Sime Darby: A Widening Probe

Now, the net has been cast wider.

The ongoing internal probe by Sime Darby Bhd to find out how it made staggering losses has now been expanded to cover all its six business divisions.

The probe was previously confined to the conglomerate’s energy and utilities division.

Sime Darby’s five other business units are the plantations, property, healthcare, automotive and industrial divisions.

Chairman Musa Hitam said the management and external professionals were now putting the conglomerate under the microscope to weed out any weaknesses before coming up with any short-term and long-term restructuring efforts.

“Work is in progress at Sime Darby.

We are being transparent and very serious about it. Let the process of democracy work.

“I would like to assure the ordinary people, who are majority shareholders of Sime Darby, that nothing will be swept under the carpet. The timeline for this probe is as soon as possible,” Musa said here yesterday after closing the World Islamic Economic Forum, of which he is chairman.

The government-linked company announced last week that it would have to book massive losses suffered in projects in the Middle East as well as the Bakun hydroelectric dam project in Sarawak.

Sime Darby is expected to book close to RM1 billion in losses in its third-quarter results, expected to be released next Thursday.

Last week, Sime Darby also ordered its group chief executive Zubir Murshid to take leave of absence. It has appointed Azhar Abdul Hamid as acting group CEO.

The government has assured transparency in any investigation conducted on the company.

Musa said the internal probe might take some time due to the group’s sheer size of more than 100,000 workers and presence in 20 countries.

On calls for him to step down, Musa said he and the entire board would do so only after going through due process and then found guilty.

“To ask me to step down in two or three days is not fair. There is a due process and methodology for me and the board to first go through.

“To step down, you must first have the basis to do so. Nobody can ask us to step down except for the shareholders.” [ Yes, PNB and its Unit trusts holders are going to cry for sure!]

There is no substitute for pure meritocracy. Tokenism has seen its days!

Hit the right spots and see the cookie crumbles.

Veni, Vidi, Vici - Hong Leong Crosses the Rubicon

Veni, Vidi, Vici!

Hong Leong crossed the banking Rubicon and short of a 'yeah' from shareholders at the forthcoming EON EGM, has taken over EON Capital and its jewel in the crown, EON Bank.

EON Capital Bhd's board of directors has accepted Hong Leong Bank Bhd's offer to acquire the former's assets and liabilities for a cash consideration of RM5.06bil or RM7.30 per share.

MIMB Investment Bank Bhd reported that having taken cognizance of Credit Suisse's opinion, the board accepted the offer.

MIMB also said EON Capital's board member Ng Wing Fai's views would also be included in a circular to shareholders for the upcoming EGM.

Ng, whose Primus Pacific Partners (HK) Ltd held a 20.2% stake in EON Capital, has expressed disagreement with the board over the offer.

The investment bank said after taking into consideration Credit Suisse's opinion, the advice of the international adviser Goldman Sachs and all relevant aspects of the offer, the board has resolved that the proposed disposal was in the best interest of the bank.

It said the board would table a resolution at the EGM on the proposed disposal as well as the proposed distribution of the cash proceeds to shareholders.

MIMB said the proposed distribution of the cash proceeds arising from the disposal would be done in two parts - a special dividend estimated to be about RM3.30 billion based on EON Capital's audited financial statements as at December 31, 2009 and, a capital reduction exercise amounting to RM1.76bil.

So, those poor chaps at EON Bank will have to bear and grind their teeth as Hong Leong personnel take over their much prized posts in time.

As the say, Winner takes all!

Can This Be True?

Malaysia: Hitting Top Ten in Competitiveness

 Malaysia's competitiveness ranking surged into the top 10 in the world as Asian countries took the first two spots after financial turmoil and an economic crisis saw previous leader, the United States, slipping to third place.

Malaysia's competitiveness ranking rose to 10th, from 18th a year earlier, as the country benefited from strong demand from Asia as well as implementation of efficient policies, especially government policies, said the latest IMD World Competitiveness Yearbook 2010.

“The quantum leap in Malaysia's competitiveness ranking marks a strong recognition of investors accorded to the Government's commitment to reshape the country's competitive landscape,” said CIMB Investment Bank chief economist Lee Heng Guie.

“This improved ranking bodes well for Malaysia to drive for higher private investments and FDIs.”

IMD said Singapore, ranked as the most competitive economy, and Hong Kong displaced the United States off the perch as the two Asian countries displayed great resilience through the recent economic and financial crisis.

Malaysia, which is now ranked the fifth most competitive country in Asia Pacific, scored highly in business and government efficiency.

