Silverlake Axis

The Edge report on the company. The company IPTs, are the reason, blocking me from participating with the "superior" company. There was a discussion previously in this thread, IIRC.

(not vested)

Silverlake Axis down 24.4% on short-seller attack

SINGAPORE (Aug 21): A 42-page report which placed a 29 cents target price and a “short” recommendation on Silverlake Axis ( Financial Dashboard) could have caused the stock to fall by as much as 27% to an intra-day low of 61.5 cents.

Authored by someone with the moniker “razor99”, the report claimed that the Malaysian-based software solutions provider “will prove instead to be an investor’s worst nightmare”, comparing it to other fraudulent IT service companies such as Longtop Financial of China and Satyam Computer Services of India.

“When we first reported our findings on Longtop in February 2011, it was a market darling. Three months later the auditor, Deloitte & Touche, resigned and the stock was delisted soon after. We think there are a number of striking similarities between Silverlake Axis and Longtop,” says the report.

The report also claimed that Silverlake Axis reported “supernormal profitability driven by dramatically higher revenue per employee compared to peers”, which was the exact same red flag that existed at Longtop Financial.

“Silverlake Axis also has loss-making related-parties which employ a large number of Silverlake Group employees. These hidden entities are undisclosed contingent liabilities to Silverlake Axis,” it adds.

The report said this is reminiscent of Longtop’s use of a related party to employ most of its employees.

By inflating Silverlake Axis's financial results, the report alleges that founder and Chairman Goh Peng Ooi has been able to pocket more than RM 1.0 billion ($422.5 million) through stock sales and dividends, while minority shareholders have contributed more than RM 550 million of net capital into Silverlake Axis.

Earlier at 1.20pm, Silverlake Axis called for a trading halt "with immediate effect" pending an announcement.

Prior to that, the Singapore Exchange had queried its "unusual price movements" and asked the company if it was aware of any information not previously announced that might explain its trading.

The counter last closed 24.4% or 20.5 cents lower at 63.5 cents, with 22.9 million shares changing hands, before the trading halt was called.
http://www.theedgemarkets.com/sg/article...ler-attack

(21-08-2015, 02:04 PM)sgpunter Wrote: The short sell report can be found openly online.

http://www.scribd.com/doc/275404514/Silv...lchemy-pdf

I must say the Straits Times article today on SGX Chief Regulatory Officer talking about short selling is very timely indeed. 

Interesting read. Finally, Someone shed the light on SilverlakeAxis, the company that i always has doubt about its ability to make so consistent good profit abnormally high comparing to its peers.
For so long, I has stayed out and did not profit from this Malaysian "multi-bagger" beauty but at the end I think I had made a good decision. Only invested in something that you understand.

IIRC, RPTs have been around them the longest time. It could be what has characterized them for some time but it seems like as long the growth story was proving itself, it was entirely ok i reckon.

Read through the shortist's report briefly (have to admit i do not have much knowledge of SAL's previous dealings) and some of my observations from a neutral party:
- Most of the accusations in the report are pretty qualitative in nature - Interviews with 'industry' insiders/ex-employers/competitors who talked about an alarming work culture, possibility of bribery and also the declining competitive nature of the business.
- Some of the techniques that accounting shenigans use legally like loading expenses/revenue between subsidaries before/after IPO, are nothing new.
- I thought the essence of this report would really be section 6/exhibit 16. I have not verified the numbers independently but if it is accurate, it provides good summarized proof to whom has been the ultimate beneficiary all this time, and who has been paying the bills.

The previous discussion on the company placements, more than 2 years ago...

http://www.valuebuddies.com/thread-464-p...l#pid51992

As a general reply,

Msians are well trained for stock manipulations. This is part of their culture since the good 80s and clob days.

Most software cos are too good to be true - Datacraft was once a darling that costs many arms and legs and even Indian IT co Infosys or another was also troubled by scandals.

Msian banking industry is only that big... how is it that a co like Silver can be sailing the seas?

