Wednesday, March 12, 2014

Reports by financial journalists must be fair, accurate and responsible !!!!

On the EdgeMalaysia:

  • Reports by financial journalists must be fair, accurate and responsible: SC
    Business & Markets 2014
    Written by Bernama
    Wednesday, 12 March 2014 18:46

    KUALA LUMPUR (March 12): Dissemination of information by financial journalists must be done in a fair, accurate and responsible manner, says the Security Commission (SC).

    The SC was referring to a regulatory settlement, entered into with a Malaysian media editor on October 2013, in connection with news published on an online news portal, on Aug 10, 2012.

    "The price sensitivity of the subject matter of the article, coupled with the recklessness with which the article was written, without any verification with the SC, had created unwarranted and steep fluctuations to the involved company," it said in its 2013 annual report today.

    Meanwhile, on safeguarding the capital market against money laundering activities, the SC said that it is committed to ensuring that capital market intermediaries implement the highest standards of preventive measures, to counter the problem.

    "We continued to facilitate and reinforce a high level of compliance by licensed intermediaries, with the SC's guidelines on Prevention of Money Laundering and Terrorism Financing.

    "We are also observing global standards and best practices, in relation to this increasingly important scope of the SC's supervisory function," it added.
Aug 10, 2012?

And The Sources Strikes Big At E&O


    Far too long I have been highlighting the According To Sources issue on this blog. After a while this blog gets caught in a repetitious cycle of repeating and repeating and repeating itself. Is like, do you guys and gals really care? Or perhaps it only matters if it happens to us ( I do hope not). I just don't know.

    As mentioned before:
    • Yeah, our financial news can be really incredible at times. Many a times, a story will be spun by our financial news wizard reporters. The way they write, the way they spin the story around and around, they can really make any given stock sounds soooooo sexy.
    And sexy stocks do sexy stuff. The stock prices soar.

    Think about it.

    I write an article, I throw in the 'according to sources' this and that and that is going to happen. It's going to make Fly Kacang Fly Bhd fly!

    Punters read the story, they treat those words as gold.

    They get on the phone, they call their remisers and orders truckloads of the Fly Kacang Fly stock. Or they just let their fingers walk the talk by keying their truckloads of the stock via on-line trading.

    And as long as they make their money, they don't care whether the story is really true or whether the story just cooked up to seduce them to punt the stock

    Take for example, the last posting made on this According To Sources issue: And According To Sources .... . Did that sexy story came out exactly as what the so-called sources clam??

    And I said many times, anyone could a source of imformation. The Fly Kacang Fly's mak cik who brings the tea for the Boss could be a source of information, yes? The toilet cleaner also could be one. Anyone in Fly Kacang Fly could be a source. Whether they are reliable source is another issue.

    Or what if the source does not even exist? What if the 'according to source' is used just to lend some form of credibility to the said rumours?

    Not possible?

    Anyway, yesterday, the SOURCES hit big time. Really big time. Center stage. It's showtime!

    On MalaysiaInsider:

    • SC to order Sime general offer for E&O, say sources August 10, 2012

      KUALA LUMPUR, Aug 10 — In a volte face, the Securities Commission (SC) will now order Sime Darby Bhd to make a general offer for Eastern & Oriental Bhd (E&O) shares after buying a 30-per cent stake last year, say government sources.

      The Malaysian Insider understands the decision was made after a review by the leadership under new SC chairman Datuk Ranjit Ajit Singh.

      “The SC has reviewed the matter and decided to overturn the earlier decision made when Tan Sri Zarinah Anwar was the chairman,” a government source told The Malaysian Insider.

      Ranjit, who was the SC managing director, took over as chairman after Zarinah ended her term last March 31.

      Another source confirmed the review and said the decision will be made public soon.

      Sime Darby purchased its controlling 30 per cent interest in the property developer from three major shareholders — managing director Datuk Terry Tham, Singapore’s GK Goh Holdings and a group of investors led by businessman Tan Sri Wan Azmi Wan Hamzah — at the end of August last year in a deal that valued E&O shares at RM2.30 a piece.

      The purchase price represented a 60 per cent premium over the value of the shares in the company on the open market when the deal was announced.

      The RM776 million deal triggered unease over the widely-perceived coddling by the agency of large state-controlled companies at the expense of minority shareholders when exercising its authority on corporate takeovers.

      The SC ruled six weeks after Sime Darby’s purchase of the three blocks that the plantation-based conglomerate need not make a general offer, prompting E&O minority shareholder Michael Chow to sue the SC for failing to compel Sime Darby to make a general offer for the rest of the shares.

