English

MSWG Weekly Newsletter 21 September 2018 (English)

21.09.2018

MSWG’S QUICK TAKE ON-ONGOING CORPORATE DEVELOPMENTS

 

KIM TECK CHEONG CONSOLIDATED BERHAD (“KTC”)

KTC announced the resignation of its Independent Director, Mr Wee Hock Kee who is Chairman of the Audit and Risk Management Committee as well as a member of the Nomination Committee on 12 September 2018.

In his resignation letter to the Chairman of the Board, the Independent Director had stated the following:

“I feel I have no choice but to step down, due to the recent development in the boardroom wherein my role as the Chairman of the Audit and Risk Management Committee has been undermined. 

The Board had rejected the advice of the Audit and Risk Management Committee on a significant accounting matter (a significant audit finding on impairment reported by our external auditors in their Audit Review Memorandum) that my Committee considers it cannot compromise over; and all means to resolve the disagreement had been exhausted. It is irresolvable concern about disclosure and financial reporting of the fourth quarter 2018 unaudited results. This breakdown of trust and confidence on us (collectively as members of the Audit and Risk Management Committee) has diminished our effective contribution as an oversight board for financial reporting.

Hence, I as the Chairman of the Audit and Risk Management Committee take full responsibility for this impasse and the best way is to resign as a board member and pave the way for the appointment of a new Chairman of this board financial oversight committee.  I believe I have served the board to my best ability and exercise my fiduciary duties in good faith taking into account the interest of ALL shareholders.”

[Source:  KTC’s announcement on Bursa Malaysia’s website on 12 September 2018]

MSWG Weekly Newsletter 14 September 2018

14 September 2018

MESSAGE FROM THE CEO

 

PLCs sitting on large cash balances

Every now-and-then, we come across PLCs sitting on large cash balances.

Inevitable, minority shareholders, and even institutional shareholders, sometimes raise the following question to the Board at AGMs: “Why don’t you distribute some of the cash rather than just sitting on it?”

For these shareholders, their rationale is simple: if you do not have any plans to use the money (like capex) over the next few years, why do you not return the money to shareholders as dividends.

Shareholders often phrase their statement to the Board as the PLCs ‘not sweating their assets (cash) enough’. The cash is merely sitting in the PLC and the PLC is only getting FD rates. This is not the reason why the shareholders parted with their cash to invest in the PLC, especially during the IPO.

To be fair, some of these PLCs do declare dividends while some do not. While some dividends are generous, the other dividends are not so…barely above the Fixed Deposit (FD) rates.

The answer from the Boards are often that the cash is being held as a ‘war chest’…we do not know what bargains (acquisitions/takeovers) will come our way in the future and when it does come, we must have sufficient cash. The PLCs argue that with cash settlement terms, they can obtain better prices and at the same time not affect their gearing ratios adversely.

MSWG Weekly Newsletter 07 September 2018 (English)

12 September 2018

 

MSWG’S QUICK TAKE ON-ONGOING CORPORATE DEVELOPMENTS

TA ENTERPRISE BERHAD

INDEPENDENT ADVICE CIRCULAR TO THE HOLDERS OF THE OFFER SHARES (HOLDERS IN RELATION TO THE CONDITIONAL MANDATORY TAKE-OVER OFFER BY DATUK TIAH THEE KIAN (“OFFEROR”) THROUGH TA SECURITIES HOLDINGS BERHAD TO ACQUIRE ALL THE REMAINING ORDINARY SHARES IN TA ENTERPRISE BERHAD (“TAE”) (“TAE SHARES”) NOT ALREADY HELD BY THE OFFEROR AND THE PERSONS ACTING IN CONCERT WITH HIM (“PACS”) (“OFFER SHARES”) AT A CASH OFFER PRICE OF RM0.66 PER OFFER SHARE.