The rankings are tabulated based on four main criteria; economic performance, government efficiency, business efficiency and infrastructure.

Economists said the jump in ranking is a reflection of the work the Government has put into improving the country's overall business and economic climate.

“It also demonstrates the Government's handling of the global crisis by introducing measures to stabilise the economy,” said Affin Investment Bank economist Alan Tan.
The New Economic Model, the Government Transformation Programme and the Economic Transformation Programme are among the key initiatives that the Government introduced lately to improve the overall business and government environment in the country.

Economists said the improvement in Malaysia's ranking was also due to the perception investors surveyed had of the country, and the challenge now is to translate the jump in ranking into more investments, both foreign and local.

“Being more competitive is positive for the country. It will have some influence on decision-makers,'' said Maybank Investment Bank Bhd head of research Andrew Lee.

“What the Government needs to do is to continue with the Government Transformation Programme and make it known to the outside world that this is happening.''

IMD said for 2010, the challenge for Malaysia was to continuously improve the government delivery system to facilitate business, strengthen the economy through high quality investments, groom small and medium enterprises for global competition, continue to intensify life-long learning and nurture a talented workforce and drive productivity and competitiveness through a creative and innovative mindset.

Lee said that given the more intense and unpredictable environment ahead, policymakers need to quicken the momentum of change to sustain or raise Malaysia's position ahead of the global competition.

Will Robert Kuok Take PPB Private?

The dust has hardly settled down after the cost over-run fiasco at Sime Darby- the second largest plantation group in the world. Then this had to happened!

Wilmar, the world's largest plantation group owned by Robert Kuok,  is now mired with a tax fraud charge from the Indonesian tax authorities.

But it looks like the far-flung corporate empire of the Kuoks may yet be able to withstand the speculative pressure of mass selling of both Wilmar and Perlis Plantation Group (PPB)as it goes under the microscope of the VAT investigations.

Analysts differed on the outlook for plantation giant Wilmar International Ltd following allegations of tax fraud.
Wilmar was alleged to have colluded with Indonesian tax officials to claim tax rebates worth 3.6 trillion rupiahs or RM1.24 billion, but Wilmar has said that its internal records will stand up to scrutiny.

Research house OSK Research said in a report today that shares of Wilmar could be a bargain after the counter fell by nearly 7 per cent yesterday on the Singapore stock exchange and that it was encouraged by Wilmar’s strong stand on the allegations.Knowing the Kuoks, they have an impeccable reputation to protect and it will be a little while before the market rise to adore once more Wilmar and PPB,the heart and soul of  Robert Kuok's  legacy in life.

“Should the company be able to sort out the issue, the stock will be a bargain even at these levels,” said OSK Research. “While the stock may still weaken somewhat from here, we believe it is now cheap enough for investors to start nibbling on.”. I guess the money from Europe is already here buying into both Wilmar and PPB.

The report also noted that Wilmar has clarified that its COO Martua Sitorus is not personally under investigation for tax fraud allegations.

“We believe the market will be relieved as Martua was the person who spearheaded Wilmar’s expansion in Indonesia,” said OSK Research which maintained its “Buy” call on Wilmar.

A separate report by a local research house said that Wilmar shares will be affected by uncertainties arising from the allegations and said that if the RM1.24 billion in tax rebates were to be charged to Wilmar’s profit and loss account, it would reduce the group’s 2010 profits by 23 per cent.

Robert Kuok is a shrewd businessman par excellence and he will definitely be involved personally to straighten this thing out for the good the company,shareholders and the host country,Indonesia.

“What is more detrimental is the reputational damage to the group,” said the research house. “We wonder if the Chinese government would start scrutinising Wilmar’s tax payments and accounts due to the allegations in Indonesia.” [ I doubt the Chinese authorities will do this.]

The research house maintained a “hold” call on Wilmar due to potential earnings disappointment from lower operating margins, the impact of a potential slowdown in the China market which accounts for 70 per cent of Wilmar’s earnings and uncertainties arising from the tax claim allegations.

PBB Group Berhad holds a 18.4 per cent stake in Wilmar and its shares dropped nearly six per cent yesterday on news on the allegations. Wilmar accounts for about 75 per cent of the PBB Group’s profits.

PBB Group said yesterday that the claims were still uncertain as investigations by Wilmar had yet to be concluded.

Yes, truly there are many who jumped the gun and could have sold short to spook genuine shareholders to let go of their precious holdings of Wilmar and PPB.

Let us see how long Wilmar and PPB will be kept on a temporary even keel before they do a sprightly run up at the bourses on both side of the Causeway.  This, we watch.