      The legal suit has renewed debate over the SC’s handling of alleged irregular trading activities and had put pressure on Zarinah, whose husband — the E&O chairman — had raised his personal stock holdings in the company just weeks before Sime Darby announced the acquisition.

      The SC has also filed an application to recuse the judge hearing the suit as he used to be with the regulator. But the judge dismissed the application, only for the SC to file an appeal with the Court of Appeal, which heard the case yesterday.

      Singapore’s Straits Times reported last January that a SC task force found that Sime Darby was obliged to make a general offer for E&O shares after acquiring a 30 per but was superseded by the regulator’s top ruling authority.

      The daily reported that the task force was of the view that a general offer obligation had been triggered as a new “concert party” was created between Sime Darby and Tham, who jointly controlled more than 33 per cent in the property concern after the deal.

      Malaysia’s takeover rules stipulate that any party that acquires more than a 33 per cent interest in a publicly-listed entity must carry out a general offer for the remaining shares.

      A general offer can also be triggered if a new party buys less than 33 per cent but secures management control of the target company.

      But the SC’s final ruling three-member committee adjudged “in a majority decision” that there was no general offer obligation as Sime Darby and Tham were not acting in concert, according to an affidavit by the agency’s second-most senior commissioner Datuk Francis Tan, which was sighted by the Singapore daily.

      The committee also accepted the task force’s recommendation that the three groups that sold the blocks of E&O shares to Sime Darby did not collectively control the company and that the disposal did not trigger a general offer.
    That news came late in the afternoon.

    This sexy piece of stock started a buying frenzy. It was incredible. Some were screaming for the stock to go limit up. This piece of news whose sole credibility was based on  sources, un-named sources. ( Ever wonder who these sources are?)

    Notice how E&O took off for the moon at around 4 pm.

    And then came the news at 5.50pm.

    • Published: Friday August 10, 2012 MYT 5:50:00 PM
      SC's position on GO in Sime-E&O remains unchanged By Joseph Chin

      KUALA LUMPUR: Sime Darby Bhd does not have to make a general offer for the remaining shares in Eastern and Oriental Holdings (E&O) after it acquired a 30% stake, according to the Securities Commission.

      The SC said in a statement on Friday that its position on the GO requirement in the Sime Darby-E&O acquisition remained unchanged as per the statement issued on Oct 11, last year.

      "The decision is now subject to judicial review which is pending in court," the SC said.

      Securities of E&O surged in active trade late Friday on a news portal report that the SC would now order Sime Darby to make a GO for the remaining E&O shares.

      E&O surged 42 sen to close at RM1.90 with 44.74 million shares done while its call warrants E&O-CA jumped 16c to 16.5 sen.

      In the Oct 11 statement, the SC had stated it concluded the review of the circumstances surrounding the acquisition of 30% equity interest in E&O by Sime Darby for any Take-Over Code implication.

      The SC had then stated in the course of the review, parties involved in the transaction were interviewed and relevant documents procured.

      It said the review included an assessment of possible concert party relationships between and amongst the parties involved. Precedents in Malaysia and practices and rulings in other jurisdictions on similar issues were also examined.

      "Having analysed all the evidence gathered, it is the SC's finding that the acquisition of the 30% equity interest in E&O by SDB had not given rise to a mandatory offer obligation under the Malaysian Code on Take-Overs and Mergers 2010," according to the statement.
    Oh oh!

    How now brown cow?

    SC is now denying the news published on Malaysia Insider.

    And this is a delima. A massive delima for punters who punted based on the news released by Malaysia Insider.

    All thanks to Malaysia Insider's un-named government sources, these punters will be worried about the fate of their punt made yesterday afternoon.

    Will the denial send the stock plunging?

    How now brown cow?

    Would you continue to punt on stocks based on news sources who quotes un-named sources?

    ( see also: )

    ( ps: if this blog posting was published at 4:30 pm, I wonder what would be the reaction?  Would I get 'Here we go again... pouring cold water again... Ah Chi Ah CHor so much ..... )

      Saturday, June 22, 2013

      Flash Crash Slams Several Stocks

      Got this in my comments:

      • newbie has left a new comment on your post "MaeMode Defaults Its Loan Payments And Enters PN17...":

        Dear Moolah, Did you notice the sharp fall in a number of stocks today?Stocks like BJTOTO,BKAWAN,TDM,CBIP and COASTAL plunged near the end of the session .Remembered you wrote about a similar subject some time ago.Any conspiracy theories behind such fall? Spooked quite a number of people.Thanks for your time reading this. 
       Yes, I did write about this before and it's rather spooky again.

      This is the 3rd time something like this happen and yet here we are again.

