Friday, September 02, 2011

And What About The Promise Made By Masterskill CEO?

I always do not like it when the CEO comes broadcasting on the local media suggesting that their shares are cheap and so on and that they (the CEO) would most likely to buy/invest more into the company.

Of course, the stock gets some boost from such an endorsement but after some time, perhaps some market players would have already forgotten about it, the talk appears more than empty promises.

And this is where I would like to raise the question.

In such incidents, are these CEO promises nothing but empty promises or perhaps our local stock market gatekeepers should ask the simple question.

Are those promises nothing but cheap marketing gimmick to boost their share price and a misleading statement to seduce the investing public to buy more of their shares?

Well, I do hope nobody would ask me what's wrong with issuing misleading statements to the investing public.

For it makes an utter mockery of the stock exchange and imagine the ensuing chaos whereby CEOs are granted the freedom to mislead the investing public with whatever statements they wish to make.

Yes, I find it strange and sad that we do not see censorship on CEO making such wild statements.

Let's examine this posting made on May 2011: How Now Masterskill?

Let me reproduce the entire article here:

>>>>>>>>>>-------------------------------------------------------

So we have the Green Packet boss and management who had contiuned talking about being EBITDA positive since Feb 2008. ( refer And Green Packet Says The Magic Word Once More )

And then we have the KNM boss and his MBO. (refer KNM: Are you IN it to win IT? Or are you IN it to LOSE IT??? )

Today I noted one of the big loser is MEGB. It's currently down some 4.1%.



The chart is coloured specially for a reason.

It represents the period since MEGB's boss gave an interview with Star biz: Masterskill CEO may raise his stake in company.

Friday February 18, 2011
Masterskill CEO may raise his stake in companyBy LEONG HUNG YEE

KUALA LUMPUR: Masterskill Education Group Bhd group chief executive officer Datuk Seri Edmund Santhara is considering to up his stake in the group.

In a filing with Bursa Malaysia on Wednesday, the education-based Masterskill said Edmund, who owns some 90.6 million shares, or 22.1% stake in the company had announced his intention to deal in his securities in Masterskill.

“(I'm) looking at purchasing at this price,”
Edmund said when contacted by StarBiz yesterday.

However, he said he could only buy the shares today as per Bursa Malaysia rules.

“Well, I need to wait and see. Perhaps, anything below RM2 doesn't justify keeping the company listed,” Edmund said when asked on the amount of shares he intended to purchase.

Last December, he told StarBiz that the share price then of RM2.22 was not “justifiable” for a firm that made about RM100mil in net profit annually.He said that the company was fundamentally sound and that its Kuching campus was already in operation.

“The current share price weakness presents a great buying opportunity for Edmund to accumulate its shares,” an analyst said, adding that Edmund's move to purchase more shares may be a practical thing to do.

The analyst said most companies undertake share buybacks if they believe their shares are undervalued, or to send a signal of confidence in the company.

Masterskill, which raised RM771.3mil from its initial public offer (IPO) in May 2010, has succumbed to selling pressure yesterday.

The counter fell to a record low since its listing after Fidelity Management and Research (FMR) LLC, the parent of Fidelity Investment, sold 280,000 shares in the former.

The counter fell 8 sen, or 4.32%, to RM1.77, its lowest since its listing on May 18, 2010.

However, Edmund remains unperturbed by the divestment by FMR.

“It's a simple portfolio investment, so it's normal. The company fundamentals remain strong,” he said.

Edmund was confident its share price would stabilise soon. “As the company is good, the price will soon stabilise after the seller is gone, mainly Fidelity Investments,” he said.

FMR, one of Masterskill's substantial shareholders, has been trimming its stake in the education group since October. Following the disposal of 280,000 shares, FMR held a direct stake of 20.6 million shares, or 5.02% in Masterskill.

Dealers attributed the price slide the stock has fallen some 30 sen from its one-month high of RM2.34 on Jan 13 mainly to the recent selling pressure. However, they believed the selling might not be done as yet.

As at Sept 30, the nursing and allied health sciences education provider has 17,613 students. It posted a net profit of RM26.2mil for the third quarter ended Sept 30 on revenue of RM80.7mil.

The education group is due to announce its fourth quarter ending Dec 31, 2010 financial performance tentatively next Wednesday. Bloomberg's consensus estimates expect Masterskill to post RM104.6mil in net profit for the full financial year ended Dec 31, 2010.

--------------------------------

Let's look at that chart again.



