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VOICE OF MSWG

Despite a year-to-date return of almost 7% for the KLCI this year, Lotte Chemical Titan Holding Bhd (LCT), Malaysia’s biggest IPO since 2012, has not performed to expectations.

Its already reduced reference price of RM6.50 is still trending lower, clearly pressured by the poor sentiment on the stock and weak market conditions in the chemical sector, even after being shored up by its stabilising manager Maybank Investment Bank Bhd.

Lotte’s owners should be concerned: they not only read the market incorrectly, hoping that demand would exist because of the paucity of large new listings on the KLCI, but in also failing to expand capacity, unlike its global competitors.

But the regulators should also be concerned.

Lotte is not new to the exchange, having been delisted more than six years ago. It is also the second counter that has ended below its IPO price (after KIP REIT) this year, which does not bode well for Bursa’s reputation.

15 July 2017

MSWG’S QUICK TAKE ON-ONGOING CORPORATE DEVELOPMENTS

AXIS INCORPORATION BHD (“AXIS”)

The Kuala Lumpur Sessions Court convicted and jailed two former executive directors of Axis Incorporation Bhd (Axis) for furnishing false statements to Bursa Malaysia.

Lee Han Boon and Saipuddin Lim Abdullah both pleaded guilty for furnishing false information to the stock exchange in relation to Axis’ revenue of RM91.13 million. Out of that amount, RM51.5 million was false for the fourth quarter ended 31 March 2008. Lee and Saipuddin also respectively faced four other counts of the same offence in relation to Axis’ consolidated income statement for all four quarters in its financial year ended 2007.

Lee, 36, a former substantial shareholder and executive director of Axis was sentenced to seven months imprisonment and fined RM200,000. Saipuddin, 58, also a former substantial shareholder and executive director of Axis was sentenced to 12 months imprisonment.

The trial against Lee and Saipuddin started in 2015. It will continue against two other individuals, Koh Tee Jin and Lee Koon Huat, who were charged and jointly tried with Lee and Saipuddin for the same offences.

[Source: Media release on SC’s website on 10 July 2017]

07 July 2017

VOICE OF MSWG

AOB: AUDITORS SHOULD IMPROVE QUALITY CONTROL

Capacity building efforts are continuing apace in Malaysia with the Securities Commission (SC) expressing concerns over the work of auditors with questions raised recently over audit quality issues and urging auditors to up their ante in service delivery.

In lauding the SC’s Audit Oversight Board (AOB) move to point out heightened deficiencies among audit firms relating to revenue recognition, inventory, group audits and related-party transactions such as to potentially harm the integrity of the local capital markets, we are also encouraged by its collaborative approach in their desire to guide and monitor such remediation efforts.