Arrrghh....
I screwed up.
:P
KNM - Would Poor Corporate Governance Have A Negative Impact On The Stock?
That posting have one MASSIVE flaw.
What happened? Well, I relied on the little bells provided by RHB charting. I did not verify the data and if I did, I would realise that RHB missed out the events that happened on Aug 2004. Meaning to say there was a 1 into 2 share split ( see announcement:
| Entitlement - Others ) and after the share split, there was a bonus issue of 1 for 2 ( see announcement: Bonus Issue )
Which means my entire posting is beyond repair.
LOL!
Excuse? I was too lazy and incompetent to check my facts.
Ok... please line up and aim all the rotten eggs over here!
ps: pls be gentle.
ps: I am too lazy to recount. hehe. But if anyone is kind enough, I welcome them to do the entire calculations for me. :P
ps: It is Monday, isn't it?
******* EDIT 10/10/2011. The following posting is rather meaningless now because I realised that
I Screwed UP My Earlier KNM Posting ********
==========================================
Last month, I posted on the issue of the impact of corporate governance on a stock.
Do see Maybulk: Does poor corporate governance have a negative impact on a stock?
So this morning I was wondering about And KNM Directors Got Fined.... rm 25,000 Each!
( Yeah, tell me about it. A fine of rm 25,000 for a corporate director? I wonder who does the fine insult??? Really! )
Anyway, I was thinking about the impact of the poor corporate governance from KNM on its stock price.
I asked myself, what if an 'investor' bought KNM when it IPOed back in 2003 and held it till today.
Now that sounds like a fun exercise, no?
So, I opened up the chart of KNM from RHBInvest. This was KNM's chart since its listing in 2003.
Doesn't look too bad, yes?
But then I looked at all those little bells on the chart. And I made reference back to Bursa website and the result was rather interesting.
First, the IPO.
27 June 2003: PUBLIC ISSUE OF 6,680,000 NEW ORDINARY SHARES OF RM1.00 EACH AT AN ISSUE PRICE OF RM1.48 PER NEW ORDINARY SHARE PAYABLE IN FULL ON APPLICATION AND PLACEMENT OF 4,400,000 NEW ORDINARY SHARES OF RM1.00 EACH AT A PLACEMENT PRICE OF RM1.48 PER NEW ORDINARY SHARE PAYABLE IN FULL ON APPLICATION BY THE NOMINATED PLACEES
Ok, let's ass-u-me.... :)
IPO at 1.48 - 27 June 2003.
Assume 'investor' purchases 2,000 shares. This means an investment outlay of 2x1.48 = 2960.
(ps: if I do screw up with my calculations, please don't sue... just tell me and I will correct. :P )
A. 1 for 2 bonus issue Sep 2006 ( see announcement: Bonus Issue )
So total number shares becomes 3,000
B) 1 for 1 bonus issue and then share split 1 into 2 - June 2007. ( see announcement: Bonus Issue and Entitlement - Others )
Getting tricky. :P
Total number of shares held is now 3,000
After bonus issue, total number of shares becomes 6,000
After share split of 1 into 2, total number of shares becomes 12,000
Hope I have yet to screw up. :P
C) May 2008, rights issue of 1 for 4 at rm 4.00. ( see announcement: Rights Issue )
Getting even trickier. :P
(rights issue? LOL! Put more money in babe!)
With 12,000 shares, 'investor' will be eligible for 3,000 new shares at a price of 4.00 each.
Assuming 'investor' agrees and takes up the rights issue, 'investor' puts in extra outlay of rm 12,000.
Total outlay + original cost of investment = 12000 + 2960 = rm 14,960
Number of shares held becomes 15,000
( no screw yet, I hope! )
D) 2 for 1 bonus issue. July 2008 ( see announcement Bonus Issue )
Waaaahhh! so generous! 2 for one bonus issue woh!
So the number of shares held increases from 15,000 to 30,000
Aha! Made a mistake here. :P
Investor had 15,000 shares. A 2 for 1 bonus would see investor get 30,000 new shares.
So investor would now have 45,000 shares. ( Sorry.. sorry... and thanks for the correction!)
