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MSWG Weekly Newsletter 01 June 2018 (English)

01 June 2018

MESSAGE FROM THE CEO

On 30 May 2018, the FBM KLCI index saw its biggest one day drop since October 2008, plunging 56.56 points or more than 3% to emerge as  the worst-performing index in the region.

Construction and infrastructure-related counters were the worst casualties with some counters hitting limit down, namely George Kent (Malaysia) Berhad, Gamuda Berhad and HSS Engineers Berhad. Other major losers included YTL Corporation Berhad and Malaysian Resources Corporation Berhad (MRCB). There are four main reasons for the above:

  1. The Kl-Singapore High-Speed Rail (HSR) project will be scrapped…unless Singapore could convince Malaysia to proceed with it.
  2. The MRT 3 rail project will be scrapped.
  3. The ECRL is being reviewed in detail.
  4. That all major contracts will be reviewed.

Some listed companies will be affected by these decisions as their order-books will now be lowered substantially.

Share prices may nose-dive further. There will be both rational and irrational selling of shares driving prices much lower. There will be instances where the share price will be substantially lower than the true value (the intrinsic value) of the shares.

In the midst of plummeting share prices, some listed companies may carry out share-buy backs.

MSWG Weekly Newsletter 25 May 2018 (English)

MSWG’S AGM WEEKLY WATCH 28 MAY 2018 – 1 JUNE 2018

For this week, the following are the AGMs/EGMs of companies which are in the Minority Shareholder Watch Group’s (MSWG) watch list.

The summary of points of interest is highlighted here, while the details of the questions to the companies can be obtained via MSWG’s website at www.mswg.org.my.

Company Points/Issues to Be Raised
Xinghe Holdings BHd 
(AGM)

As stated in the Company’s public announcement dated 16 October 2017, most of the proceeds raised from the private placement are expected to be utilised as working capital for the Company and/or to fund its future investments/business projects in Malaysia, but we do not see the cash raised being held in the Company.

(i)        We note on page 62 of AR2017, the Group has generated strong operating cashflows in FYE 2017. What was the justification to raise additional working capital by placement resulting in EPS dilution? What is the optimal level of working capital for the Group?

(ii)       Note 14 on page 93 of AR2017 states that the Company’s issued ordinary share capital was increased from RM285,258,833 to RM297,158,833 by the following placements:

(1)    200,000,000 new ordinary shares at an issue price of 5.2 sen per share on 26 January 2018; and

(2)     25,000,000 new ordinary shares at an issue price of 6.0 sen per share on 5 February 2018.

What is the justification to raise additional working capital through the abovementioned placements especially since the Group has generated strong operating cashflows in FYE 2017 (page 62 of AR2017)?

Placements generally result in dilution of earnings per share and net assets per share and this is not favourable to minority shareholders.

(iii)       What will be the selection criteria and credentials required for potential placees?

(iv)       What will be the expected contributions in terms of value-add or strategic inputs from the placees?