      Has something been done?

      Are they gonna say it's an error trade again?

      21 Oct 2011:
      And almost one year ago,About Stock Market Yesterday: The Day KLSE Decided to Have Gap Up And Gap Down All Over

      Same thing all over again.....!!!!!

      Several stocks went limit down at the very last minute of trade.

      Several stocks shot up too!!!

      Come on SC.

      Come on Bursa.

      Don't tell me you guys saw nothing.............

      Apparently they did and they just said " Trades ‘valid and genuine’


      • Six counters from mid-caps to big ones, namely, Hap Seng Plantations Holdings Bhd, Batu Kawan Bhd, TDM Bhd, CB Industrial Product Holding Bhd (CBIP), Coastal Contracts Bhd and Berjaya Sports Toto Bhd, hit limit-down, or a 30% plunge, with a combined trade of RM43.1mil in that short time window during pre-close.

        While the trading pattern may seem like an “error in trading” could have taken place, a Bursa Malaysia representative when contacted by StarBizWeek clarified: “With regards to the eight stocks which hit their limits-up (two) and down (six), Bursa Malaysia has investigated the matter and has confirmed with the broker that the basket order, which was from their institutional client, was valid and genuine.
      Valid and genuine????

      Has the institutional client lost their marbles???

      Why DUMP all those shares and sell with limit down orders????

      You believe???

      Yeah, I think extremely likely of the pre-close trading. It's nonsense and we get to see nonsensical trades like this!!!


      Here is how the flash crash looked like....




      See how these stocks literally fell off the cliff near the end of closing trade???

      Which institutional client would give a mindless trade order like this??????

      I just highlighted 3. There are more.

      And here is the opposite.

      Some stocks went straight up!!!!!!!!!!!!!



      Oh yes, there are several more stocks trading in such an outrageous manner at end of trade. Some plunging while others surge limit up.

      What gives?

      Come on Bursa, you cannot just say that these trades are from an institutional client and that the trades were valid and genuine.

      Of course they are valid.

      But.... think lah.

      Do you call this a fair and orderly stock market???

      Well again... if these institutional clients are so important then what about the retail investors???

      Which retail investors wants to be a long term shareholder when market shenanigans like this happen and the culprits get away freely????


      Thursday, June 20, 2013

      MaeMode Defaults Its Loan Payments And Enters PN17

      Just got this:

      Yeah, I saw that and I see it's highlighted on the Edge also.

      With that default, MaeMode is now a PN17 stock. PRACTICE NOTE 17 / GUIDANCE NOTE 3:FIRST ANNOUNCEMENT 

      Anyway, I am not a bit surprised at all.

      My last posting on MaeMode was on 2nd May. Time's Almost Up For MaeMode

      Thursday, May 23, 2013

      Unhappy Goldis Minority Shareholder

      lim hwa has left a new comment on your post "Investment Adviser: Just Who Are You Advising For?...":

      I refer to the recent announcement by Goldis Berhad on 8 May 2013 for the capital distribution of IGB shares. From the first reading of the announcement, it seems the proposal is really to reward the shareholders of Goldis. However, with further understanding of the proposal, the proposal seems to me just another way of taking the value from the minority shareholders.

      In my humble opinion, to put the unlisted share as an alternate option to cash to MI is as good as forcing the MI to have no option but just have to take up the cash option. My rationale is that one of the key objectives of us investing in stock markets / listed shares as compared other investments is due to liquidity. As the proposal is to distribute the unlisted shares, then such proposal is defeating the our objective.

      To simplify it, assuming a listed co only owns a very profitable subsidiary (say with NTA of RM100 mil). The major shareholders then propose the similar structure to all the shareholders whereby the profitable subsidiary to be transferred to a non-listed company at say RM50 mil. Thereafter, all the shareholders will be given the options to choose (i) the unlisted shares or (ii) cash value per listed share which will be substantially undervalue as the valuation for the transfer is only half of the NTA.

      Eventually, the major shareholders will own 100%/ majority of the unlisted company cuz i presume majority of the MI will not opt for unlisted shares due to liquidity.

      With this, the major shareholders are essentially privatise the jewel of the listed company at a cheap valuation in the expense of the MIs' value.

      I see the above illustration happens to GOLDIS now.

      May I have your view on this case i.e. GOLDIS just to make sure MIs' are well protected before the same structure to be replicated for the next many more coming proposals if this first kind of proposal is successfully completed.

      Wednesday, May 08, 2013

      Red Flag Raised At HB Global Cash Balances!

      Since I had been posting a lot about China based companies listed in our stock exchange, I was watching HB Global.

