-2015.

Tanjung Offshore is in the midst of a reverse takeover (RTO) exercise that will see it buying marine vessels from several parties who would end up with more than 33% of the company. Tanjung Offshore is seeking a waiver from the MGO rule. A group of minority shareholders, on the other hand, are opposing this.

It is difficult to fathom why Ekuinas should grant Tanjung Offshore a waiver. Ekuinas had done right by including the non-competitive clause after paying a whopping RM220mil for Tanjung Offshore’s OSV assets.
 
Ekuinas’ planned floatation of Icon Offshore Bhd (which is essentially the asset it had acquired from Tanjung Offshore) already has some challenges in the form of seemingly toppish valuations and one report questioning the certification of some of Icon Offshore’s vessels. The last thing it would need is having another competitor creep into the same sector.

As far as the MGO waiver is concerned, it should be opposed as minority shareholders should be protected in this deal by offering them a chance to exit the business at the same price the new shareholders are buying into the company.


I like to draw the readers attention to the word "whopping". To put things in perspective, these assets were injected into Icon Offshore, a company that will IPO at a valuation of RM 2.2 Billion. In other words exactly ten times the price that Tanjung received for its assets. I have to admit, there were other assets in Icon Offshore, and Ekuinas might have injected funds or loans into Icon Offshore. But still, there is a huge valuation gap, and I would not immediately assume that Tanjung received a whopping amount. My guess is that the deal in 2012 was very good for Ekuinas, not so much for Tanjung Offshore. That assumption is also based on the fact that part of the IPO proceeds of Icon Offshore will go towards its existing shareholders and part will be used to shore up its balance sheet.

One group of Tanjung Offshore minority shareholders seems to have this same opinion, according to this article in The Malaysian Insider: "16 minority shareholders oppose Tanjung deal, say they are shortchanged".


“The directors have a bad track record when it comes to striking deals, and this transaction does not look good,” Chuah told The Malaysian Insider yesterday.


My guess is that Chuah was referring to the sale of its assets to Ekuinas in 2012.


"If Tanjung is exempted from the MGO, the new owner or investor will become the controlling shareholder. This means we don't have the option of cashing out and will have to go along with whatever deal that is struck.” Chuah said that with the RTO, Tanjung is expected to return to the same business it disposed of two years ago, as Bourbon is involved in marine vessel services. Chuah fears that the minority shareholders would be asked to cough out extra cash in order to complete the deal, and questioned why they were excluded from the deal.


The CI is currently in record territory, but the share price of Tanjung Offshore has languished, despite being in an industry that is perceived to be quite "hot" these days. The company did pay out a dividend of RM 0.44 in 2012, which explains the sudden drop (the share going "ex"), but other then that, the share has performed very disappointingly. Another indication that things have not gone very well for the company.

 

 

For me, I have some doubts about the industry. The perception seems to be that there will be lots of growth due to "juicy" contracts by PETRONAS. I doubt that these contracts will be that juicy. Next to that, it seems every single company in this business is raising money to further increase its fleet. Somehow or the other, that doesn't make much sense. And lastly, activities onshore have hugely increased (for instance in North-America) recently through the use of "fracking":

 

 

Hydraulic fracturing is the fracturing of rock by a pressurized liquid. Some hydraulic fractures form naturally—certain veins or dikes are examples. Induced hydraulic fracturing (also hydrofracturing, fracking, and fraccing) is a mining technique in which a high-pressure liquid fluid (usually water mixed with sand and chemicals) is injected to a wellbore in order to create small fractures (usually less than 1.0 mm wide) in the deep-rock formations in order to allow natural gas, petroleum, and brine to migrate to the well.

 

Bernas: are all minority shareholders really treated fair and equal? (2)

I wrote before about the privatisation exercise of Bernas,

In a new twist to this story, The Malaysian Insider published the following article:

"Story behind Syed Mokhtar’s ‘RM2.25 billion tax-exempt’ Bernas deal revealed, says PKR MP"

In it is again allegedly confirmed that minority shareholders of Bernas are not treated the same:


"In the letter, Syed Mokhtar gave his personal undertaking that he would guarantee the national interests of rice in Malaysia. In the relisting of Bernas, 10% shares of Bernas IPO will be allotted to Putrajaya for the National Farmers Association (Nafas) and the National Fisherman Association (Nekmat). Syed Mokhtar also pledged annual contributions to the welfare programmes of Nafas and Nekmat for five years or until the relisting exercise of Bernas was completed."