Recommendation by BDO Capital Consultants Sdn Bhd (“BDO CC”):

BDO CC is of the view that the Offer is NOT FAIR and NOT REASONABLE. BDO CC advises and recommends that Holders to REJECT the Offer.

Recommendation by the Directors:

The Non-Interested Directors excluding Jory Leong Kam Weng, being:

  • Zainab Binti Ahmad
  • Dato’ Sri Mohamed Bin Abid
  • Peter U Chin Wei
  • Christopher Koh Swee Kiat
  • Datin Rahmah Binti Mahmood

MSWG Weekly Newsletter 30 August 2018 (English)

​30 August 2018

MESSAGE FROM THE CEO

last Monday, we launched the Malaysia-ASEAN Corporate Governance Report 2017 at Bursa Malaysia.

Below we highlight some of the significant findings based on our coverage of 880 companies along with our commentary.

17 companies achieved CG scores of above 100 points while 113 companies (or 13% of the companies covered) scored less than 50 points. For every company that has achieved above 100 points, there are 6 companies in the below 50-point category. There is much work to be done to escalate the CG practices of the 113 companies. Of the 17 companies, 12 companies were GLCs.

It is better practice to pay dividends promptly after declaration instead of torturing the shareholders by delaying the payment. In the case of interim cash dividends, better practice dictates that the distribution should be concluded within 30 days after being declared. For final dividends, which is subject to shareholders approval, it is 30 days from shareholder approval.

The Companies Act 2016 stipulates a notice period of 21 days for AGM. International best practice advocates a longer notice period of 28 days. More than half of the companies i.e. 495 companies (56%) gave a notice period of more than 28 days. This is commendable as shareholders will have more time to peruse the annual reports and the CG reports which are getting thicker and thicker by the day.

The publication of Key Matters Discussed at the AGM is now a requirement. 78% of the top 100 companies publish their AGM minutes/Key Matters Discussed. However, based on the 880 companies covered, the compliance rate is a disappointing 37%. This requirement is meaningful as shareholders who were unable to attend the AGM and the public can now be privy to what transpired at the AGM. This will lead to more informed decision making.

MSWG Weekly Newsletter 24 August 2018 (English)

24.08.2018

MESSAGE FROM THE CEO

 

The Malaysian Institute of Accountants (MIA) wants to increase the penalty for accountants who flout the law by up to 10 times.

A fine of up to RM5,000 was set in 1967 under the Accountants Act 1967.

Now, after 51 years, MIA wants to increase it to RM50,000 to serve as a sound deterrent in the future.

The proposed fine of up to RM50,000 seems low when compared to the fines that other statutory regulators like Securities Commission and SSM can impose.

Even a rule-based regulator (non-statutory) like Bursa Malaysia can impose a fine of up to RM1,000,000.

A RM50,000 can be a lot for a smaller accounting firm but a mere drop in the ocean for a big four (and bigger) accounting firms.

MSWG Weekly Newsletter 17 August 2018 (English)

​17 August 2018

MESSAGE FROM THE CEO

The SGX Listing Requirements (“LR”) has been amended to clarify expectations under the comply-or-explain regime. The Malaysian regime is an apply-or-explain regime. There are, of course, different nuances when it comes to the words ‘comply’ and ‘apply’.

The recent amendments to the SGX LR are quite interesting when compared to Bursa Malaysia’s Listing Requirements. We will examine four of these:

  1. Disclosure on reasons for not paying dividends

The issuer is required to disclose reasons where directors decide not to declare or recommend a dividend.

Minority shareholders often look forward to dividends. But there are times when declaring a dividend may not be in the best interest of the issuer.

One such instance is when the issuer may fail the solvency test (by declaring the dividend) under the Companies Act 2016.

Another instance is when the issuer needs funds. In this instance, it may be cheaper to plough back the funds to the issuer than to pay out the dividend and borrow funds at higher cost. Hopefully, shareholders may be rewarded by share price accretion instead of dividends if all goes well.