The coloured area showed roughly the preiod when MEGB had been trading below 2.22 - remember 'Last December, he told StarBiz that the share price then of RM2.22 was not “justifiable” for a firm that made about RM100mil in net profit annually' and then on Feb 2011, he said 'anything below RM2 doesn't justify keeping the company listed,”

MEGB now trades at 1.85.

And if I am not mistaken, there's isn't a SINGLE buy transaction done by the boss.

Doesn't it makes you wonder?

Why did he on Feb 2011 tell out loud to the local investing public that he intends to purchase shares in MEGB?


Where are the share purchases since?


Is talk really so cheap?

>>>>>>>>>>>>>>-----------------------------------

So let me ask a simple question. Since Feb 2011, there was ZERO purchase of shares in MEGB announced by Masterskill CEO.

How?

How could he make that promise on the local media and fail to keep it?

Is it a question of empty promise? Or is there an intend to mislead?

Think about it...

  • “Well, I need to wait and see. Perhaps, anything below RM2 doesn't justify keeping the company listed,” Edmund said when asked on the amount of shares he intended to purchase.
How?

If an investor trusted Edmund and purchase shares of Masterskill back on Feb 2011, how now?

Masterskill last traded at 1.18 today!



How?

My one naive wish?

I wish that CEOs shows MORE RESPONSIBILITY  when they make statements about their shares when making a press interview.

I feel it's not right if any CEO makes any misleading statements to the press.

I understand that as an CEO they are probably rich enough but there are some of the investing public who are trust what they read in the press. I do hope the CEOs don't make a fool out of these folks and their precious hard earned money. Money which required some serious blood, sweat and tears to accumulate.



33 comments:

Simon said...

never listen a word coming from brain spinner's mouth

Moolah said...

Simon: How do we prevent such incidents from happening again?

M.A. Wind said...

Bossie has to talk that way, making RM 8,500,000 per year, see your previous posting.

I think those wages are pretty outrageous, they should be low basic plus on top performance based bonus. Last quarterly results not good at all, so no bonus.

Something else strange, they estimated that the listing would cost 5.5m, but it cost 8.0m, rather big difference (45%), how can they make a mistake like that?

Three ongoing courtcases, bit too much for my liking, in one they claim 100m from TV3. Is that for real?

solomon said...

Maybe purchase is done by nominees or talk is dirt cheap....

Or perhaps, it is another Chronicles like Narnia? If I can privatize it in 80 cents why should I act and waste my bullets...

Simon said...

Dont easily taking the management comment so seriously. Unless you are heading for short term.

You can always listen to their negative outlook but not something they say during their worst timing in the company.

Just look how coastal contract do. Most of them are very quiet and did extremely well for the past few years.

Why listen to those people that do not have the credibility to overcome/fix the company.

Moolah said...

Simon & Solomon: My flawed solution or rather my niave solution is simple.

Get the gatekeepers of the stock exchange to STOP CEOs from making statements that have direct impact on the share price.

Yes, stop the CEO from making statements such as 'my share is cheap, I intend to buy....'

See now that no share purchase is made, how would one define such a statement?

Moolah said...

He made that much? 8.5 million???

Damn...... !!!

Simon said...

In the finance world. There is no such thing call gate-keeper.

if the gate-keeper is good, then it is hard for everyone to do business.

When business failed, the gate-keeper would take the accountability.

Why the gate-keeper would like to bother so much that might cause a significant impact while choose to do minimal job and making the business owner happy and let the investor taking the most risk.

Moolah said...

Sorry but I do not share your idea about gatekeeper.

These are the small little changes that I wish to see in Corporate Malaysia.

These are the small little things that matters and these are the small little things that can be enforced and these are the small things that can really make a difference.

Well SC has openly asked for feedback and this is yet another of my open feedback (with a real example) on what's needed to be improved in our corporate world.

Mohammed said...

I won't blame the guy for saying that he would be buying the stock below RM2.00 and then not doing so, when the thing tanked. Who would want to catch a falling knife? May be he is waiting for the knife to hit and stick to some wood, so to speak. May be he doesn't have the bullets and merely said that to sound optimistic, as most CEOs do about their companies.

There are, of course, other maybes.
Anyway I don't particularly like the education sector in Malaysia, in general. Most of them companies are here today, gone tomorrow, financially speaking.

Moolah said...

Mohammed: Thanks for your views.

You said "I won't blame the guy for saying that he would be buying the stock below RM2.00 and then not doing so, when the thing tanked."

