22 February 2019
MESSAGE FROM THE CEO
The MAHB - Air Asia Spat
While we all wish that the issues could be settled amicably, this is not the case.
There is now a court case to hear MAHB’s (Malaysian Airports Holdings Berhad’s) suit against Air Asia (AirAsia Group Bhd and Air Asia X Bhd) for RM36.12 million for outstanding airport taxes.
Air Asia has filed a counter-claim against MAHB for over RM400 million.
The fact that things has come to a head, resulting in legal action, only indicates that the parties were not able to iron out a mutually acceptable amicable outcome.
It is perhaps best that the courts, as the final arbiter of contentions, be allowed to deliberate on the suits by both parties (the claim and the counter-claim).
This is the exercise of the companies’ legal rights to turn to the courts for adjudication and does not necessarily reflect badly on the parties…for, after all, the very fact that they are turning to the courts indicates that they have exhausted all avenues and want the final arbiter to decide on the issue.
Some of the concerns of the minority shareholders are as follows:
1. One party will be the winner and the other party will be the loser…and there is likely to be an impact on the share price as there are monetary implications. Reputation will be impacted (which also impacts share price and confidence in the companies). This is of concern to the minority shareholders.
2. Legal suits always become a distraction for boards and management as this distraction may result in performance deficiencies which in turn affects the bottom line and profits (which have a direct correlation to share prices). This is of concern to the minority shareholders.
3. MAHB has reiterated that the PSC (Passenger Service Charge) is a statutory rate fixed by the government and published via gazette. The PSC was set at RM73 per passenger and Air Asia has been collecting only RM50 per passenger. MAHB is demanding that Air Asia pay up the RM23 difference. What are the consequences of not complying with such a gazetted rate? Can Air Asia refuse to collect the RM23 difference? This is of concern to the minority shareholders.
4. Air Asia has responded to EPF’s letter over the issue and has met up with the EPF. MAHB has not (as at 20/2/19). There seems to be a lack of promptness in addressing EPF’s letter and/or meeting the EPF. This is of concern to the minority shareholders.
5. Mavcom (Malaysian Aviation Commission) has been rather silent on the issues in the past pertaining to their role in mediating on these issues and whether they can call upon the parties for mediation. This is of concern to the minority shareholders. (arguably, now that the issues are before the courts, Mavcom’s role may have been eclipsed).
We can only hope for a timely resolution of the issues as both MAHB and Air Asia are important role-players in the aviation ecosystem. They are also popular investments amongst both institutional and minority shareholders. Shareholders also want certainty and the earlier the issues are resolved, the sooner will the management of both companies get back to concentrate on the running of their businesses.
MSWG'S QUICK TAKE ON-ONGOING CORPORATE DEVELOPMENTS
ASIA POLY HOLDINGS BERHAD (“APH” or “The Company”)
APH has on 15 February 2019 announced that APH had acquired quoted securities in D'nonce Technologies Berhad (“D’nonce”) during the period from 11 January 2019 to 14 February 2019 for which the aggregate of the purchase consideration has exceeded 5% of Asia Poly Group's audited net assets.
The shares were purchased in the open market at prevailing prices as quoted on the Exchange at the time of purchase and it was funded by bank borrowings. The purchases (“Acquisitions”) were carried out with the intention for potential capital gains.
The Acquisitions have no effect on the issued and paid up share capital of APH and the shareholdings of substantial shareholders of APH, and also do not have any material effect on the gearing, earnings and net assets of Asia Poly Group for the financial year ending 31 December 2019.
Save for Dato’ Yeo Boon Leong and Mr. Lim Teck Seng, none of the Directors and/or major shareholders and/or persons connected with them has any interest, direct or indirect in the Acquisitions. Currently, Dato’ Yeo Boon Leong and Mr. Lim Teck Seng are Non Independent and Non-Executive Director and Group Chief Executive Officer respectively of D’nonce.
The Board makes no opinion on the Acquisitions which were made in the ordinary course of business of Asia Poly Group.