E) 4 into one share split!! ( see announcement: Entitlement - Others )
( Hehe... KNM back then... faced thunder, lightning woh! ... let's see there were ... forced selling on CEO shares, share buybacks, MBOs.... errr... such a happening stock.... and yeah KNM was a penny stock then! 4 into 1 .... would make KNM... appear more expensive. Hohoho! )
4 into 1 reverse share split...hmmm... 30,000 shares held would be consolidated into 7,500
45,000 shares would be consolidated into 11,250 shares. ( how did I pass my maths? :P )
Ok so far?
Remember original outlay + original cost of investment = rm14,960.00 and the number of shares held is 11,2500 shares.
KNM today is 1.23
If investor cashes out today, investor gets back 11.25 x 1230 = 13,837.50
But.... cost of investment = 14,960!!!!
Arrrrrrrrrrrrrrghhhhhhhhhhhhhhh!!!!
See the wonders of holding an investment in a stock that has poor corporate governance?
But.... but..... it looks like I have screwed up!!!
Oh.... no..... oh yeah!
I left out all dividends. *&^^:$%^#^%%#@@
hey but if you are interested to know how huge the dividends were... and lol.. if you think too huge... please skip the tedious counting below... :P
- June 2004: Final Dividend
- May 2005: First and Final Dividend
- June 2006: First and Final Dividend
- June 2007: First and Final Dividend
- Feb 2008: Interim Dividend
- Feb 2009: Interim Dividend
- March 2011: Interim Dividend ( I don't see any for 2010. :P )
Ok... 7 set of dividends.... should be fast and easy.
June 2004, 5 sen tax exempt. In this case, investor had 2000 shares then. This means 10 sen collected.
May 2005. 3 sen less tax of 28%. ( 3 sen also want to less tax? :P ) Investor had 2,000 shares. So dividend collected this year would be 4.32. Total dividend collected = 14.32 sen.
June 2006. 5 sen less tax of 28%. Still 2,000 shares. So dividend collected this year would be 7.2 sen. Total collected = 21.52 sen.
July 2007. 5 sen less tax of 28%. Now have 3,000 shares. So dividend collected this year would be 10.8 sen. Total collected = 32.32 sen.
Feb 2008. 4 sen less tax of 27%. Now have 12,000 shares.So dividend collected this year would be 35.04 sen. Total collected = 67.36 sen.
Feb 2009. 1 sen less income tax of 25% and 0.5 sen tax exempt. Now have 45,000 shares. So dividend collected this year would be 18.75 sen. 56.25 Total dividends collected = 123.61 sen.
March 2011. 3 sen tax exempt. Number of shares now held 7500. 11,250. So dividend collected this year would be 22.5 sen. 33.75 sen. Total dividends collected = 108.61 sen. 142.36
So total dividends collected (assuming me calculations is not screwed up) since 2003 is 108.61 142.36 sen.
Let's add this figure to the earlier calculations...
Cost of investment - 14,960
Shares worth today - 13.837.50 *** corrected figure ***
Dividends collected - 1423.60 ** corrected figure ***
How?
* hehe... got profit woh! *
Last April 2010, I wrote the following posting KNM's MBO Fails
Let me reproduce the entire posting:
......................
It was a laughing stock the day KNM's management announced its proposed management buyout.
It was noted in the postings KNM: Do Show Us The Money! and KNM: Should I Stay Or Should I Go?
Yesterday KNM announced what was simply expected.
- Further to the Company’s announcements dated 4 February 2010 and 22 March 2010 in relation to the above, the Board of Directors of KNM wishes to announce that after due deliberation, the Company and BlueFire Capital Group Ltd (“BlueFire”), including its partners GS Capital Partners VI Fund L.P and Mettiz Capital Limited, are unable to reach an agreement on the pricing of the Proposed Acquisition. Hence, the parties have mutually agreed that the proposal made by BlueFire on 4 February 2010 has lapsed.
Company and the bidders unable to agree on the pricing of the proposed acquisition? ( That announcement link: here )
That's all it can say? Is that all?
What a bloody disgrace!
Surely the company can be more transparent and shows the respect to the investing public how they failed to come into agreement on the pricing issue. What was BlueFire final bid? Was the proposal on 4th Feb 2010, the only proposal? Any newer proposal made by BlueFire? Was BlueFire even serious about the management buyout?
And who are the members of KNM management that are involved in the management buyout?
