Saturday, September 24, 2011

Maybulk: Does poor corporate governance have a negative impact on a stock?

From fellow blogger M.A. Wind's posting: Bursa: long term returns

  • My best overall guess of the long term yield including dividends and costs incurred of a portfolio is in the range of 4-5% per year. This is rather disappointing given the GDP growth of Malaysia. Western countries have had less growth in GDP but higher returns on investing in shares. I think that the reason for this is the lower degree of Corporate Governance in Malaysia, which is directly influencing these returns. Related Party acquisitions at (highly) inflated prices and General Offers with delisting threats at (very) low prices are directly lowering returns.
Aren't you curious about the issue of lower degree of Corporate Governance and how Related Party Transactions is directly lowering returns?


Does poor corporate governance have a negative impact on a stock?

Let's take a well known stock, a stock where some have claims as an 'investment grade' stock,

I certainly wasn't impressed.

Company makes 62 million losses and it doesn't even attempt to explain how these losses incurred.

And by Dec 2008, I was wondering Why Is Maybulk So Active In the Share Market?

Let me reproduce that entire posting here again...

Yes, why is Maybulk so active in the share market?

Caught the following announcement on Bursa Malaysia:
Dealings in quoted securities pursuant to Paragraph 9.21 of the Listing Requirements

  • Malaysian Bulk Carriers Berhad ("MBC” or "the Company”) wishes to announce that the MBC Group has, for the period from 31 January 2008 to 22 December 2008, purchased quoted securities from the open market. These purchases have exceeded 5% of MBC's latest audited consolidated net assets ("NA") as at 31 December 2007, details of which are set out below:-

    1. The aggregate purchases for the period from 31 January 2008 to 22 December 2008 amount to RM91.38 million. This represents 5.15% of NA;

    2. The total cost of all investments in quoted securities as at 22 December 2008 is RM143.80 million;

    3. The total book value of all investments in quoted securities as at 22 December 2008 is RM122.12 million;

    4. The market value of all investments as at 22 December 2008 is RM122.93 million; and

    5. There were sales of quoted securities during the current financial year and the losses on disposal amounted to RM11.23 million
    This announcement is dated 23 December 2008.
Fact from 31 January 2008 to 22 December 2008, Maybulk purchased shares amounting to RM91.38 million.

Aren't you shocked at what it is doing?

Don't you think that the amount is way too much?

Someone once mentioned that Maybulk's management is highly 'reputable'. Well that the fact that Maybulk chose NOT to disclose what they bought and the fact that they bought more than 5% of its total Net Assets as of its audited accounts as at 31st Dec 2007 places a massive question mark over the management. Won't you agree?

And honestly, what do the management of the company think they are? Is Maybulk a securities trading firm?

Does the management reckons that they are super traders or super investors?

Well, the fact that they loss some rm 11.23 million speaks volumes about their stock market skills!

Seriously, don't you reckon that Maybulk should stop this?

Look they aren't good, are they? And if so, why dabble in the share market?

Does Maybulk have so much money to lose in the share market?

And if you are a minority shareholder, do you honestly like what you see?

Aren't you appalled by all this?


I was certainly appalled with all these. I dislike the idea of our listed companies dabbling in the share market. This is a no-no for me. I feel the management should always focus on its core business.

Well that's my flawed thinking.

And then of course there is that massive related party transaction issue between Maybulk and POSH.

Unfortunately, I did not post anything on it.

However, many thanks to blogger M.A. Wind, he is kind enough to share his horrific experience.

Do read the following posting: Maybulk/POSH: What happened to the Cash?

According to Wind:

So far we have seen the following significant breaches of rules:
  • no mentioning of the purpose of Maybulks investment in POSH
  • no recently audited accounts (less than 6 months old)
  • incomplete financial picture leaving out (for instance) non-interest bearing debts
  • incorrect calculation of the gearing ratio
And according to Wind there is more! (Do check out his blog for more updates based on his personal experience on Maybulk.

This is however only the top of the iceberg. The next two episodes will be:

  • Clarkson, the valuer who didn't believe his own valuation
  • the magical accounting tricks of KPMG
And so we have here... Maybulk, a stock, flush with massive corporate governance issues.

So how?

Does poor corporate governance have a negative impact on a stock?

My say?

I would always avoid stocks that have poor corporate governance.

When I invest in a stock, I regard myself as being a small business partner of the business. And as a business partner, how can I trust my business partners who have poor corporate governance? Am I a business partner for them to take advantage of? Yes, would I be short changed the very minute I turn my back? How could this equate to a smart investment for me?

