Tycoons see their O&G investment value cut by almost half

Tuesday, 2 December 2014

PETALING JAYA: With the oil and gas (O&G) sector being the hardest hit in the current market rout, tycoons who own significant stakes in these companies have seen a huge loss in their net worth.

These tycoons had collectively had their shareholding in these companies valued at some RM15.89bil when O&G stocks were trading at their highest prices. The fall in global crude oil prices and the plunge in the value of O&G stocks on Bursa Malaysia saw the value of their shareholding cut by almost half to some RM7.86bil yesterday.

Accelerating the decline in share prices yesterday and the loss in their net worth was the decision by Petroliam Nasional Bhd (Petronas) to slash its capital expenditure (capex) by between 15% and 20% next year.

Petronas’ capex cut has spooked investors in the local O&G sector as many companies rely on the national oil company for work. Petronas’ huge capex, estimated at RM60bil a year prior to the planned cuts, was also a buffer for the domestic industry from the onslaught of crumbling crude oil prices and its effect elsewhere.

The largest of these companies, SapuraKencana Petroleum Bhd, has seen its share price dip by 48.78% year-to-date. At its peak, SapuraKencana was trading at RM4.81, translating to a wealth of RM4.85bil for Tan Sri Shahril Shamsuddin’s 16.84% stake in the integrated O&G concern.

SapuraKencana was the most actively traded counter yesterday, falling 10.36% to close at RM2.51. At yesterday’s market capitalisation of RM16.76bil, Shahril’s shareholding in the company was valued at RM2.53bil.

Another major shareholder of SapuraKencana is Tan Sri Mokhzani Mahathir, whose 10.25% interest has also seen a decline by almost half its value. At yesterday’s price, Mokhzani’s stake in SapuraKencana was valued at RM1.54bil compared to the RM2.95bil it was worth during its highest level.

Mokhzani had sold a block of 190.3 million shares in SapuraKencana earlier this year when the stock was trading at around RM4.30 per share, giving the entire sale a value of RM818.29mil. The shares were taken up by seven institutions.

Another stock in which Mokhzani has an interest in, Yinson Holdings Bhd, was also not spared from the bearish sentiment surrounding O&G stocks. Yinson’s share price has declined from its peak to close at RM2.45 on Dec 1. Based on yesterday’s price, Mokhzani’s stake in the company was worth RM235mil.

Billionaire Robert Kuok, T Ananda Krishnan, Tan Sri Ngau Boon Keat and Tan Sri Quek Leng Chan are also part of the list of value losers in this O&G stock meltdown.

Kuok owns 80% of PACC Offshore Services Holdings (POSH Semco), an offshore marine services provider that was listed on the Singapore Exchange in April 2014 at a price of S$1.15 per share. POSH Semco closed yesterday at S$0.51, meaning that Kuok has lost more than half the value of his stake in that company.

Similarly, Ananda’s worth from his 42.3% shareholding in Bumi Armada Bhd has gone down by half the value it was during the peak of its share price. To be noted is that Bumi Armada had undertaken a rights issue in August this year that has seen the dilution of Ananda’s shareholding in the company.

Bumi Armada, Malaysia’s largest offshore support vessel firm, was relisted in 2011 at a price of RM3.03 per share. The stock dived into penny-stock territory yesterday, falling to a low of 98 sen before ending the day at RM1.01 per share. Based on yesterday’s price, Ananda’s stake in Bumi Armada was valued at RM2.06bil.

Dialog Group Bhd’s Ngau, meanwhile, has seen the value of Dialog’s stock fall. His stake was worth RM1.45bil based on yesterday’s closing price of RM1.26. This is about a one-third decline from the RM2.25bil his 23.2% stake was valued at when the stock had hit a high of RM1.96.

Stock investors such as Quek and his lieutenant Paul Poh are also edging into negative territory.