And that is simply not allowed, according to the rules.

Will the authorities (Securities Commission and/or Bursa Malaysia) investigate the above and take any action, if appropriate? I guess we have to wait and see, even if action is taken it can often take a very long while.

The shares of Bernas have been removed from the Official List of Bursa Securities with effect from 9.00 a.m., Friday, 18 April 2014.

Minorities' right to expect full value (2)

I wrote before about the offer to acquire all shares of CapitaMalls Asia (CMA) by CapitaLand (CL) .

Some moderate good news, CL has increased its offer price from S$ 2.22 to S$ 2.35, an increase of 6%. I still find the offer rather "stingy", but this makes it somewhat better.

It is now up to the minority investors whether they will accept this final offer or not.

From todays "The Business Times" (Singapore), "Bumper Q1 for M&A in Singapore":


It has been a busy first quarter for bankers, here and in other parts of Asia, with a slew of acquisitions and privatisation deals.

Bankers say that it has been a bumper quarter, lifted mainly by privatisations in the property sector, and that they see many more deals in the pipeline.

But some are also watching if greater public dissent by minority shareholders and activists could put a damper on the mergers and acquisitions (M&A) process, including that of pricing.

CapitaLand last Friday sweetened its privatisation offer for CapitaMalls Asia (CMA), of which it already owns about 70 per cent, following concerns that CMA had been undervalued, a point hammered home in a published commentary by former senior managing director at Temasek Holdings, Michael Dee.

Shareholder activism is here to stay, say market insiders.

"There is greater activism around these transactions," Axel Granger, head of M&A for South-east Asia at Bank of America Merrill Lynch, told The Business Times. "Investment bankers will have to pay more attention to the opinion makers. It is a natural evolution. It is something we have seen in the United States, and it is moving to Asia."

But Willard McLane, head of Asean corporate and investment banking at Citi, noted that the current level of activism in this region is still relatively modest.

"I don't see much shareholder activism in Singapore in the way we see it in the US, for example. We haven't seen a lot of cases where shareholders are publicly promoting agendas or blocking deals," he said.

A related article in the same newspaper: "Shareholder activism rises in S'pore".

A discussion about CMA and the offer price can be found on the "ValueBuddies" forum.

Minorities' right to expect full value

In Malaysia low privatisation offers by the large majority shareholder are quite common. The problems are:

[1] no competing offers;
[2] independent directors should maximize returns for all shareholders;
[3] minority shareholders should stand up and fight.

It seems that in Singapore there is a very similar situation.

The first relevant article is by Michael Dee, former regional CEO for Morgan Stanley and senior managing director for Temasek Holdings, it can be found in the Valuebuddies forum.


CMA shareholders should stand their ground against 'fair offer'

CMA is a cash cow and is worth much more than that

THE CapitaLand (CL) offer for the 35 per cent of the CapitaMalls Asia (CMA) shares they do not own is yet another example of the lack of respect for minority shareholders. The post-IPO performance of CMA shares and the paltry premium over the IPO price and book value multiple should concern all CMA shareholders.

At the November 2009 CMA IPO, all of the proceeds went to CapitaLand and none were invested into CMA. Thus the IPO and current offer are just asset trades for CL with no strategic benefit for CMA shareholders. Prior to the IPO, CL shares peaked at $8.60 and during the financial crisis fell almost 80 per cent. A few months later, CMA's IPO was priced at $2.12, closed the first day at $2.30 and the multiple of book value offered was 1.55x. The current offer of $2.22 is valued at a thin 1.2x book value.

Yet, now more than four years later, CL wants to pay only a 4.7 per cent premium to the IPO price, a 3.4 per cent discount to the day one closing price and a 23 per cent discount to the IPO book value multiple. Has CMA really deteriorated that much over the last four years?

At the time of the IPO, CMA had 59 completed projects and today there are 85, a 44 per cent increase. In 2013 vs 2012, revenue, profit and the asset value per share were all up about 10 per cent and operating income increased a whopping 40 per cent. Looking back to the IPO, in 2009, profit was $388 million and for 2013 it was $600 million, an increase of 55 per cent. Total equity in 2009 was $5.5 billion and at year-end 2013, it is $7.2 billion, more than a 30 per cent increase. So operating performance since the IPO has been quite strong and hardly justifies a discounted multiple to book value and a discount to the closing price after the IPO.