Anyway, analysis of such companies are also highly dependent of Mgt's guidance - really don't have much feel.

Lastly, if I m not wrong, boutique fun mgr Alan Wang (Hankore) was once heard to be behind the stock...

Odd Lots Vested
Certificate Coming?
GG

A 10-year scheme by Goh? Too much credit given to him?. Thn again, a screen through sgx listed stocks shows tt its rather normal for founders to be pursuing other ventures apart from their "listed company". Where else can their private biz earn the money from on other thn the readily available buyer of their own listed company? Silverlake Axis probably bring this to another level.

Perhaps this is a good lesson too all mgt-owners out there. Just because the IPTs are stated as "on arm's length" doesnt make them "right" if they wasn't initiated on the basis of shareholder return. No matter how immaterial tt amount is.

We have observed in many local firms what we termed as "greedy founder". those that see minority shareholders as free riding on the achievement of the company tt they have founded.

What we most surprise is that minority shareholders do not question these practices.

Just to cite an example and without naming the firm: The remuneration committee recommended a performance bonus (in addition to their salary) to be paid to directors if they achieve certain financial targets. Presumably, the bonus is to align mgt and shareholder interest. In normal circumstances, this would be an excellent initiative. In this case, with the directors owning in excess of 80% of the company, the bonus seems counter-intuitive. It appears to us as plainly greedy founders extracting value at the expense of minority shareholders.

Any examples from you guys?

Cheers
Hsq.Cap
Twitter: @hsquare_capital
https://hsquarecapblog.wordpress.com

(20-05-2015, 11:23 PM)Jacmar Wrote: This is VERY BAD. SAL has just issued a denial of aggressive actg. They have been lump in together as satyam and even Eratat. I am not an actg expert but here is the link to the article.
http://asianextractor.com/2015/04/27/for...d-in-asia/

foreword-introduction-the-daredevils-case-guide-to-detect-accounting-fraud-in-asia


There will be fireworks tomorrow.

I thought that I remembered reading something about it.... tio lah....came and disappeared...

(21-08-2015, 06:32 PM)HitandRun Wrote:

(20-05-2015, 11:23 PM)Jacmar Wrote: This is VERY BAD. SAL has just issued a denial of aggressive actg. They have been lump in together as satyam and even Eratat. I am not an actg expert but here is the link to the article.
http://asianextractor.com/2015/04/27/for...d-in-asia/

foreword-introduction-the-daredevils-case-guide-to-detect-accounting-fraud-in-asia


There will be fireworks tomorrow.

I thought that I remembered reading something about it.... tio lah....came and disappeared...

Kee Koon Boon -> 1st guy on the right (or 1st guy on the right of the advert banner on valuebuddies forum).

http://valueinvestingsummit.com/?a_aid=5...luebuddies

I reckon stock manipulation is there among all nationalities, not the "forte" of M'sian.  

(21-08-2015, 05:34 PM)greengiraffe Wrote: As a general reply,

Msians are well trained for stock manipulations. This is part of their culture since the good 80s and clob days.

Most software cos are too good to be true - Datacraft was once a darling that costs many arms and legs and even Indian IT co Infosys or another was also troubled by scandals.

Msian banking industry is only that big... how is it that a co like Silver can be sailing the seas?

Anyway, analysis of such companies are also highly dependent of Mgt's guidance - really don't have much feel.

Lastly, if I m not wrong, boutique fun mgr Alan Wang (Hankore) was once heard to be behind the stock...

Odd Lots Vested
Certificate Coming?
GG

I thought the interesting part of the report was how Silverlake fared against peers. They've managed to book extremely high revenues per employee and enjoy a sizeable 50+% operating margins, which is achieveable only if they have wide and deep economic moats. Unfortunately I'm quite unfamiliar with the banking software industry to comment on it.

On RTP, the report claims that they were unable to investigate further since they do not have sufficient information on the various parties involved as they are private entities controlled by Goh.