But... how about the fact he's the CEO?

Doesn't this constitute a misleading statement?

As a public figure, as a CEO, doesn't he have a responsibility to withold the integrity of corporate Malaysia CEOs?

If that's the case, any CEO can just make any statement they want, in hope to boost their share price.

I just cannot imagine the integrity of our stock exchange then.

:(

ronnie said...

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

Moolah said...

Very true Ronnie.

However... seriously ... don't you you think it's really time something is done?

shi said...

Can we sue them for giving misleading information with intent to deceive.

Kris said...

How i wish we can do short selling in Malaysia?? Each time we see this type of comment, we should short the stock and make money:P

Moolah said...

shi: Can we sue them for giving misleading information with intent to deceive.

==> I cannot answer this. Perhaps you might want to consult your lawyer.

Moolah said...

Kris: More needs to be done my friend.

Can you imagine if every CEO starts to give a press interview with the local media and each CEO promptly declares that they will buy their own shares because they are so undervalued and so on and so on..... ???

Can you sense chaos?

Yeah.. if their shares were really undervalued, why the need to announce and act like a stock salesman? Why the need to tell the whole world? Why don't they just buy?

Mr ICICI said...

everybody wants to buy at a low price.
the last thing a ceo or director who has GENUINE intention to buy a company's shares is to announce his intention to do so BEFORE he actually makes the purchase.

hence, if the ceo or director actually announces his intention before he even makes the purchase, he's either one very stupid ceo/director or just talking up the share price. in any way you look at it, it should be a big negative for the stock.

Mega Stock Folio said...

I am one of those unfortunate investors. Quite heavily invested in this stock. And have recently sold more than 90% of what I owned in this stock. I'd say I have lost 6 figures.

http://megastockfolio.com/catching-the-falling-knives-of-masterskill/2011/09/

http://megastockfolio.com/sold-megb/2011/08/

dreamer said...

Edmund is top 10 highest paid ceo in 2010

dreamer said...

edmund santhara is the top 10 highest pay ceo in malaysia 2010 http://pramleeelvis.wordpress.com/2011/08/31/the-highest-paid-malaysian-directors-as-reported-by-malaysian-business-magazine-16th-august2011-edition-do-you-know-who-earned-the-most-and-do-you-know-that-260-directors-earned-rm1000000-and-more/ here is the link

Simon said...

over confident is the most hated mistakes made by individual.

learn to be humble and slow and steady to achieve your goal. There is no such thing as sure win in any event of life.

The best bet you will get is 99% success rate with 1% risk of failure.

I would start to consider MEGB once it hit a penny stock. But I still dont like CEO which is a brain spinner.

random said...

mm your blog is mentioned on radio again :) any chance u will do an interview soon?

Moolah said...

Err.... why was it mentioned?

random said...

say u highlight edmund cheap talk la.. say but never do

Moolah said...

Ah.. thanks!

But this issue rather serious hor.

And this is one simple issue very much solvable by SC and the BM.

They just needs to tell the CEOs that CEO are seen as corporate leaders and as leaders, the need to uphold the integrity of corporate Malaysia and the need to be responsible with what they say to the investing public.

I really wonder if we will see any improvement in this sector.

Another sad chapter for Corporate Governance.

Sigh.

Mr ICICI said...

may i know which radio station is that?

Moolah said...

BFM.

random said...

Balls For Moola

ronnie said...

Dear Moola,

Masterskill is on Forbes Best Under a Billion 2011 list! Latexx is also on the list. LOL!!!

hng said...

Hi Moolah

Have you come across analyst have target buy call of more than 230% upside? This is what happen by analyst from NetResearch under CBRS scheme have malton target price of RM 1.60, that is more than 230% potential upside !!!. I've never seen such a high percentage target from analyst report. Is it too good to be true or just merely too bullish, miss-guide investor. What do you think?


By the way, do you have investment idea on Brem holding. Its business model very similar with PBA, defensive and have consistent income derived from water concessionaire, but with additional growth factor from property development + property investment. Brem currently trade cum cash dividend of 5sen + share dividend of 1: 25 + bonus 1:4, what is fair value for brem?

Simon said...

Ronnie,

Just check latexx book. There are still strong.

Moolah said...

hng: I posted a posting on Malton at Sahamas forum here: http://www.sahamas.net/view_topic.php?id=16420&forum_id=82

* difficult for me to answer your question with such details in here.