Wednesday, 13 September 2017

Raising the bar for SGX delistings

Article in The Straits Times, some snippets:

For a company to be voluntarily delisted, a shareholders' meeting must be held where approval for the move must be received from 75 per cent of the shareholders present and where not more than 10 per cent disagree with the move.

The snag is that this feat is made easier because the listing rules here do not bar directors and major shareholders from voting - and since the major shareholder, usually also the company boss, is the party proposing the delisting move, the odds are stacked heavily against minority shareholders.

In recent years, however, some companies are being taken private at a very low valuation at the bottom of the business cycle, only to be relisted in another jurisdiction at a much higher valuation.

No wonder, some minority shareholders feel existing listing rules fail to give them adequate protection if an opportunistic major shareholder wants to delist the company and attempt to squeeze them out of their shares at unattractive prices.

..... the academics observed that there had been instances of IFAs assessing offers as being "fair and reasonable" even when the exit offer in question was at a steep discount of more than 30 per cent to the latest NAV of the takeover target.

Against this backdrop, I would say that the SGX listing manual is due for an overhaul.

Delistings have become a red-button issue among aggrieved minority shareholders. It is one area that urgently needs to be looked into when the rule book is revamped.

The same applies to Bursa, a revamp is needed in which minority investors receive more protection from delistings at a very low price, it is long overdue.

Thursday, 31 August 2017

Late "strong pick-up" by Bursa

Article from The Star, one snippet (emphasis mine):

Bursa Malaysia staged a late strong pick-up before closing, led by gains in selected blue chips such as CIMB Group Bhd, Axiata Group Bhd and MISC Bhd.

The benchmark FTSE Bursa Malaysia KL Composite Index (FBM KLCI) closed 12 points higher to 1,773.16 yesterday, after a slow start to the week.

Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew said foreign investors were net sellers yesterday despite the strong pick-up in the FBM KLCI.

It was a last-minute push before the long holiday, and it was quite unusual considering the results season is still ongoing,” he told StarBiz.

It was definitely unusual, let's zoom in on a few counters.

On 16:50:01 it was CIMB's turn, a sudden 32 cent jump in price:

Two seconds later UMW's turn, a 45 cent jump:

And one second later at 16:50:04 Timecom's turn, a 53 cent jump in price:

As a consequence, a sudden spike in the KLCI:

Who was (were) the buyer(s), may be a fund that needed to show good results at the last trading day of August?

It looks all very artificial, is this actually allowed, will SC take action?

Monday, 28 August 2017

PNB reveals secret of how it makes money to pay high dividends (3)

I wrote before about this subject: here and here.

A lot of articles recently about PNB and the new group chairman Tan Sri Abdul Wahid Omar, both in The Edge and in The Star.

Unfortunately, again what I called "the most important number" is missing, this is what I wrote before:

Lots of numbers are mentioned, but the most important number (per managed fund) is missing:
"The increase/decrease in the Net Asset Value (marked to market) per unit over 2016"

This is a pretty basic number, essential to measure the long term performance in the long run.

Once we know this number we can compare it to other funds, or to the total (that is taking into account dividends received) returns on Bursa.

A simple question: was this number positive over 2016? And how does it compare to the price investors pay per unit?

Disappointing that this all important number is not given, and that the journalists present didn't ask for it.

From The Edge:

This is not a Ponzi Scheme. As I said, in good times, we create reserves and we don’t distribute all the gains in any particular year. So, we will have those reserves to buffer the payment of dividends during the tough years,” said Wahid.

The point was raised as questions over whether the high dividend at PNB-managed Amanah Saham Bumiputera are real and sustainable have been bandied for some time.

It should be noted that even when the local bellwether FBM KLCI fell 39% year on year in 2008 — and the dividend payout by the Employees Provident Fund (EPF) dropped to 4.5% — ASB’s dividend remained at an envied 7%. Yup, that is 378 basis points above the so-called risk-free-rate or 10-year Malaysian Government Securities of 3.22%.

Well aware of the scepticism, Wahid offered simple logic instead of going on the defensive. “It is a very simple model in the sense that during good times, you don’t pay all the returns. So, we keep some reserves. And during tough times like the past three years, we’ve been realising returns from the unrealised gains. No magic. It’s a very basic model,” he explained.

The yearly distributed returns are known, why not make the realized returns (marked to market, after expenses) public? We can then compare them to each other to check if they match, if there are any long term trends and to compare them to returns from similar Malaysian unit trust schemes.

Monday, 14 August 2017