Quek had bought his 9% in TH Heavy Engineering Bhd (THHE) in 2013 at a price of 45 sen per share, enjoying gains for most of this year – the stock had hit a high of RM1.03 on Feb 19 this year. THHE closed yesterday’s trade at 40.5 sen a share, giving Quek a paper worth of RM38mil for his shareholding in the company as opposed to RM80mil as at the end of last year.

In April, Quek and Poh also took a block of 15.5% in Alam Maritim Resources Bhd at RM1.35 a share. They are sitting on a paper loss of some RM80mil today, or a decline of over 40%.

Malaysia's MOL Global says CFO resigned for personal reasons, shares tumble 45%

Tuesday, 2 December 2014

Malaysian online payments company MOL Global Inc said Chief Financial Officer Allan Wong resigned last month for personal reasons, not because of any accounting or financial reporting issues.

MOL Global's shares, which were halted on Nov. 24 after the company said it would delay its quarterly earnings report, fell as much as 45 percent to $2.25 after resuming trade on the Nasdaq Monday.The company announced the delay and Wong's departure at the same time last month, without citing a reason.

The news wiped out more than half of the company's market value, before trading in the stock was halted by the Nasdaq.

MOL Global, the first Malaysian company to be listed in the United States, made a lackluster debut in October, after pricing its offering at the low end of the expected price range.

The company, majority owned by Malaysian billionaire Vincent Tan, said on Monday it had delayed the third-quarter results because of accounting errors at its new subsidiary in Vietnam.

MOL Global said revenue rose 5.6 percent from a year earlier to $14.5 million in the three months ended Sept. 30.

MOL Global also said two class-action complaints had been filed against the company and some officers and directors for allegedly providing false statements in the IPO registration statement and the prospectus.

Deutsche Bank, which helped MOL Global to go public, temporarily suspended its research coverage on the company last week, citing the delay in reporting third quarter results and the departure of the CFO.MOL, which has a market capitalization of $276 million, said it was "working expeditiously" to respond to the exchange's request for additional information to resume trading.

The company, also known as Money Online, is one of the largest e-payment enablers for online goods and services in Southeast Asia by payment volume.

Tan, who has an estimated worth of $1.3 billion according to the Forbes magazine, owns about a 45 percent stake in the company. He has owned Welsh soccer club Cardiff City since 2010.- Reuters

THE FIVE BASIC PRINCIPLES OF FINANCE

PRINCIPLE 1: Money Has a Time Value

• A dollar received today is worth more than a dollar received in

the future.

• We can invest the dollar received today to earn interest. Thus, in

the future, you will have more than one dollar, as you will

receive the interest on your investment.

PRINCIPLE 2: There is a Risk-Return Trade-off

• We won’t take on additional risk unless we expect to be

compensated with additional return.

• Higher the risk, higher will be the expected return. Note

expected return may not be equal to the realized rate of return.

PRINCIPLE 3: Cash Flows Are the Source of Value

• Profit is an accounting concept and measures a business’s

performance. Cash flow is the amount of cash that can actually

be taken out of the business.

• It is possible for a firm to report profits but have no cash.

• Financial decisions in a firm should consider “incremental cash

flow” i.e. the difference between the cash flows the company

will produce with the potential new investment and what it

would make without the investment.

PRINCIPLE 4: Market Prices Reflect Information

Investors react quickly to news/information and decisions made by

managers.

Good News ==> Higher stock prices

Bad News ==> Lower stock price

PRINCIPLE 5: Individuals Respond to Incentives

Managers (as agents) respond to incentives they are given in the

workplace. If their incentives are not properly aligned with those of

the firm’s stockholders (the principal) they may not make decisions

that are consistent with increasing shareholder value leading to agency

costs.

The agency problems/costs can be mitigated through:

1. Compensation plans that reward managers when they act to

maximize shareholder wealth

2. Monitoring by the board of directors

3. Monitoring by financial markets (such as auditors, bankers,

security analysts, credit agencies)

4. The underperforming firms seeing their stock prices fall and face

threat of being taken over and have their management teams

replaced.