Xian Leng, why is still no action taken?

In 2011 investors in Xian Leng were rudely surprised by news of large financial irregularities. I have posted several times about this company.

Key findings were reported by PriceWaterhouseCoopers Advisory Services, the major findings were reported here.

We are now almost two years further and still no action has been taken. KiniBiz wrote about the company recently. Some snippets:

• Chin Seak Huat ceased to be a substantial shareholder in beleaguered ornamental fish breeder Xian Leng Holdings Bhd, after selling 1.45 million shares or two percent equity interest in the company.
• It noteworthy that Chin was instrumental in the special audit on Xian Leng by PricewaterhouseCoopers Advisory Services (PwC) last year, which implicated Chua Bah Bee @ Chua Chong Seng— the brother of MCA president Chua Soi Lek— in the siphoning out of RM85.7 million, set aside to build ponds at Xian Leng.   
• Xian Leng after all has turned out to be a political minefield with many parties uneasy with the findings of PwC.
• While many investigations have commenced, no action has yet to be taken.
• Whether the authorities take any action is taken at Xian Leng remains to be seen, with most of them evasive when questioned.

Hopefully we can soon witness some much needed, tough and transparent actions by the authorities.

The following video is from 2007, when all still looked good.

 

 

On 2:47 one can hear Chua Chong Seng saying:

 

"Sound fundamental of the company .... we are the cautious, prudent, fundamental company .....".

 

The fraud had started already and the Company would book six straight years of losses. 

Clarification

In my article “SC Chairman (under fire) retires as expected” made on 10th March 2012, it has been brought to my attention by the Securities Commission Malaysia that, as a matter of fact, Tan Sri Zarinah Anwar’s decision to retire as the Chairman of the Securities Commission Malaysia was by her own accord and is in no relation to the alleged issues arising from the acquisition of the shares in Eastern & Oriental Berhad (“E&O) by her husband, Datuk Azizan Abdul Rahman prior to Sime Darby Bhd’s acquisition of a 30% stake in E&O Berhad.

Furthermore, it has also been pointed out to me that at all material times, Tan Sri Zarinah Anwar has acted according to the ethical guidelines of the Securities Commission Malaysia and conducted herself fairly throughout the acquisition of the 30% stake in E&O Berhad by Sime Darby Berhad.

As such, the inaccuracies are much regretted and therefore I hereby retract the said article from my blog. Lastly, I apologise for any inconvenience caused arising from the inaccurate statements made.

Frontken shares sold at 8 times the market price

Article in The Edge Malaysia highlighting that a block of 28 million shares in Frontken was transacted at 47.6 sen off-market, while the market price was 6 sen. In other words about 8 times the current price, very steep and unusual.

Most likely the shares are held by OCBC Capital Investment, and the transaction has to do with the court case where OCBC won its appeal, as reported here.

On another note, this announcement mentions several financial irregularities of around RM 9 million involving one of Frontken's subsidiaries. Bad news for the investors who have already been suffering for a long time.

Household incomes continue to soar?

I read with amazement the following article from Bernama:

"Household Income Continues to Soar on Economic Transformation".

"The current average monthly household income of Malaysians at about RM5,000 compared to RM4,025 in 2009"

This simple statement begs a few remarks:

[1] 2008/2009 was the worst global recession of the last 50 years, to take 2009 as the starting point for a comparison is rather tricky; at the very least it should have been noted that 2009 was an exceptional year, to put things in the right perspective.

[2] The average monthly household income does not mean much for the average person on the street. Malaysia has one of the worst GINI scores in the world, this index measures the degree of inequality in the distribution of family income in a country. A much better measure would have been to divide the population in brackets and to show how much for instance the people earning the lowest 20% wages have benefitted.

[3] An increase in income is only "real" if accompanied by low inflation. The Department of Statistics claims that the inflation is indeed very low (between 1% and 2% the last year), see for instance this graph. I don't believe those low numbers at all, when I left Malaysia in 2010 almost all prices that I could come up with had roughly doubled in the last say 10 years, not exactly an indication of low inflation (I have to admit that I compared prices in KL, in the rural areas it might have been different).

Interestingly, the Bernama article seems to agree that the official number is wrong:

• "However, he said the government should place greater emphasis and take measures to reduce inflation rates in the two states, which were escalating due to indiscriminate hikes in prices of goods by certain parties."
• "Universiti Sains Malaysia, School of Social Sciences, associate professor of criminology Dr P. Sundramoorthy said, all the government initiatives and various financial support were timely and relevant to ease the burden of the rising cost of living."

But if the real inflation rate is indeed much higher than the reported one (and I think everybody will agree with that), then the real GDP growth (which is the GDP growth corrected for inflation) is much lower than reported.

I wrote before about Malaysia's economic growth, and made some critical comments.

I like quite a few aspects from the Economic Transformation Program and in general I am positive about their achievements, but some of the claims they make are really too much. By giving a more balanced picture their credibility would increase.