Thursday, April 13, 2006

How does one value a company one cannot trust?

Here's ze trick question that I asked the other day again...

How does one value a company one cannot trust?

Remember this past blog posting on
MTD Capital's flip-flopping of its business?

  • ACPI to buy MTD Capital's construction arm for over RM80m

    What a shocker!

    What we have here is MTD Capital, a construction company, selling out its construction business to ACPI, a subsidiary company of MTD Capital for 80 million. And MTD Capital will then become a holding company!

    What the...!!!!!

    From an investor point of view, isn't MTD Capital simply moving away the 'cheese' from its minority investors???

    Isn't there a lack of respect from MTD Capital towards their minority shareholders?

    Put it this way.. if one had invested in MTD Capital because one believed in the potential of its construction business, this sale of the construction business has effectively taken out the very justification why one should have invested in the stock. How on earth is this possible? How can they allow such flip-flopping of business between subsidies?

I just realised that there is more!

Yup... more!

Malaysia's Metacorp Acquires 40 PCT Stake in Modal Ehsan

Two things strikes me from that news clip..

  1. Metacorp Berhad (KLSE:8389) has agreed to acquire a 40 per cent stake in property developer Modal Ehsan Sdn Bhd for RM10.4 million (US$2.8 million
  2. Modal Ehsan is a 60 per cent subsidiary of ACP Industries Berhad (ACPI) (KLSE:5924) which in turn is an associate company of Metacorp.

Ahem... when will all these ever end? Left hand selling to the right hand, right hand selling to the back hand, back hand selling to the under hand!!!

And to add extra icing to ze cake... there is this other news thingy: Malaysia's MTD Grants Granion Option to Buy MTD Infra Shares


Goodness me... what great corporate governance from this group!

So... how does one value a company one cannot trust?

When there is no corporare governance, how can the investing public expects to be given a fair chance to be adequetly compensated for taking all the risks in investing in their company?


Remember the old adage...

Fool me once, shame on you.
Fool me twice, shame on me!!

to be continued... :p


boyplunger said...

True indeed. Fund managers are shunning this counter for the very same reason you highlighted. I m not surprise you found that out...lucky for you who notice their lack of corporate governance. As for the rest, they might be think MTD is a buy for its story in construction and MTD infra. blah blah. It be cool to see what management has to say about their corporate activities. But then again, most likely one will get beating around the bush sort of answers.