Monday, March 18, 2013

Transparency? Who Wants To Invest In A Company They Cannot Trust?

Posted on Star Business:

  • Monday March 18, 2013
    Listed firms told to be transparent to investors

    KUALA LUMPUR: Companies listed on Bursa Malaysia need to be transparent in providing information to the investor community, said Bravemarket Inc managing director Dr B.M. Marcello Maestro.

    He said he had been talking to some of the local companies and found them undervalued because of their lack of transparency.

    “You need to communicate with the investors by giving them clear information about your company’s growth, earnings and revenues.

    “Most of the companies have knowledge and future plans about their company but they are not putting that in their website which makes them look unattractive to investors’ eyes,” he told Bernama.

    Maestro urged the companies to inform the investor community about their growth plans – where they are going, and how and when they are going to get there – because investors are interested in the future and not in the past.

    “Clarity creates confidence. If you are clear about your company, then you will have investors coming in for you, and once they are confident about your company then they will keep on investing for a long time.

    “It doesn’t matter if your past performance is poor, you need to explain why and how you are going to overcome that,” he said.

    Maestro said a company’s share prices were an indication of how investors were valuing its assets.

    “Once the share prices go up, its market cap will follow and the company can have lower funding.

    “With lower funding, you can expand more because your share prices are higher, and you could also improve the balance sheet,” he added.

    Bravemarket, a US-based firm servicing financial institutions, businesses and governments, has engaged government agencies to select the best local small and medium enterprises for inclusion in the Bravemarket Asia Investment Ready 500. — Bernama
My comments: I fully agree that companies are going to be undervalued when the transparency is lacking.

When a company is not transparent, it is not telling the investors what is happening within the company. And I cannot understand for the life of me, why can't the owners and management understand the importance of transparency. Is transparency not important? Are the owners and management so arrogant that they feel that the minority shareholders are not important? Don't they understand that a minority shareholder, is a shareholder and shareholders are but their business partners? So why wants to be their business partner when they have are not giving access to information that will help them understand the business they are investing?

Yes, who wants to buy your company share?

Like this also cannot understand???

Think about it.

A prospective investor or even fund manager for the matter of fact, sees this company. Earnings is great. Dividends paid is not bad too. But sadly, before they could invest, they see this company embarking on multi million dollar project. The information given by the company is hazy, leaving the prospective investors utterly dumbfounded on what is happening, which gives them no choice but to avoid the company.

Why risk investing their money, when they have no idea what is happening exactly with the lack of transparency?

When there is lack of information and clarity, who can the investors trust the company?

Or as they say, who wants to invest, to be a business partner, of a business they cannot trust?

Is this all too difficult for the owners/management to understand???

For example, blogger

Protasco's Puzzling Purchase

Some of the issues highlighted.
  • PT ASI is only a few months old: "PT ASI was incorporated in Indonesia on 6 September 2012 as a private limited company".
  • PT ASI only has one director who hardly owns any shares. No background of this director is given.
  • The vendor is 99% owned by Anglo Slavic Petrogas Ltd, a company registered in the British Virgin Islands, no background is given, a search on the internet returns nothing; who is behind this company, what is their track record?
  • The company structure of PT ASI owning part of PT FAS owning PT Haseba is rather artificial, why is such a difficult construction chosen?
  • Who are the minority shareholders of PT FAS and PT Haseba?
  • On the signing of the S&P, Protasco will pay RM 50 million cash, why so much? This is about 30% of the total amount, much higher than normal in comparable deals.
  • On November 1, 2012 PT ASI signed a S&P agreement to buy an additional 46% of PT FAS. What was the price paid for that stake? Why does Protasco not wait until this deal is panned out?
  • a thorough reasoning should be given: where is the profit guarantee based on? It is definitely not based on the profit from PT Haseba, its results are poor, its revenue in 2011 is even zero:

 Do read Wind's other postings:


Black Ink said...

Nice one Ze Moola!

I was wondering about this oil rig purchase thing myself.

I was just about to buy shares last year and then they did this - using up half their cash!

They don't have any expertise in the area either.

What gives man?!

Moolah said...

Black Ink: ALL of the stuff that was written on Protasco was written by fellow blogger, M.A. Wind.

Please do visit his blog.

So what gives with Protasco?

Well, I have no clue because the company has not being transparent at all. I can't answer because I have no info.