CL will stress the offer price is at a premium to recent closing prices. Yet this is illusory as CMA is worth more than its market values and worth much more to CL than the offer price. CMA shares hit a high of $2.66 within days of the IPO on Dec 7, 2009. Two years after the IPO, the shares had fallen 60 per cent to a low of $1.13, while during the same period, the STI was unchanged. Within a few months of the IPO and aside from a few weeks in 2013, the shares traded below the IPO price about 90 per cent of the time. Even today, after the offer, the STI has still outperformed CMA's share price by 35 per cent since the day one close. Most of the dividends have gone to grow the business and reinvest in new projects, yet current investors are not being compensated enough for those investments and the projects currently being developed.

CMA is 65 per cent owned by CL and at least one of the independent directors also sits on CapitaLand's board. Additionally the chairman of CapitaLand and CapitaMalls Asia are the same person. Thus the majority of the Board should not be considered independent in the transaction as five of 10 board members have direct ties to CL. CL has had direct control strategically and operationally of CMA as a public company. This includes a healthy conflict of interest as noted among the 26 pages of Risk Factors of the IPO prospectus; "We cannot assure you (potential CMA investors) that the interests of our (CL) existing Reits or private real estate funds will not conflict or be subordinated to our (CL) interests in such circumstances. Furthermore, we cannot assure you (CMA Shareholders) that conflicts of interest will not arise in future . . ."

As a minority shareholder, the odds are stacked against you. When a 65 per cent shareholder has to decide whether to put minority or their own shareholders first, it is clear that CL comes first. You were warned at the IPO.

CL investors, including Temasek, should wonder why CL is not buying their own shares that are trading at only about 0.8x book value. Is it really the case that the CMA offer is so cheap that it is a better investment than buying CL shares at a 20 per cent discount to book value instead of CMA's 20 per cent premium?

Clearly the market sees the unique value in CMA, value that is not being provided to CMA shareholders. Just look at the CL share price since the CMA offer. Investors and analysts in CL have bid up the CL share price almost 10 per cent, to a level not seen for almost six months.

CL wants to attain 90 per cent so as to delist CMA. This means buying at least 25 per cent of the outstanding shares. No doubt an IFA (independent financial adviser) can be found to give a "fairness" opinion. However there is a big difference between a minimally acceptable fair offer and receiving the full value of the company. CMA investors should expect the independent directors to maximise the value they receive and not just accept a price deemed "fair". But who is negotiating on behalf of CMA shareholders to get the best price?

CL wants to buy CMA as cheaply as possible because it is a great asset. In short, CMA is a cash cow and is worth much more than they are offering now. Shareholders should be prepared to stand their ground in order to attain the full value for giving up their share of the company. CMA is very profitable and has strong dividends so even if CL walks away, the minorities are left with a good yielding asset. The China assets are increasingly valuable now that the government is focused on increasing consumption and domestic demand. CMA shareholders should be happy to hold onto their shares.

One hopes the independent directors will represent only the minority investors to the full extent of maximising the economic potential for shareholders. Since CL has now shown they are negotiating solely on their own behalf, it is up to the minority shareholders to make their decisions about whether they are getting full, fair or inadequate value. As a general matter, if minority investors won't stand up for their rights then they can expect even more poor performance from the majority managers of their assets.

The second letter is at Business Times, partly behind a paywall:

I refer to "Privatisation unhappiness: market is to blame" (BT, April 23), which says in effect that markets fluctuate so you have to take the good with the bad when it comes to takeover offer valuations. I could not disagree more stridently.

What the column fails to take into consideration is that the current rash of takeover complaints deals with a unique class of takeovers - those where a controlling or majority shareholder or consortium who is in control of the corporate entity, makes an offer for the minority shares they do not own. It is a whole different game when a shareholder or group of shareholders are in control of the value of the offer.