MSWG’s Comments
As disclosed in the announcement, the acquisitions of D’nonce shares were funded by bank borrowings. The acquisitions will not have a material effect on the gearing of the Group. Nevertheless, the Board needs to explain, in greater detail, the rationale for funding a non-core investment, i.e. investment in quoted shares, by bank borrowings. It is insufficient to just briefly state that it is for potential capital gains. What is the borrowing cost to fund the share acquisition in D’nonce and what is the expected return from the acquisition?
Shareholders would also wonder whether the acquisition is really merely for potential capital gains or is there more to it, considering that APH’s Executive Chairman and a director, Dato’ Yeo Boon Leong and Mr. Lim Teck Seng, are also Non Independent Non-Executive Director and Group Chief Executive Officer of D’nonce respectively. It seems puzzling that APH needs to have its Executive Chairman and another director appointed to the Board of D’nonce, (especially since the other APH director is also D’nonce’s Group Chief Executive Officer), for the mere purpose of acquiring D’nonce shares for potential capital gains. The whole scenario warrants more explanations from the Board, especially since the shares were acquired immediately after the appointment of the Directors of APH to key positions in D’nonce.
As stated in APH’s announcement, “The Board makes no opinion on the acquisitions which were made in the ordinary course of business of Asia Poly Group”. In this regard, and in the interest of transparency and meaningful disclosures, shareholders surely need more meaningful information than merely such a brief statement.
MSWG’S AGM WEEKLY WATCH 25 February – 1 March 2019
For this week, the following are the AGMs/EGMs of companies which are in the Minority Shareholders 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.
|
Date & Time |
Company |
Venue |
|
27.02.19 (Wed) 10.00 am |
JCY International Bhd (AGM) |
Grand Paragon Hotel, 18 Jalan Harimau, Taman Century, JB |
|
One of the points of interest to be raised: |
|
|
Company |
Points/Issues to Be Raised |
|
JCY International Bhd (AGM) |
1) As stated on page 7 of the Annual Report 2018 (AR2018), the Company recorded lower revenue of RM1.39 billion in the financial year ended 30 September 2018 (FY2018) mainly due to unfavourable exchange rate, as well as lower quantity shipped during the FY2018. Given that hard disk drive (HDD) shipment units are expected to shrink gradually in the foreseeable future, how would the topline perform in the near term? 2) As stated on page 9 of the AR2018, the Company has expanded horizontally to increase market share and offer wider range of products to more customers to ensure long term sustainability of the business. It will also diversify into other related and new industries. i) What are the results achieved from the horizontal expansion strategy adopted over the past few years? ii) What are the new areas that the Company will diversify into? 3) As stated on page 78 of the AR2018, spending on other staff-related expenses increased to RM22.06 million from RM2.04 million in FY2017. What are the reasons for the 9.8 times increase in these expenses? |
MSWG’S WATCHLIST
ASIA BRANDS BERHAD (“ABB” or “The Company”)
The Board of ABB has on 19 February 2019 announced that ABB will not proceed with the implementation of the Private Placement as ABB had achieved its objective to raise funds from the Rights Issue for the repayment of the Islamic Medium Term Notes (Tranche 1, Series 3) of RM40.0 million due on 18 March 2019.
In addition, the Private Placement was proposed to be implemented to facilitate ABB to comply with the public shareholding spread requirement under Paragraph 8.02(1) of the Listing Requirements of Bursa Securities in the event ABB’s public shareholding spread falls below 25% following the implementation of the Rights Issue. As the public shareholding spread of ABB after the implementation of the Rights Issue remains above 25%, ABB has decided not to proceed with the implementation of the Private Placement.
