Friday, 27 March 2015

Malaysia scores dismal on "open government"

The World Justice Project published its Open Government Index 2015. In the overall score, Malaysia ended on a dismal 88th place out of 102 countries.




Malaysia scored well on "Publicized Laws and Government Data", but badly on "Right to Information", "Civic Participation" and "Complaint Mechanisms".

This kind of research always has a subjective element in it, but overall (from own experience) I would agree with the above findings: excellent laws, but what is the use of it when enforcement and transparency are so lacking.

I guess most people have similar experiences with a complaint to a government agency that ended in a drawer somewhere and never came out of it. The reason why many people don't even bother anymore to file a complaint.

More information can be found here.

Wednesday, 25 March 2015

To Cliq or not to Cliq?

Cliq Energy has finally announced its qualifying acquisition, an investment in an oil and gas company based in Kazakhstan.

Regular readers know I am not "exactly" a fan of DCF valuations. Unfortunately, it has been used in this case:


The price of oil that is used in the DCF model is the prevailing price in December 2014.

However, the price of oil has since drastically fallen:



I certainly hope that a new DCF will be calculated, based on the recent price of oil. It will give a much lower outcome, is my estimate. Hopefully the details of the DCF will be published, although I doubt that.

Cliq had a long time to come up with its proposal, so we can expect lots of financial numbers.

Unfortunately, it is very disappointing:


Some comments:
  • Not a single balance sheet number of Phystech;
  • Some profit & loss numbers, however no PBT or PAT but the dreaded EBITDA (whenever they are presented, the earnings are much lower than the EBITDA number, we have to wait and see if that is also the case here);
  • EBITDA for 2013 only RM 23 Million, does not really look exciting;
  • Numbers are only up to December 2013 (15 months old), even tiny ACE-listed companies have already announced their (unaudited) December 2014 numbers a month ago, why can't Phystech give their unaudited numbers?

I have seen excellent formats provided by research houses where lots and lots of relevant data regarding a company is packed in one single page. Although the announcement of Cliq counts 26 full pages, relevant numbers are very scarce, lots of important (financial) information is left out.

We must hope that the official brochure to Cliq's shareholders will be of a much higher quality.

Tuesday, 24 March 2015

Tanjung Offshore: more twists and turns

Tanjung Offshore's storyline seems to have more twists and turns than a whole season of Game of Thrones.

Even Transparency International Malaysia (TI-M) entered the fray, according to this news article.

Although Tanjung Offshore is a very interesting case to follow from a corporate governance point of view, TI-M might just want to focus on the big ticket items like 1MDB, which might be literally one thousand times bigger than Tanjung Offshore: the issues in the former company seems to run in the billions, the issues in the latter company in the millions.

Yesterday Tanjung Offshore made fourteen announcements in one go:




The Malaysian Insider wrote about the issues, some snippets:


According to a filing with Bursa Malaysia today, the withdrawal notice from the three parties – Tan Sri Tan Kean Soon, Datuk Dr Nik Norzrul Thani N. Hassan Thani and Datin Norhafizah Mohd Nordin – was received after the uplifting of suspension of three officers – Tan, Muhammad Sabri Ab Ghani and Harzani Azmi with immediate effect.

Interestingly, the board of directors has also redesignated Tan as its new executive director, replacing Muhammad Sabri who has resigned from the board today. Tan was previously a non-executive director.

Apart from Muhammad Sabri, who resigned for "personal reasons", George William Warren Jr has also resigned as independent non-executive director “to explore other opportunities elsewhere".

In a press statement, Tanjung said the board welcomed Datuk Mohd Hafarizam Harun as its chairman, after appointing him an independent non-executive director today. Three others were also appointed as independent non-executive directors, namely Nik Norzrul Thani, Datuk Maheran Mohd Salleh and Tan Sam Eng.

Meanwhile the Audit Committee, in consultation with Bursa, had on March 20, 2015, appointed Ferrier Hodgson MH Sdn Bhd as a special auditor to review matters highlighted by the Independent Committee (IC).

To recap, Tan had initially planned to remove Warren and two other directors – Datuk Ab Wahab Ibrahim (non-executive director) and Shahrizal Hisham Abdul Halim (independent non-executive director) – in the proposed EGM. Warren, Wahab Ibrahim and Shahrizal Hisham were the members in an IC established by Tanjung’s board of directors on Jan 8 this year.


The reasons given for the resignations ("To explore other opportunities else where." and "Personal reason.") are disappointing given what happened in the past, I had expected some more zest.

I guess that we have to wait for the outcome of the investigations by the special auditor and by the authorities.

Sunday, 22 March 2015

Liew Kee Sin: there is a conflict of interest

For the first time it seems that Liew Kee Sin has admitted that there is a clear conflict of interest in his business dealings.

In an article (page 18) in The Sun:




Liew was of course very much involved in property developer SP Setia, where troubles started about 3.5 years ago when PNB made an offer.

While still at SP Setia Liew was getting involved in another property developer, Eco World.

Later on Liew resigned from SP Setia, but still stayed on as chairman for the Battersea Project Holding in London.

And now Liew is involved in Eco World International Co. Ltd, which will also develop three large scale projects in London.

Liew allegedly said “There is conflict but I declare (to the authorities) and I’m transparent about it,” The Sun reported Liew as saying. “It is up to the shareholders (to decide).”

Not sure which shareholders he was specifically referring to, since he is involved in so many companies.

First and foremost this appears to be an issue that has to be handled by the boards of directors of all companies where Liew is involved.

The question is of course, how does Liew deal with all the inherent conflict of interest situations. For instance:
  • If he receives a juicy project proposal, to which company will he refer this deal?
  • If a very credible person in the industry reaches out to him for a job, which of his companies will he recommend?
  • What will he do is he receives confidential information in a board meeting, which might also apply to any of the other companies he is connected?

All not exactly far fetched scenario's.

Every director has a fiduciary duty to act in the best interest of his company, how can one juggle this duty for so many companies (engaged in the same industry) at the same time?

One publication that has consistently been critical about this conflict of interest is Kinibiz. It's latest article (behind pay wall) in this matter can be found here. A previous 5-part series of articles can be found here, with the most important questions being asked here.

I am afraid I very much agree with the critical comments brought up in those articles.

Unfortunately, in the Malaysian context, this conflict of interest is not exactly unique, it occurs quite often. The many Related Party Transactions (and probably many more transactions that are related but not indicated as such, which is even worse) are a testament to that.

It has always been quite puzzling for me why founders in Malaysia not just focus their efforts on one single company, but seem to be involved in many companies, with large overlaps in business dealings.