Consider this: Temasek used to own 15 per cent of F&N. If it made a bid for the outstanding shares it did not own, would a bidding war have erupted with the velocity we saw last year? Will we see a bidding war for CapitaMalls and Olam, etc? Most certainly not. However, Temasek sold its shares in July 2010 and thus a bidding process was able to unfold whereby all F&N shareholders received the full market value possible, but only because there was competition for the asset.

Now contrast that with today's deals. What bidder is going to emerge for the minority shares with the controlling shareholder(s)? The Temasek consortium controls 52 per cent of Olam and CapitaLand controls 65 per cent of CapitaMalls Asia (CMA). No other bidder is going to step up to drive an undervalued company to its maximum shareholder value. As the article points out, there is no chance the controlling shareholders are going to make a bid at full value - why should they?

The third article is the response from the SIAS on this matter.

Bernas: are all minority shareholders really treated fair and equal?

Bernas (Padiberas National Berhad) has been in the news lately. The first attempt by companies linked to Syed Mokhtar AlBukhari to takeover and thus delist the company failed, but a second attempt succeeded (at least regarding the latter part). Rather surprisingly, since the offer was exactly the same.

Regarding the offer price, it seems to be rather low for such a cash cow, an opinion that MSWG agrees with, according to this article in The Ant Daily:


According to the Minority Shareholder Watchdog Group (MSWG), a prudent estimate of Bernas’ intrinsic value is RM3.2 bil or RM6.13 per share. At a conservative 8.5-11.5% discount with at least a 2% perpetual growth rate, the indicative value of Bernas is estimated at between RM4.18 and RM6.13.


Then why did some of the minority shareholders change their mind and accept the low offer? Is it possible that some received a better offer than others?

Comments made by Agriculture and Agro-Based Industries Minister Ismail Sabri Yaakob clearly seem to indicate that. In an article "Bernas delisting ‘good’ for farmers, fishermen" at KiniBiz website, the Minister allegedly said (emphasis mine):


.... Bernas has agreed to his request to pay Nafas and Nekmat RM2 million each annually even though they are no longer shareholders and are not entitled to a dividend.

“(This is so) that Nafas and Nekmat will still have consistent financial (support) … So it’s a good deal for them. They are well taken care of,” he said.

Ismail Sabri said he had received a “personal undertaking” from Syed Mokhtar that Nafas and Nekmat will be offered 5% each of the shares, should the company be re-listed in the future.


Similar articles can be found here and here reinforcing that the Minister really said this.

That is all very nice for Nafas and Nekmat, I have zero problems with them being treated generously and receiving more than the low one-off payment of RM 3.70 per share.

But there are many other minority shareholders of Bernas, and according to the rules, they should be treated the same, they should receive the same offer. Thus they also deserve a yearly payment and an offer a percentage of shares when Bernas is relisted again.

The Capital Markets and Services Act, paragraph 217, clearly states this:

Lee Won Chen of Shearn Delamore & Co writes it in a very clear manner:

So why have the other minority shareholder not received a similar offer?

Nafas and Nekmat have in the mean time accepted the offer, according to the same article:


The National Farmers Organisation (Nafas) and National Fishermen’s Association (Nekmat) had respectively held 3.7 and 3.2 percent of Bernas shares previously.

However, Bernas, now owned by companies related to tycoon Syed Mokhtar AlBukhari, has since bought the shares.

Because of this the public shareholding has fallen below 10% and the shares of Bernas have been suspended since March 21, 2014.


This of course will put even more pressure on the remaining shareholders, holding shares in an unlisted company is not a very attractive proposition for many.

In an interesting twist, Bursa Malaysia asked the company to clarify an article in The Edge Malaysia dated February 10, 2014, and Bernas answered:


In response to your query, after due enquiry with our Directors and major shareholders, the Board of Directors of Padiberas Nasional Berhad (“Company”), wishes to inform that as at today, the Company is not aware of any written arrangement on the following:

(i) any corporate restructuring that includes an impending relisting plan; and
(ii) where the National Farmers Association (“Nafas”) and the National Fishermen’s Association (“Nekmat”) will eventually hold a 5% stake each in the newly listed entity.


The statements of the Minister on one side and Bernas on the other side seem to contradict each other. The behaviour of Nafas and Nekmat (accepting the same offer offer that they refused earlier) seems to put more weight on the statement of the Minister.

