Saturday, September 24, 2011
MAYBULK: DOES POOR CORPORATE GOVERNANCE HAVE A NEGATIVE IMPACT ON A STOCK?
From fellow blogger M.A. Wind's posting: Bursa: long term returns
My best overall guess of the long term yield including dividends and costs incurred of a portfolio is in the range of 4-5% per year. This is rather disappointing given the GDP growth of Malaysia. Western countries have had less growth in GDP but higher returns on investing in shares. I think that the reason for this is the lower degree of Corporate Governance in Malaysia, which is directly influencing these returns. Related Party acquisitions at (highly) inflated prices and General Offers with delisting threats at (very) low prices are directly lowering returns.
Aren't you curious about the issue of lower degree of Corporate Governance and how Related Party Transactions is directly lowering returns?
Yes....
Does poor corporate governance have a negative impact on a stock?
Let's take a well known stock, a stock where some have claims as an 'investment grade' stock, Maybulk.
Me? I chose this stock, Maybulk, as an example because me and M.A. Wind had written on it several times before for different reasons.
Maybulk last traded at 1.77. Here's how Maybulk had performed the last three years.
I would then compare Maybulk with FBM KLCI.
And here's the comparison drawn.
See how Maybulk clearly underperformed the market? More alarming is the fact the local market was in an extremely bullish state early this year.
So is poor corporate governance the main issue with Maybulk?
Do consider the following....
First this blog had focus on Maybulk's 'other investments'.
Posted on Nov 2008: Maybulk Had 'Investment' Losses Of Over 62 Million!
And as mentioned, in the posting, 'And this one was not easily detected for one has to scrutinise the company's earnings notes to see the big stinking whopper!'
I certainly wasn't impressed.
Company makes 62 million losses and it doesn't even attempt to explain how these losses incurred.
And by Dec 2008, I was wondering Why Is Maybulk So Active In the Share Market?
Let me reproduce that entire posting here again...
Yes, why is Maybulk so active in the share market?
Caught the following announcement on Bursa Malaysia: Dealings in quoted securities pursuant to Paragraph 9.21 of the Listing Requirements
Malaysian Bulk Carriers Berhad ("MBC” or "the Company”) wishes to announce that the MBC Group has, for the period from 31 January 2008 to 22 December 2008, purchased quoted securities from the open market. These purchases have exceeded 5% of MBC's latest audited consolidated net assets ("NA") as at 31 December 2007, details of which are set out below:-
1. The aggregate purchases for the period from 31 January 2008 to 22 December 2008 amount to RM91.38 million. This represents 5.15% of NA;
2. The total cost of all investments in quoted securities as at 22 December 2008 is RM143.80 million;
3. The total book value of all investments in quoted securities as at 22 December 2008 is RM122.12 million;
4. The market value of all investments as at 22 December 2008 is RM122.93 million; and
5. There were sales of quoted securities during the current financial year and the losses on disposal amounted to RM11.23 million.
This announcement is dated 23 December 2008.
Fact from 31 January 2008 to 22 December 2008, Maybulk purchased shares amounting to RM91.38 million.
Aren't you shocked at what it is doing?
Don't you think that the amount is way too much?
Someone once mentioned that Maybulk's management is highly 'reputable'. Well that the fact that Maybulk chose NOT to disclose what they bought and the fact that they bought more than 5% of its total Net Assets as of its audited accounts as at 31st Dec 2007 places a massive question mark over the management. Won't you agree?
And honestly, what do the management of the company think they are? Is Maybulk a securities trading firm?
Does the management reckons that they are super traders or super investors?
Well, the fact that they loss some rm 11.23 million speaks volumes about their stock market skills!
Seriously, don't you reckon that Maybulk should stop this?
Look they aren't good, are they? And if so, why dabble in the share market?
Does Maybulk have so much money to lose in the share market?
And if you are a minority shareholder, do you honestly like what you see?
Aren't you appalled by all this?
==>>>
I was certainly appalled with all these. I dislike the idea of our listed companies dabbling in the share market. This is a no-no for me. I feel the management should always focus on its core business.
Well that's my flawed thinking.
And then of course there is that massive related party transaction issue between Maybulk and POSH.
Unfortunately, I did not post anything on it.
However, many thanks to blogger M.A. Wind, he is kind enough to share his horrific experience.
Do read the following posting: Maybulk/POSH: What happened to the Cash?
According to Wind:
So far we have seen the following significant breaches of rules:
no mentioning of the purpose of Maybulks investment in POSH
no recently audited accounts (less than 6 months old)
incomplete financial picture leaving out (for instance) non-interest bearing debts
incorrect calculation of the gearing ratio
And according to Wind there is more! (Do check out his blog http://cgmalaysia.blogspot.com/ for more updates based on his personal experience on Maybulk.
This is however only the top of the iceberg. The next two episodes will be:
Clarkson, the valuer who didn't believe his own valuation
the magical accounting tricks of KPMG
And so we have here... Maybulk, a stock, flush with massive corporate governance issues.
So how?
Does poor corporate governance have a negative impact on a stock?
My say?
I would always avoid stocks that have poor corporate governance.
When I invest in a stock, I regard myself as being a small business partner of the business. And as a business partner, how can I trust my business partners who have poor corporate governance? Am I a business partner for them to take advantage of? Yes, would I be short changed the very minute I turn my back? How could this equate to a smart investment for me?
And with the poor performance of Maybulk the stock, it appears that this isn't such a poor decision!
http://whereiszemoola.blogspot.com/2011/09/maybulk-does-poor-corporate-governance.html