Last but not least, given what has transpired, and if the management that are involved in BlueFire's acquisition bid continues to remain in charge of the company, how should the minority shareholder view what has happened?
Biggest question that needed to be asked is, "Does the current management even has the interest of the minority shareholders in mind?"
What if the management and BlueFire returns with a much lower pricing? Not possible?
Exactly. How can the minority shareholders trust the current management now?
The current management involved with BlueFire, should look themselves in the mirror and ask themselves what have they been doing the past couple of months? Have they been focused on running and managing the company? Or are they only interested only in doing the management buyout for their own vested interest?
Stinks doesn't it?
In my flawed opinion, the board of directors should review the loyalty and the integrity of the current management involved in BlueFire. If there is no loyalty and no integrity, these management should simply go!
The Star Business carried a much detailed article: KNM deal falls through
- Thursday April 15, 2010
KNM deal falls throughBy RISEN JAYASEELAN
Offer lapses due to disagreement on pricing
PETALING JAYA: The deal to acquire the assets and liabilities of oil and gas company, KNM Group Bhd, has fallen through due to a disagreement on pricing.
The company said yesterday that the offer had lapsed by “mutual agreement of the parties,” as there was no agreement on the pricing.
It is understood that a meeting between the buyers and the board of directors of KNM had taken place yesterday afternoon, prior to the announcement.
StarBiz had three weeks ago highlighted the possibility of the buyers withdrawing the offer or lowering their price. Then, the buyers had completed their due diligence on the assets of KNM and yet, had not come up with any firm offer. The buyers had made a conditional offer to buy the assets of KNM on Feb 4, subject to a due diligence. The offer was at an indicative price of 90 sen per KNM share, totalling RM3.5bil.
It is not clear what price the buyers had offered yesterday but an analyst familiar with the situation said the board had asked the buyers for a price which was at a certain premium over the market price of KNM’s shares.
That, however, was more than what the buyers were willing to pay for KNM’s assets, the analyst said.
Maybank Investment Bank believed that the buyers had made a final offer of between 60 and 70 sen. In a note issued yesterday, Maybank Investment expected the market to react negatively over the deal falling through. Should the deal fall through, “we tactically downgrade KNM to a sell in the short term, ahead of this negative newsflow,” Maybank Investment wrote.
On the other hand, Kenanga Research head Yeonzon Yeow said that should KNM’s price dip below 60 sen a share, it would be a buying opportunity. Yeow has a fair value of 70 sen per KNM share, based on a price earnings multiple of 10 times the 2011 forecast earnings of KNM.
But some other research houses have a lower fair value of KNM, such as OSK Research, which has a fair value on KNM at 59 sen and TA Research at 62 sen. Both research houses said their fair values exclude considerations of the then indicative offer of 90 sen.
KNM founder and major shareholder Lee Swee Eng, a private equity firm called Mettiz Capital and a Goldman Sachs unit, are all part of the group seeking to buy KNM’s assets which include foreign companies in Germany and Italy.
The due diligence, which was conducted by foreign-based consultants including KPMG, is said to have cost the buyers a few million US dollars.
It is not surprising that the buyers are no longer keen to pay 90 sen a share for KNM’s assets as the latter posted an unexpected loss of RM31mil in its fourth quarter ended Dec 31, 2009. This dragged KNM’s full-year 2009 net profit to RM171mil, almost half the previous year’s RM336.4mil. The result was also significantly below analysts’ consensus forecast for FY2009 of RM288.7mil.
The poor fourth quarter results were due mainly to provisioning for foreseeable losses in its operations in Brazil, Canada and Indonesia, coupled with a revaluation of the group’s Canadian properties. Analysts said that due to the low price of oil and the general economic malaise, many of the projects that KNM was supposed to have participated in had failed to materialise.
Analysts said it was unlikely another offer for the assets of KNM could happen soon, considering that this group of buyers had already gone though a due diligence and yet could not agree on a price with the board.
The attempted KNM deal may also go down in corporate history as one of the last attempted mergers and acquisitions that had sought to use the assets and liabilities route that required only a simple majority of shareholders to approve. It would also have been the largest private equity deal ever done in the country.
The regulators are very likely to raise the shareholder approval threshold of such deals to 75% in the coming weeks.
.......................
And today 6 Oct 2011 'something' is finally done about such disgraceful behavior.