Bursa Malaysia and the Securities Commission should urgently investigate this matter and show that they really practice what they preach:

"to promote and maintain fair, efficient, secure and transparent securities and futures markets and to facilitate the overall development of an innovative and competitive capital market."


On a side note, regular readers of this blog will know that I don't like these "listing-delisting-relisting games" at all, they are "played" mostly by the tycoons, at the expense of the minority investors, who hardly stand a chance. I have yet to read a good and proper reason why a company needs to be delisted and relisted, arguments given are often vague along the lines of "the need to restructure the company". The authorities really should do something about this abuse of the rules and the continued disadvantaging of minority investors.

Triumphal and Perak Corp: unfair privatisations?

Article in The Star: "Will minority shareholders triumph in seeking higher value?".


"It has been reported that a group of individual shareholders who own a combined 4.4% stake in Perak Corp have deemed the RM3.90 per share offer by Perak Corp as “ too low”. This is taking into account the fact that the company’s underlying assets, which have not been revalued in a long time, have appreciated. Perak Corp is the owner of Lumut Port via listed Integrax Bhd – an asset that has huge income-generating potential. Its two major property assets, meanwhile, are the 256.8ha in Bandar Meru Raya and 186ha in Behrang.

The minorities estimate that Perak Corp’s revalued net asset value (NAV) is more than RM12. The company’s NAV per share as at Sept 30, 2013 was RM5.03, while it is sitting on RM180mil in cash.

In Triumphal’s case, the offer of RM1 is at a 65% discount to the company’s NAV per share of RM2.84 as at Sept 30 last year. It has been pointed out by analysts that the company has strong asset backing and was in a net cash position of RM17.81mil as at Sept 30 last year."


Delisting exercises are often unfair in Malaysia, done at a steep discount to its NAV (while sometimes the NAV is even conservatively valued). There is a rather awkward "reward" for controlling shareholders, if they don't extract clear value from a listed company then the share price will go down and the controlling parties are able to privatize the company for a low price. Minority investors are often unable to fight these exercises, being a dispersed group.

However, in this case:


"Two major local institutions now have the opportunity to challenge recent privatisation deals involving Bursa Malaysia-listed firms which are seemingly unfair to minority shareholders. The institutions are Permodalan Nasional Bhd (PNB), which owns 12.18% in Triumphal Associates Bhd, and Sime Darby Property Bhd, which controls a 6.13% block in Perak Corp Bhd."


With the current attention for more shareholder activism by institutional investors, these cases come quite timely. Will PNB and Sime Darby put up a fight?

MSWG holds an investor education forum on January 23, 2014 at 10.30AM about these two cases, but also about Kian Joo Can Factory and BERNAS. Interested parties might want to contact MSWG about this event.

Code for institutional investors

I have often written about the lack of what I call GLF's (Government Linked Funds) in shareholder activism in Malaysia, for instance:

Let’s have real shareholder activism
Institutional investors have to fight
A death knell for shareholder rights


"They have been very disappointing in the last decades, they could have been vocal, they could have voted against controversial deals (especially Related Party Transactions), they chose to stay silent and toe the line. I am sure that if they had issued press releases in the past, announcing how they would vote and why, that newspapers would be more than happy to print their views.

They helped to initially fund MSWG, it looks like these GLF's found that that was enough for them, they let MSWG do the talking and stayed further passive.

I really hope their mentality will change soon; they are managing other people's money and thus have a huge responsibility. We are now Anno 2011, a world where people demand transparency; these GLF's should update their websites, give insights in their holdings, their voting behaviour and their explanations for it, etc."

One of the prime examples of this can be found here, it involves a very controversial RPT cash deal by MMC taking over Senai (a loss making airport) in the midst of the global recession. MSWG tried to organize a meeting, but the following funds could not attend due to "some other work commitment":

• EPF (Kumpulan Wang Simpanan Pekerja)
• PNB
• KWAP (Kumpulan Wang Persaraan)

MSWG and the Securities Commission have issued their "Malaysian Code for Institutional Investors 2014", it is now open for public consultation, the document can be found here.