And with the poor performance of Maybulk the stock, it appears that this isn't such a poor decision!


Avatar said...

Another great post Moolah. MA Wind is also doing a fantastic job highlighting the POSH transaction with Maybulk. These are the things we should be seeing in the business newspapers/analyst report....

Tried commenting on MA Wind's blog several times but strangely, it didn't get through.


K C said...

I strongly agree that public listed companies should not dabble in the stock market. Focus on your business. However, good companies having regular cash flows do have a lot of cash, much more than what is required for its ordinary operations, for the time being. I would prefer this excess cash to be returned to the shareholders in the form of share repurchase, or special dividends. But many prefer to retain the cash, for future capex, or purchase of positive NPV projects. While waiting and scouting for these expenses, this excess cash is often invested in short-term securities; money market funds, bank FDs and including stocks. Some still give very good dividends (DY>8%).Just do not speculate in share market but invest for safe better return while waiting for business opportunity. I think it may not be that bad after all.

ronnie said...

Dear Moola,

Maybulk is majority owned & managed by the Kuok Group which is reputedly one of the best managed business groups in Asia.

M.A. Wind said...

Thanks for linking.

I agree, companies should not buy listed shares, just return to shareholders as dividends, let everybody invest themselves.

The irony? If there was ever a good time to buy listed shares for Maybulk, it was in the economic crisis. And what did they do with their RM 800 million? They bought a small piece of an overvalued company in a related party transaction .....

Instead, buying a basket of shares and bonds would have easily given them 100% profit in one year, RM +800 million.


M.A. Wind said...

Thanks for the linking and the graph, will refer to it, didn't know the under performance was that bad.

I agree, companies should not invest in the share market, better return the money in dividends let every shareholder invest themselves.

The irony? Maybulk bought all the time shares, but not in the midst of the crisis. Instead of spending RM 800 million in the POSH RPT they could have bought a basket of international shares and bonds, would have yielded 100% in one year. Instead they got stuck with a small, illiquid holding which has been disappointing.

But the best would have been to simply return the RM 800 million to the shareholders in dividends, like what PCL did .... :(

Moolah said...

Ronnie: We all know who owns Maybulk. 'These' type of things.. no need to say.

Now.. despite.. the ownership.. perhaps these reputable owners should have had a better answer for M.A. Wind.

Yes what exactly happened to the POSH cash?

Why did Maybulk dabble so much in the markets?

What exactly did they purchase and sold?

Sorry but I for one would really like these answers.

Moolah said...


Btw.. I do have a reason not mentioning ownership.

Sometimes when big name owners are involved, the focus moves towards who instead of 'what and why'.

Here in Maybulk, I wanted to focus on 'what exactly is all these other investments all about' and I wanted to know 'why' the losses occured.

And for Wind's issue, I would want to know 'why and what' exactly happened. :(

You know, yesterday i posted about the conflict of issue between icap the fund management and the it having a role in giving investment advisory on selected issues.

For me, the question is NOT who icap is but WHY the conflict of interest happened.

I hope you understand my simple issue.

Focus mianly on the issue.

Ownership is not a wild card for me. That's my flawed thinking.

M.A. Wind said...


May be try another browser, I was also having some problems before. All comments are welcome, even anonymous ones (at the moment, might change).

Avatar said...

Dear MA Wind,

I'm using Firefox 3.6.22. When I try to post, it just comes up blank. Preview doesn't work either. Logging in using Google account or even an anonymous setting doesn't work? Anyone else has the same problems?

Maybe it's due to your restriction settings? Or is it subject to moderation?

In any case, just wanted to say THANKS for the informative posts :)


Moolah said...

Strange. I used firefox too whenever I post any comments on his site.

Avatar said...

Ok, I see... it must be my noscript add-on or something similar. I'll check.

Thanks Moolah.

Moolah said...

The newe explorer and firefox is a bit leceh. :P

Try this...

1. logut of google.
2. close firefox.
3. open firfox again.
4. go to
5. login to blogger.
6. Then try cgmalaysia blog again.

Err.. don't ask me the logic behind these. :P

Avatar said...

Thanks for the advice. I actually googled this problem and found the solution.

It turns out that I need to change my Firefox settings to "accept 3rd party cookies".

Already commented on his site. Things are getting pretty interesting in the investing world nowadays. Such huge volatility....


Moolah said...

Glad you are able to solve the issue.

hehe.. investing is always interesting... :P