      HB Global's stock was plunging when it said publicly it was delaying its audited accounts ( )!!!!

      Last night HB Global made the following announcement:

      • The Board of Directors of HB Global Limited (formerly known as Sozo Global Limited) (“HB” or “the Company”) wishes to announce that the Company’s External Auditors, Messrs. Paul Wan & Co had expressed an audit disclaimer opinion in the Company's latest audited financial statements for the financial year ended 31 December 2012, as follows:-
        “Basis for Disclaimer of Opinion
        Included in the Group’s balance sheet as at 31 December 2012 is bank balance amounting to RMB 249,633,611. In the course of our audit, we were not able to satisfactorily and independently substantiate the bank balance of the subsidiary company.  In addition we were not able to receive reliable independent confirmations on majority of the trade receivables and trade payables that were circularised; these balances represented 56% of trade receivables and 48% of trade payables as at 31st December 2012.  These brought into question the proper accounting for bank balances, trade receivables and trade payables and the corresponding transactions in the Group for the year ended 31 December 2012 and the completeness of transactions recorded in the Group’s accounting records.
        Disclaimer of Opinion
        Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for our audit opinion.  Accordingly, we do not express an opinion on the financial statements.”
        This announcement is dated 7 May 2013. 

      NOT able to satisfactorily and independently substantiate the BANK BALANCE of the subsidiary company?


      Red flag raised!

      Remember the past postings on the China based stocks? So What's The Problem With China Based Companies?

      The media kept on highlighting that these China based stocks were so cash rich.

      I challenged that statement and I showed with a real example on how a director of a China based stock sold shares BELOW the cash per share value and for that stock, we saw the company's cash balances was said to be at 894.674 million. So much cash but the company earns only 3.416 million in interests. Does it make sense?

      Let's look at the last reported quarterly earnings from HB Global.

      The balance sheet shows the following...

      Oh yeah... cash balances were said to be at 124.725 million. HB Global 'as per'  its balance sheet is cash rich!

      Now if you look at the cash flow statement below, the interest received is only 1.018 million!!!!!



      HB Global said it holds cash balances of over 124 million but it only receives 1 million in interests!!!!

      Does it make sense to have so much money and not generate any bank interest for all these cash?

      Now HB Global auditors is questioning the cash balances!!!!


      Next time you hear someone talks about cash rich China based stocks, tell them to have a look at HB Global!!!!!

      And yeah... currently there are 9 China based stocks listed here and our dear old Bursa Malaysia wants to have more such listings!!!!!


      Saturday, May 04, 2013

      So What's The Probelm With China Based Companies?

      I was reading the following article:

      In light of the recent posting, Do You Want More China Based Companies To Be Listed Here?, the first few passages caught my attention...

      • THERE are currently nine China-based companies listed in Malaysia and you'll be hard pressed to find one that is trading above their initial public offering (IPO) price.

        Of course, some did trade above their IPO price soon after they were listed but none proved sustainable.

        It's somewhat perplexing that they are not. These companies are cash-rich, have profits that grow year-on-year and almost, if not, all are trading at huge discounts to their net cash per share.

        Sure, not all of their businesses are terribly sexy. Most are shoe manufacturers but given the growing population and income levels the world over, there remains growth potential.

        So, what is the problem?
      Yeah what's their problem?

      First thing first.

      "you'll be hard pressed to find one that is trading above their initial public offering (IPO) price.".. When I posted Do You Want More China Based Companies To Be Listed Here?, on the average, these China based companies were starring at 63% losses since their IPO listing. And the losses increased since ALL of these China based stocks declined further since then.

      Two of the big losers were HB Global and CSL, with HB Global plummeting some 24% yesterday when it announced it's delaying its audited accounts! ( )!!!!

      CSL closed at 26 sen yesterday. (IPO Price 95 sen!!!!! )

      The Star Business article talked about these stocks trading at huge discounts to their net cash per share.

      Let's look at CSL quarterly earnings report: Quarterly rpt on consolidated results for the financial period ended 31/12/2012 

      Have a look at the pdf file attached to that Bursa webpage.

      From the balance sheet, we can see that CSL is cash rich!

       CSL says it has some 894.674 million in its piggy bank!

      That's a lot of cash!

      Super cash rich since CSL does not have any borrowings.

      But the market is selling CSL at 26 sen only!!!!

      26 sen... which means CSL market capital is worth 323.117 million!

      Holy cow!

      I'm sure you will ask is the market out of whack selling CSL at 26 sen!!!!!

      With a market capital of 323.117 million, it means the market is valuing CSL way below its 894.674 million.