Bursa Securities raps KNM, fines directors RM200,000
Yeah.. that 'something' ... amounts to a WHOPPING rm 200,000..... :(
It's now Oct 2011 and the fine is only rm200,000?????
And to be precise that's just a shocking rm25,000 fine for each of its directors!!!
Sigh.... such a big fine... how will such fine deters others from pulling such disgraceful stunt in the future?
- Bursa Securities raps KNM, fines directors RM200,000 Written by Joseph Chin of theedgemalaysia.com
Thursday, 06 October 2011 19:07
KUALA LUMPUR: Bursa Malaysia Securities Bhd publicly reprimanded KNM GROUP BHD [] for breaching the Main Market Listing Requirements.
The regulator had on Thursday, Oct 6 also rapped and fined its directors a total of RM200,000 for not disclosing enough details about a proposed takeover in February 2010.
The regulator said KNM’s announcement was “not factual, unclear, inaccurate and lacked sufficient information and material facts to enable investors to make informed investment decisions”.
Bursa Securities fined managing director and major shareholder Lee Swee Eng and seven others RM25,000 each for breaching the listing requirements.
They were executive directors Gan Siew Liat, Chew Fook Sin and Ng Boon Su, independent non-executive directors Datuk Ab. Halim Mohyiddin and Lim Yu Tey.
Two former board members -- Dato’ Mohamad Idris Mansor (resigned April 28, 2010 as independent non-executive chairman) and Lee Hui Leong (resigned on April 8, 2010 as executive director) – were also fined.
Bursa Securities said the directors had breached paragraph 16.13(b) of the Main LR for permitting, knowingly or where they had reasonable means of obtaining such knowledge, KNM to commit the breach.
To recap, KNM had on Feb 4, 2010 announced BlueFire Capital Group Ltd (Bidco), a company controlled by Lee Swee Eng (who was a major KNM shareholder) about a proposal to acquire the KNM.
The proposed price was equivalent to RM0.90 per issued ordinary share of KNM.
However, Bursa Securities said the Fe 4, 2012 announcement did not disclose crucial facts which were contained in the Bidco offer letter.
Among them was that the proposed acquisition would be fully settled by redeemable convertible preference shares in a new entity and the RCPS can be converted into non-voting ordinary shares in Bidco or redeemed for cash.
Another condition which was not stated in the announcement to shareholders was there was not new shareholder holding 5% or more in KNM or existing shareholder increasing their shares by 5% or more; or more than 10 new shareholders holding 1% or more in KNM shares.
“The conditions which formed an integral part of the Proposal were clearly of interest and material to shareholders and investors to enable them to make an informed decision regarding the proposal,” it said.
Bursa Securities said the conditions were material to assess the reasonableness of the offer and certainty of the acceptance by KNM of the proposal.
Bursa Securities noted that KNM’s share price and volume traded had increased following the announcement. KNM’s share price rose from 75 sen to 81.5 sen on Feb 5, 2010 and the volume traded on that day was 142 million (3.5% of KNM’s share capital) versus the past five-day average of 15.9 million shares traded.
The proposal subsequently lapsed on April 14, 2010.
Yet another stock hitting the headlines for the wrong reason.
- Xian Leng to conduct special audit
Published: 2011/10/05
Xian Leng Holdings Bhd said there might be some financial irregularities involving some RM17.36 million in capital expenditure.
The company plans to hire an independent party to carry out a special audit.
The amount is significant because for the past two financial years, Xian Leng's group revenue came in just under RM20 million.
Xian Leng has suffered three straight years of losses. For the second quarter of the current financial year ending January 31 2012, it posted a net loss of RM1.3 million, up from RM1.21 million in the same period a year ago.
Special audit is now required to check on Xian Leng's rm17.36 capital expenditure.
Hmmm.... well this is one area to be cautious. For example, money spend on capital expenditure could be overstated. Or remember the case of Megan Media where millions were borrowed and spend on new plants and machinery. Upon audit the plants and machinery were no where to be seen!
Now I am not saying this is what's happening in Xian Leng, in fact I simply have no idea what's happening but I am certainly anxious to discover what happens next.
Oh yeah, we had seen recently that many companies had spend millions and millions on capital expenditure. Perhaps the prudent investor should be cautious against such companies who have the nasty habit of making millions and millions in capital expenditures each year.
