Why corporate governance is important?

January 29, 2008
This article was taken from The Edge. The article is very important to long term investors in KLSE.
  

On enforcement
Last year was a successful year for our enforcement efforts. Our enforcement measures resulted in swift action against the perpetrators of offences. We also have increasingly resorted to civil action to obtain restitution for investors.

 

Is that partly because the other actions, such as criminal prosecution or action under the securities offences, have not got the kind of results that you expected?
We have got a range of enforcement tools available to us. We have been increasingly adopting a more strategic approach towards enforcement. In the past, we have tended to rely mainly on criminal prosecution but that takes time. The courts have a backlog of cases and we have to take our turn. So, we needed to look at more effective and efficient enforcement measures although we still resort to criminal prosecution where it is warranted. But increasingly we apply administrative action, which offers quick and effective resolution, and we take civil action in appropriate cases. But we assess each case and still prosecute the major offences.

 

The evidence is that a lot of crime has been committed but eventually no one gets charged or if charged, not convicted with a stiff penalty. And that seems to encourage more such crime. Your comments, please.
There is a perception that because the SC is the regulator of the capital market, every offence in the capital market, be it by public—listed companies or the directors or the management or even the auditors, falls within the jurisdiction of the SC. Where it does fall within our jurisdiction, our approach is very clear. We will take action, investigate and, if the facts and the evidence warrant it, enforcement action will be taken. And you have seen our track record on this. But sometimes offences in the capital market do not fall within the jurisdiction of the SC. The SC has jurisdiction only where there is a breach of securities laws. Many offences committed in the capital market may not be breaches of securities laws. Some may be criminal breach of trust, which is a penal code offence. Or it could be a breach of directors’ duty to act honestly in the best interest of the company, which is a Companies Act offence. Where in the course of our investigation we uncover these offences, we hand over the information to the relevant agencies as we don’t have the powers to investigate and prosecute. Where, however, the facts reveal multiple offences, then we will be able to mount a joint prosecution.

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Astro: A long term play

January 17, 2008

In this post,i would like to share one of the hidden jewel overlooked by the financial community.With the boom in the commodities and Oil & Gas industries,all attention seems to be focusing on companies in these industries. This has left some jewels to be undervalued.

By valuation,Astro’s operation in Malaysia is estimated at RM 4.30 (TheEdge,31/12/07). Compared to the current price of RM 3.70, the price provided a safety margin of around 14%. This valuation is only based on financial numbers only.

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If you look at management side of the valuation, Astro has the best corporate governance. Let’s look at what happened to A.K’s companies like Tanjong plc, Measat and Maxis. We can be sure that A.K has always created value for its shareholders in long term. The companies which A.K controlled never destroyed value in long term. In short term,the share price is a bit bumpy. But that’s business.Without taking risk,a company will not grow.And growth caused money! (TheEdge)

Many financial analysts just look at short term. They reported losses in Astro as something bad. Do you want a company which keep on growing or just sit there? Being in a business myself, i saw the potential that A.K wanted to seize in India and Indonesia. In the world of globalisation,those who refuse to fight will be wipe out.That’s why A.K took all his companies out from M’sia even before the globalisation idea came into Malaysia.

The next thing you might want to ask is the level of risk that Astro is taking currently.A company can crumble because of bad management and financial factors.In term of management,there is no doubt that the management is extremely great people.Just check out their profile.Next,is the cash part.Astro has very healthy cashflow and currently has no borrowings plus Astro’s account has over RM 1 billion cash in its account.That means around RM 0. 50 per share.If you buy it at RM 3.70,you are paying RM 3.20 for Astro only and get the cash for free.It offers a 26% of safety margin over its RM4.30 valuation.

If you pay RM 3.70 today (actually you are paying only RM3.20), what do you get in return? Let’s me explain this in two parts: Venture in Indonesia and India. No point discussing about Malaysia because we know Astro has satelitte pay-tv license until 2017.

Indonesia’s Venture (Please read the following news)

News 1

News 2

Astro, the dominant satellite tv operator in Malaysia, is hoping to finalise arrangements with the Jakarta-based Lippo Group to jointly operate an Indonesian satellite pay tv service undertaken by Lippo’s unit, PT Direct Vision, in a preliminary deal that was concluded in March this year.

News 3

The Lippo Groupis a giant conglomerate based in Jakarta, Indonesia, with interests in banking, finance and other enterprises. Its flagship, Lippo Ltd., listed $3.6 billion in assets in 1995. The firm owns only one small bank in the United States but has extensive interests in Indonesia, Hong Kong and China. It was founded by Mochtar Riady, an ethnic Chinese born in Indonesia.

News 4

Khazanah Nasional Bhd and CIMB Group have decided to merge Lippo Bank and PT Bank Niaga of Indonesia to comply with Bank Indonesia’s single-presence policy.

Bank Niaga, a 64%-owned subsidiary of CIMB Group, has submitted Khazanah’s plan to merge the two banks to the Indonesian central bank.

The single-presence policy requires those who control two or more banks in Indonesia to merge them, sell their stakes or form a holding company for their banks by end-2010, and are required to submit their plans by Dec 31.

Khazanah owns a 93% stake in Bank Lippo and 64% indirect stake in Bank Niaga via CIMB.

News 5

“The operators of the Astro service, MEASAT Broadcast Network Systems, are a wholly owned subsidiary of Astro All Asia Networks plc, a consortium company comprising of government-linked and private companies. Major shareholders include the Usaha Tegas Group (42.7%) and Khazanah Nasional Berhad (21.6%). Astro was listed on Bursa Malaysia in October 2003”.

….continue