      With 1,242.760 million shares, CSL's cash per stated in its Feb quarterly earnings is 72 sen!

      Yes, you heard me, cash per share is worth some 72 sen.
      Market valuing the shares at only 26 sen.

      How can the share be worth so little compared to the company's cash????

      Won't the owners be better off taking the company private?


      If the cash per share is REALLY worth 72 sen and the share is trading at 26 sen, surely the owners would buy these shares like crazy, yes?

      But this did not happen!!!

      Instead on 23 March, less than one month after this earnings report was released, one of the directors, Chan Fung @ Kwan Wing Yin, decided to dispose shares at 60 sen!!!!!


      Yes sir!

      Company's cash per share were worth 72 sen.
      Company's director disposes shares at 60 sen!!!


      Makes sense?

      Time to look at the cash flow.

      Looking at the cash flow statement is useful because the interest income is stated there.

      Think about it. For a company like CSL, it says it has 894 million in its piggy bank. A lot of money, yes? Surely the company would deposit a bulk of the money to earn some interest right?

      CSL's interest received showed only 3.416 million.


      So low?

      CSL has 894.674 million cash and CSL only receives 3.416 million in interests!!!!


      What is CSL doing with its 894.674 million????

      (ps: How about CSL allow me to manage their 894.674 million cash and I pay them 6 million in interest!! )

      Why is CSL getting so little in interest???

       Well, what's the possible answers?

      Is CSL putting any of the money into fixed deposits account?
      If no, why?
      If no, what is CSL doing with all these money?
      If yes, why so little in interest?

      How? What's the problem with these China based companies?

      Would you trust the NET CASH PER SHARE of this China based company? ( Feel free to do a similar research on other China based companies.)

      How now?

      They say share cheap because share is trading below net cash per share. But company director is selling their share below the net cash per share. Company earns extremely low interest.

      DARE you invest in such company???

       ps: When CSL was newly listed it was a darling stock. With an IPO of 95 sen, CSL managed to fly to a high of 1.93 sen within one month from its listing! See chart below.

       Here's the chart almost a year later.


      Thursday, May 02, 2013

      Time's Almost Up For MaeMode

      One of the stocks I blogged many times before is

      Friday, April 26, 2013

      Do You Want More China Based Companies To Be Listed Here?

      Saw the link to the article on Star Business: Kanger set to be 10th China-based company to list on the local bourse

      I did not even want to read about it.

      First thing on my mind was 10th!

      Do we really need all these Chinese companies to be listed in our stock exchange?

      Come on Bursa!

      Stop thinking like a commission based  salesman! These companies are stinking our stock exchange! Come on. You can't smell it? You guys complain about the lack of retail investors all the time and here you are, inviting all these China based companies to be listed here.

      You just don't get it, yes?

      More quantity is not going to increase retail investing participation.

      QUALITY is the only word that is important.

      What is stock investing?

      Stock investing is investing in good quality businesses at a good price.

      Investors don't want to invest in all these poor quality companies only to find the value of their investment shrink like hell after a few months!

      Here's proof.

      The three most recent listed Chinese stocks.

      China Automobile Parts Holdings Limited
      IPO Price: 68 sen
      Listed 30/1/2013
      Current Price: 36 sen

      China Stationery Limited
      IPO Price: 95 sen
      Listed: 24/2/2012
      Current Price: 34 sen

      Maxwell International Holdings Bhd
      IPO Price: 54 sen
      Listed: 6/1/2011
      Current Price: 31 sen

      Compare the current share price as of this morning versus the IPO price of these 3 China based stocks. All IPO investors of these Chinese stocks would be cursing at the stock performance as of today.

      The following table shows the current price versus the IPO price and the % change of all Chinese listed companies.

      On average, investors of these Chinese stocks are starring at an average loss of 63% since listing!!!!


      Bursa Malaysia, are you aware of this stat?

      If so, why?

      Why are you pushing for another Chinese stock to be listed on our stock exchange?

      Do you care for the quality of the stock exchange?

      Or do you just list such companies hoping just for more revenue for the exchange????

      Here are the charts showing the performance of all these Chinese stocks since listing.

      Chinese Automobile Parts (CAP)

      China Ouhua Winery Holdings Ltd (CNOUHUA)

       China Stationery Limited (CSL)

      HB Global Limited (HBGLOB) (Old name: Sozo Global)

      K-Star Sports Limited (KSTAR)

      Maxwell International Holdings Bhd (Maxwell)

      Multi Sports Holdings Limited (MSPORTS)

      XiDeLang Holdings Limited (XDL)

      Xinquan International Sports Holdings Limited (XINQUAN)