Some comments:

• What I miss is a general description of the "landscape", mostly some numbers like how much have the institutional funds invested compared to the total market cap of Bursa, in how many listed companies, in how many companies do they have a controlling stake, etc.
• The members of the Steering Committee are almost all from the GLF's, I would have loved to see some participation of non-government linked fund managers like Aberdeen (who is known to fight for the interest of their investors), Public Mutual, etc.
• The paper is luckily quite short and definitely readable, but also on rather high level and thus pretty general; I like more concrete stories from the trenches, what are the really big cases (in my opinion most minority shareholders value has been destroyed through: delisting, relisting, RPT's, private placements), how are they going to tackle those?
• In paragraph 3.4 a list if given how institutional investors can make their concerns known; I think an important avenue is left out, if a company "misbehaves" and (despite feedback given by institutional investors) doesn't repent, then reaching out to the media should definitely be considered. This has happened on many occasions in (mostly) Western countries, and sometimes with success.
• Paragraph 3.5 relates to seeking legal remedies or arbitration. Institutional investors should understand that this is an avenue that is almost impossible for retail investors, the costs do not compensate for possible gains. But institutional investors have often large holdings, and for them it should be a serious consideration. This avenue has so far been neglected.
• Chapter 6: "Institutional investors should publish a voting policy", on important issues (like the ones I described in the previous sentence), I think fund managers should be transparent and publish their specific voting in major issues; people who trusted their money to these asset managers are entitled to know how the asset managers voted.

At the end of the day, the proof is in the pudding, we have to wait and see if there will be a substantial improvement in the involvement by the GLF's, not only passively (behind the scenes), but also more openly and actively ("on the barricades").

Shareholder activism of fund managers works, also in the long term

The recent increase in hedge-fund activism aimed at producing changes in business strategy or leadership—including at large companies such as Apple, Hess, Procter & Gamble and, as announced last week, Air Products—has met intense opposition from public companies and their advisers. Opponents, such as prominent corporate adviser Martin Lipton, argue that such activism is detrimental to the long-term interests of companies and their shareholders: It may pump up short-term stock prices and benefit the activists—who don't stick around to eat their own cooking—but it harms shareholders in the long term.

This "myopic activism" claim has become the key argument for limiting the rights and involvement of public company shareholders. Furthermore, this claim has been successful in influencing the views of Securities and Exchange Commission officials, Delaware judges, and even institutional investors.

But is the claim true? In a comprehensive empirical study, "The Long-Term Effects of Hedge Fund Activism," completed last month and available on the Social Science Research Network, Duke University's Alon Brav, Columbia University's Wei Jiang and I found that it is not.


The above text is from an article in the "The Wall Street Journal", written by Lucian Bebchuk, one of the authors of  the scientific paper "The Long-Term Effects of Hedge Fund Activism", which can be found here.

The article in The Wall Street Journal continues:


"...we undertook a comprehensive empirical investigation of the long-term consequences of activist interventions. Our study uses a data set consisting of the full universe of approximately 2,000 interventions by activist hedge funds from 1994–2007. We identify for each activist effort the "intervention month" in which the activist initiative was first publicly disclosed, and we follow the company for the subsequent five years.

The evidence indicates that activist interventions tend to target underperforming companies, not well-performing ones. During the three years preceding the intervention month, the operating performance of companies targeted by hedge fund activists significantly trails industry peers, and the companies' stock returns are abnormally negative. This slide tends to reverse following activists' interventions.

During the five-year period following the intervention month, operating performance relative to peers improves consistently. On average, the companies targeted by activists close two-thirds of their gap with peers in terms of return-on-assets and two-fifths of this gap in terms of "Tobin's q," a standard measure of how effectively companies turn book value into shareholder wealth."


Fund managers in Malaysia (especially from government linked funds) have been very passive over the last twenty years or so. I have often lambasted that, for instance here.

The above observation regarding hedge fund managers surely also applies to normal fund managers, not only to hedge fund managers. An article written by James Saft on the Reuters website seems to agree with that, some snippets:


"The data is good enough, and the idea compelling enough, that the technique of holding managements' feet to the fire by investors may turn out to be the great hope of the besieged actively managed investment industry. In other words the take-away may not be for all of us to pile into activist hedge funds but instead to push our existing pension and mutual funds to adopt the same tactics."

"I am uncomfortable recommending investing in activist hedge funds for a variety of reasons. Costs are high and the best ones, like Carl Icahn, probably won't take your money anyway.