This morning I saw the following news article.
- Huat Lai to buy TPC Plus for RM8m
Published: 2011/10/04
HUAT Lai Resources Bhd (HLRB) has signed a deal to buy 33.65 per cent of poultry company TPC Plus Bhd from London Biscuits Bhd for RM8.1 million, or some 30 sen a share.
HLRB will announce details of its mandatory general offer in due course.
London Biscuit made another disposal???
Well, to freshen my grey cells, it was just in Aug 2010, London Biscuits was in limelight for all the wrong reasons. On 23rd Aug 2010, London Biscuits announced it was selling its stake in Lay Hong. ( See Bursa announcement: DISPOSAL BY LONDON BISCUITS BERHAD OF ITS ENTIRE EQUITY INTEREST IN LAY HONG BERHAD (“DISPOSAL”)
Original investment cost is 12.088 million.
Disposal price of investment is 11.851 million!
That stake was bought in 2006.
Mind you, the stock market back in 2010, was fairly hot.
And if one followed the posting Review Of London Biscuit, it was so clear that that the money invested by London Biscuit came directly from the funding exercises like bank borrowings!
Now would you personally borrow money to invest?
I bet you wouldn't but that was what London Biscuits did!
Let me repeat what was posted in the posting London Biscuits Disposal Of Its Stake In Lay Hong
( Recommended reading also: Regarding London Biscuits Borrowings )
--------------------
Let me reproduce the balance sheet table I made in the posting Review Of London Biscuit again.
Look at the 10 Q3 cash. It says 15.608 million.
Look at the size of London Biscuit's debts. 218.004 million!
Clearly London Biscuit is lacking cash right now, yes?
Isn't it so clear that London Biscuit needs to 'sell'????
And yes, why did London Biscuit's debts soared in the first place?
As mentioned and shown clearly in the posting Review Of London Biscuit, London Biscuit used cash generated from bank borrowings to make such 'investments'.
And the return from one such investment?
Original investment cost is 12.088 million.
Disposal price of investment is 11.851 million.
How?
Lost money in the investment and not forgetting the cost of borrowings needed to make such an investment!
Yes.... it's absolutely shambolical!
And yeah.. let us not forget about the other shambolical investment in Khee San!
- The Board of Directors ("BOD") of LONBISC are pleased to announce that the Company had on 17 September 2007 signed a Sale & Purchase Agreement dated 17 September 2007 between KHEE SAN REALTY & HOLDINGS SDN BHD (“KSRH”) for the Proposed Acquisition of 18,420,300 ordinary shares of RM1.00 each in KHEESAN representing approximately 30.7% of the enlarged issued and paid-up share capital of KHEESAN (‘the said Sale Shares”) for a total cash consideration of RM27,630,450.00
18,420,300 million shares of Khee San bought at a CASH consideration of 27,630,450.
Glee! That's a cost per share 1.50.
What's the price of Khee San today?
0.565!!!!!!!!!!!!
oO
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
( Khee San is currently untraded today (4 Oct 2011) at 51 sen!!! )
----------------------
Ok, so Lay Hong was disposed at a loss.
But sadly for London Biscuit, the disposal turned into great embarrassment for them! Lay Hong, the stock (or the chicken) flew up, up awayyyyyyyyy!
No joke!
Borrowed money to 'invest' in other stocks.
To improve cash flow, London Biscuits disposes the stock.... at a stock.
Stock.... then flies!
Sounds comical?
So today, London Biscuits says it disposes its stake in TPC Plus!
I quickly summoned Bursa website for London Biscuit's announcement.
Here is their pdf file
Page 2.
- The original cost of investment was RM8,472,426.00 and the date of such investment was 2 February 2010.
Original cost of investment 8.472 million. Selling for 8.075 million!
Selling at a discounted price once more!
Oh myyyyyyyyyyyyyyyyy!
And the rationale for disposing...
- The Proposed Disposal is to enable the LBB Group to focus on its core business of cake,
candies, wafers and snack confectionery.
How?
Me? As mentioned many times before, I am not a fan of this Listed Companies OTHER Investments.
If the listed companies have extra cash, they should stop screwing around and just return the excess cash back to their shareholders. And for companies like London Biscuits, they just that 'borrow to invest' is a big NO NO!
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