Another thing just crossed my mind. With Robert Kuok selling almost everything dear to him especially his exit from sugar and selling choice pieces of land in the CBD of KL, hasn't the thought ever crossed your mind that Asia's richest tycoon might just take PBB private as he relocates more of his interest to mainland China?

Food for thought.

As Wilmar Looks, PPB Falls too!

Wilmar International, the world’s largest listed plantation company, said yesterday it was looking into media reports that it had colluded with tax officials to obtain fraudulent tax refunds.

Two Indonesian newspapers, quoting Indonesian lawmaker Bambang Soesatyo from the Golkar Party, said Singapore’s Wilmar had received or was due to receive total “questionable” tax refunds worth 3.6 trillion rupiah (US$385mil) over the three years from 2007 to 2009.

”We are aware of the report, and we are looking into the matter,” a spokesman for Wilmar said, without elaborating.

The Jakarta Globe and the Jakarta Post reported Soesatyo as saying that the initial allegations were contained in an internal tax directorate report that said Wilmar manipulated its financial statements and then cooperated with someone in the tax department to approve the rebates.

The Indonesian tax office was not immediately available for comment outside normal business hours.

UBS analyst Andreas Bokkenheuser said in a research note that if the reports were substantiated the amounts would have a material impact on Wilmar’s earnings.

”The total restitutions of US$385mil for 2007-2009 accounts for 21% of our full-year net profit estimate. Under Indonesian tax law, the Tax Directorate can impose a penalty of up to four times the outstanding amount,” he said.

Wilmar, which has oil palm plantation assets in Indonesia and Malaysia and plans to start a sugar plantation business on Indonesia’s Papua island, is owned by Malaysia’s Kuok Group.

The allegation came as the country’s tax authority vowed it would continue a tax investigation into Indonesian coal miner PT Bumi Resources, in what is seen as a litmus test of the government’s commitment to reform.

Bumi Resources is owned by the family of Golkar party chairman Aburizal Bakrie. 

So,what price integrity and high ideals?

It's over to you, captains of industry as the ball is in your court!

Achtung! And they All Fell Down...

All Angela Merkel did was to issue an "Achtung" warning to halt the potential contagion effect from the miracle-less Greek gods at Germany's financial borders. And they all fell, euro, stock markets,commodities and global confidence.

Let us read this Reuters filing today.

"The euro fell to a fresh four-year low today after Germany moved to sharpen financial regulation, driving down commodities and Asian stock markets as investors stampeded out of riskier assets.

Asian stocks fell sharply, as did industrial metals, on worries that the German ban on naked short-selling of some securities, coupled with strengthening financial regulation in the United States, would derail the global economic recovery.

High-yielding currencies like the Australian and New Zealand dollars also fell.

“Germany just switched off the financial lights in Europe,” said a senior forex trader at a European bank in Singapore.

Naked short sales of euro-denominated government bonds, credit default swaps based on those bonds, and shares in Germany’s 10 leading financial institutions will be prohibited, a spokesman for Germany’s finance ministry said.

The euro slipped as low as US$1.2143 on trading platform EBS, its weakest level since April 2006 and taking it losses so far in 2010 to more than 15 per cent. It later recovered slightly to around US$1.2193.

The MSCI index of Asia-Pacific shares outside of Japan was down 1.74 per cent at a three-month low at 384.36 points. It has fallen almost 4.0 per cent since the start of the week.

Japan’s Nikkei average fell 1.65 per cent to a three-month low on the regulation worries and as the weak euro dragged on exporters.

“Germany’s move to regulate naked short selling has heightened uncertainty about the trading environment of financial markets, leading investors to avoid risks,” said Yumi Nishimura, deputy general manager at Daiwa Securities Capital Markets.

The Australian dollar fell to an eight-month low at US$0.854, with charts suggesting more losses as investors dumped high-yielding currencies. The kiwi was down 0.6 per cent at US$0.6854 Australian shares also hit an eight-month low.

London three-month copper dropped US$135 to US$6,565 a tonne, or over 2 per cent. Zinc prices in Shanghai fell more than 5 per cent, while London nickel fell 4.7 per cent on the fall in the euro.

Crude oil futures fell to a seven-month low, reflecting falls in other markets.

US Treasuries gained on a flight to safety. The yield on the benchmark 10-year note eased to 3.33 per cent from 3.49 per cent late two days ago.

Gold also gains on safe-haven bid. Spot gold rises US$5 an ounce from New York’s close to US$1,224.7. 

What a way to go.

Goodbye Greece, Hello Angela!