But why should shareholder activism have to be the special preserve of hedge funds anyway? It doesn't. California Public Employees' Retirement System (CalPERS) has been doing this for decades, and has pushed for more cooperative pressure with other pension funds."

"Too many actively managed funds are closet indexers with high costs, trying to beat the index by picking stocks. If, as some predict, we are in an extended period of structurally low returns in financial markets, the small gains wrung from shareholder activism will prove all the more valuable.

And remember, a pension or endowment might be able to take a different attitude towards activism, pushing for better treatment of shareholders with a long-term view, rather than seeking to unlock value and move on.

Paying for activist management of company management, as opposed to active fund management which simply votes with its feet by buying and selling, might be a long-term trend with big scope for growth."

A death knell for shareholder rights

... thanks to the advent of mutual funds, the insidious reach of the financial sector, and a fragmentation of journalism

Are we seeing the twilight of "shareholder democracy" I wonder, and if so what are the implications for shareholders, "stakeholders", corporate governance and for capitalism itself, not to mention financial analysts and even for financial journalism?

These thoughts are prompted by what seems to me to be decreasing interest nowadays among journalists in analysing and investigating individual companies and in acting as "watchdogs" of the public interest (though admittedly with some exceptions where mega-scandals are involved).

The above is from a very interesting article in The Business Times (Singapore) by Anthony Rowley, it is clearly written from a Western perspective.

In Malaysia investigative journalism on financial matters (or actually on any matter) has never been of a high standard. Recently I do see some improvements in that field, although still too little. Too often the opinion of the major shareholder is asked, and is written down, without offering any perspective, without any issue being  raised.

In Singapore the situation regarding financial journalism is clearly of a higher standard, despite both countries scoring about the same (low) score on the issue of freedom of press. I have seen very critical issues being raised in the newspapers, even concerning government controlled companies.

The article continues (with some noted by me in red):

"What we might call the concept of "shareholder democracy" gave a new legitimacy to journalists' activities in this area. It dates from the early 1970s when the idea gained ground that wider share ownership was a good thing that would ground capitalism more deeply among the populace at large.

At that time, I was one of the Financial Editor's team at The Times in London where (while learning all about price/earnings ratios, dividend yields and even how to value takeover bids etc.) we came to see ourselves as watchdogs of the public interest rather than as financial analysts. 

It was a view not without merit since the 1970s were also seeing the emergence of a class of "asset strippers" or what would later come to be known as "corporate raiders". We felt that we had to protect the proverbial "widows and orphans" from the unwelcome attention of such people.

In Malaysia, asset stripping is comparable to the many delisting exercises, the huge majority is done at a (large) discount to the net asset value. I am sure that after the successful delisting, the company is quickly transformed, to the great benefit of the controlling shareholder(s).

With the advent of the "not fair but reasonable" verdict of independent advisors, this has become painfully obvious to the investing public, at least to those that actively follow what is happening in the market.

The widows and orphans were not entirely a mythical group, or at least in those days there seemed to be a sufficient number of small shareholders willing to go along to company annual meetings and to "raise Cain" if they had been tipped off about any abuse of their interests.

Distancing shareholders
Where the rot set in was when the fund management industry became aggressive in pushing the idea of mutual funds or investment trusts, through which individuals could have a whole portfolio of diversified interest in multiple companies rather than limiting to a few companies.

Rather as in the case of debt "securitisation", where lenders lost touch with individual borrowers through the ability to have stakes in myriad loans securities, the mutual fund concept distanced shareholders from ownership and sounded the death knell of true shareholder democracy.

In Malaysia a very comparable situation occurs. I have often lamented the role of the many (government controlled) funds in shareholder activism. In the past, they have hardly ever spoken out, or taken up an active role, fighting for the rights of the minority investors. In the contrary, they have often been seen voting in favour of the majority shareholder, even when the proposal seemed to be outright bad for the minority shareholder. For funds like EPF, it seemed that establishing the MSWG was enough. Belatedly, these funds are pressured to take a more active role, which hopefully will happen in the near future.

Since then, the "caring" individual shareholder has seen his or her (some of the most astute individual shareholders were indeed widows) rights diluted even further by the advent of highly aggressive private equity groups and predatory hedge funds that channel capital direct to companies.

The idea of an individual having a degree of "ownership" and even pride in a company and some ability, however small, to influence governance has come to be seen nowadays as quaint. So has the idea that shareholders should stick with a company rather than sell out to a takeover bidder.