[Source:http://www.bursamalaysia.com/market/listed-companies/company-announcements/6067369]
MSWG’S VIGILANCE
Listing of PN17 and GN3 companies
PN17 Companies
- AMTEK HOLDINGS BERHAD
- APFT BERHAD
- BERJAYA MEDIA BERHAD
- BERTAM ALLIANCE BERHAD
- CHINA AUTOMOBILE PARTS HOLDINGS LIMITED
- DAYA MATERIALS BERHAD
- EKA NOODLES BERHAD
- HB GLOBAL LIMITED
- KINSTEEL BHD
- KUANTAN FLOUR MILLS BERHAD
- MAA GROUP BERHAD
- MALAYSIA PACIFIC CORPORATION BERHAD
- MAXWELL INTERNATIONAL HOLDINGS BERHAD
- MULTI SPORTS HOLDINGS LTD
- PERISAI PETROLEUM TEKNOLOGI BERHAD
- RGT BERHAD (fka ASIA KNIGHT BERHAD)
- STONE MASTER CORPORATION BERHAD
- SUMATEC RESOURCES BERHAD
- TH HEAVY ENGINEERING BERHAD
- UTUSAN MELAYU (MALAYSIA) BERHAD
- YFG BERHAD
GN3 Companies
- G NEPTUNE BERHAD
- IDIMENSION CONSOLIDATED BERHAD
- WINTONI GROUP BERHAD
UPDATES
CHINA AUTOMOBILE PARTS HOLDINGS LIMITED (“CAP”)
The Board of Directors of CAP has on 15 February 2019 announced that Bursa Securities has vide its letter dated 15 February 2019 decided to grant the Company an extension of time of 6 months up to 10 July 2019 to submit the regularisation plan to the regulatory authorities.
DAYA MATERIALS BERHAD (“DMB”)
Pursuant to Paragraph 5.2(a) of PN17 of the Listing Requirements, DMB is required to submit its regularisation plan to Bursa Securities and obtain Bursa Securities’ approval to implement the regularisation plan by 27 February 2019, being 12 months from the date of the First Announcement.
The Board of Directors of DMB has announced that the Company has on 15 February 2019 submitted an application to Bursa Securities seeking its approval for an extension of time of 6 months until 27 August 2019 for the Company to submit its proposed regularisation plan to Bursa Securities.
Please refer to the link below for the latest status of the company.
http://www.bursamalaysia.com/market/listed-companies/list-of-companies/pn17-and-gn3-companies/
LOCAL NEWS AND DEVELOPMENTS
Housing ministry launches scheme to aid first-time homebuyers
https://www.theedgemarkets.com/article/housing-ministry-launches-scheme-aid-firsttime-homebuyers
EquitiesTracker gets green light to list on LEAP, aims to raise RM7.14 million
Some planned PR1MA projects may be scrapped, says Housing Minister
Malaysia's Jan CPI seen falling for first time since 2009
https://www.theedgemarkets.com/article/malaysias-jan-cpi-seen-falling-first-time-2009
Malaysia's Feb 1-20 palm oil exports remains unchanged — AmSpec Agri
GLOBAL NEWS AND DEVELOPMENTS
China will not change prudent monetary policy — Premier Li
Asian millers turn to Argentina for wheat as drought hits Australian output
In sharp U-turn, monetary policy easing back in play across Asia
https://www.theedgemarkets.com/article/sharp-uturn-monetary-policy-easing-back-play-across-asia
Oil slips away from 2019 highs as surging US supply undermines OPEC cuts
Yellen offers caution as US pushes China to keep yuan stable
https://www.theedgemarkets.com/article/yellen-offers-caution-us-pushes-china-keep-yuan-stable
MSWG TEAM
Devanesan Evanson, Chief Executive Officer, [email protected]
Lya Rahman, General Manager, [email protected]
Rebecca Yap, Head, Corporate Monitoring, [email protected]
Quah Ban Aik, Head, Corporate Monitoring, [email protected]
Norhisam Sidek, Manager, Corporate Monitoring, [email protected]
Hoo Ley Beng, Manager, Corporate Monitoring, [email protected]
Lee Chee Meng, Manager, Corporate Monitoring, [email protected]
Lim Cian Yai, Senior Analyst, Corporate Monitoring, [email protected]
DISCLOSURE OF INTERESTS
• With regard to the companies mentioned, MSWG holds a minimum number of shares in all these companies covered in this newsletter save for Asia Poly Holdings Bhd, Asia Brands Berhad, & Daya Materials Berhad.
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