In Malaysian delisting exercises, the verdict these days is often "not fair but reasonable", almost always accompanied by the advice to accept the offer. And most investors heed the advice, being pressured by the "threat" of holding shares in an unlisted entity.

The end of investigation
This seems regrettable, rather as with the accelerating demise of family-owned companies in many parts of the world. Family-owned companies can still achieve startling international success while still protecting their stakeholders. Japan's Yamazaki machine tool giant is one such case.

Those who have gained most from the resolution are financial practitioners who milk fund management and investment banking for all it's worth, reaping huge fees in the process, which are paid for ultimately by shareholders. Finance has become an even bigger industry than "industry" itself.

I have often warned for the increase of what I call "financial engineering", which seems to increase steadily in Malaysia. Some examples of these activities are: Private Placements, delisting exercises, relisting exercises, difficult alphabet soup constructions, SPAC's, china listed companies, business trusts, high frequency trading, call warrants, etc.

In my opinion, no value is being created in any of the above activities. That happens when people start a real company the old fashioned way (not based on some artificial licenses or the like), continue to improve on their product/service, know how to market/brand their product, expand nationwide (and later regionally), etc. This will take time and may seem boring to some (not to me!), but there is no real shortcut here. Malaysia does have some international success stories, but still much too little. However, to try to increase the number of success stories by financial engineering, and to make the local share market more "sexy", is not the right way, in my humble opinion.

Having effectively disposed of small shareholder capitalism and democracy, financiers are turning their attention now to state capitalism of the kind seen in China and elsewhere which they claim represents unfair competition to "true" Anglo Saxon or Wall Street-style capitalism.

We see examples of this trend for instance in the Trans-Pacific Partnership (TPP) which seeks to impose tighter rules of competition on state-owned enterprises and financial institutions - notwithstanding the fact that some of these operate effectively and in the public interest.

What I would call the fragmentation of financial journalism is something else to be regretted. Some journalists fall by the wayside and become financial analysts (or even public relations officers) but beyond this, too many seem happy becoming bond market specialists and the like.

The investigative urge that goes with a desire to know and to communicate with the public at large is threatened by this specialisation. If journalists cannot any longer claim to act as a watchdogs of individual shareholder rights they certainly do need to continue as guardians of the public interest.

Internet blogs and the like can never substitute for good investigative newspaper journalism, which needs courageous editors to stand behind their reporters and on occasions to be willing to take the legal risk of pursuing miscreants (or prodding public authorities into doing so). It is still a worthwhile "mission".


I wish all Muslim readers "Selamat Hari Raya", all Singaporean readers "Happy National Day", and all readers "Happy Holidays".

Weekly roundup

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."

Goldis: victory for minority shareholders

It seems that shareholder activism is gaining ground in Malaysia.

Goldis announced in May 2013 a plan to transfer its 30.6% stake in IGB to Steady Paramount Sdn Bhd. Goldis shareholders had the following choice:

• To hold shares in Steady Paramount, but holding shares in an unlisted company is not very attractive to most investors
• To sell for cash,  RM 1.72 per IGB share, but this price is at a large discount to the NTA of IGB

In other words a choice between two undesirable options, a real dilemma for Goldis minority shareholders.

But, surprisingly, at least for me, Goldis changed its mind, according to this BM announcement:

"Reference is made to the announcement dated 8 May 2013 in relation to the Proposed Distribution. The Board of Goldis (“Board”) wishes to announce that they had, after due deliberation, decided not to table the Proposed Distribution for shareholders’ approval. The Board had arrived at this decision after taking into consideration the negative feedback from shareholders of Goldis on the Proposed Distribution."

I have to salute the Board of Goldis to take the feedback from shareholders into consideration, and change their mind. Rather rare, especially in Malaysia.

KiniBiz reported:

an analyst with a local bank backed research house opined “minorities clearly reacted negatively to this proposal initially because it was forcing their hand, they have managed to stand their ground and get the proposal scraped.”

MSWG in their weekly newsletter from July 12, 2013 commented:

And lastly Ze Moola wrote this about the proposal.

I am pretty positive about this development, I really hope minority shareholders of all Malaysian listed companies take note and fight for their rights in other corporate proposals.