No Signboard Holdings

[ghchua]

Hi weijian,

The listing status is useful, in that it can be used to raise funds to pay off liabilities. The main aim is to gain control of the shell first, and then solve those problems later. If you have a good story to tell, I am sure that there will be people willing to put money into the shell.

[specuvestor]

CEO arrested for possible share rigging and insider trading... simply ridiculous.  From IPO till to-date, all corporate announcements are like a series of unfortunate events that are detrimental to minority shareholders.  Some companies should never be listed.

SINGAPORE: The chief executive officer of restaurant operator No Signboard Holdings was charged on Thursday (Jul 27) with price rigging offences.

Lim Yong Sim, who is also the executive chairman of the company, is charged with three counts of false trading and market rigging.

The 46-year-old is accused of placing orders for No Signboard Holdings shares, and trades in the shares were executed through the account of Gugong – the majority shareholder of No Signboard Holdings – to push up or support the prices.

These trades were done between Jun 19 and Jun 29, 2018, as well as between Nov 30, 2018 and Jan 11, 2019. At the time, Lim was the director and majority shareholder of Gugong, said the police.

He is also accused of placing orders for the company's shares on Jan 31, 2019. Trades in the company’s corporate trading account were executed to push up or support the price of its shares, said the police.

Lim was arrested on Apr 30, 2019 on "reasonable suspicion” that sections of the Securities and Futures Act on false trading, market-rigging transactions and insider trading “may have been breached”, the Catalist-listed company said in a filing to the Singapore Exchange (SGX) in 2019.

The charges against Lim were filed after a joint investigation by the Commercial Affairs Department and the Monetary Authority of Singapore.

If convicted, he may be jailed for up to seven years, fined up to S$250,000 (US$189,000) or both.

-CNA

[specuvestor]

Dodgy bunch. Integrity Industrious Intelligent. Most important is Integrity, including towards OPMI

Ex NSB director one of those involved in $1b money laundering
https://tnp.straitstimes.com/news/singap...-signboard

CEO arrested for possible share rigging and insider trading... simply ridiculous.  From IPO till to-date, all corporate announcements are like a series of unfortunate events that are detrimental to minority shareholders.  Some companies should never be listed.

SINGAPORE: The chief executive officer of restaurant operator No Signboard Holdings was charged on Thursday (Jul 27) with price rigging offences.

Lim Yong Sim, who is also the executive chairman of the company, is charged with three counts of false trading and market rigging.

The 46-year-old is accused of placing orders for No Signboard Holdings shares, and trades in the shares were executed through the account of Gugong – the majority shareholder of No Signboard Holdings – to push up or support the prices.

These trades were done between Jun 19 and Jun 29, 2018, as well as between Nov 30, 2018 and Jan 11, 2019.  At the time, Lim was the director and majority shareholder of Gugong, said the police.

He is also accused of placing orders for the company's shares on Jan 31, 2019. Trades in the company’s corporate trading account were executed to push up or support the price of its shares, said the police.

Lim was arrested on Apr 30, 2019 on "reasonable suspicion” that sections of the Securities and Futures Act on false trading, market-rigging transactions and insider trading “may have been breached”, the Catalist-listed company said in a filing to the Singapore Exchange (SGX) in 2019.

The charges against Lim were filed after a joint investigation by the Commercial Affairs Department and the Monetary Authority of Singapore.

If convicted, he may be jailed for up to seven years, fined up to S$250,000 (US$189,000) or both.

-CNA

[dreamybear]

Just a few months back, NSB IPO-ed at 28 cents, selling about 59 million shares to institutional investors and 65 million shares to the public.

Recently, the market is selling NSB at about 15 cents. If institutional investors such as Lion Global, JP Morgan, and Goi Kok Ming (son of GSH) bought at 28 cents, NSB must be a steal now at 15 cents! Big discount!

Or is it?

In my initial assessment on 11 November 2017, I carelessly overlooked several glaring yet material details. I would have come to a very different conclusion. It only became apparent when the recent quarterlies were released. So let's start there.


1) The latest quarter results look really bad. How could it be, when it looked so good on the IPO prospectus? Must be the IPO expenses! Not really. Y-o-Y change, which excludes the IPO expenses, showed a drastic increase in some of the expense items. Refer to 2Q results here:

http://infopub.sgx.com/FileOpen/Q2-31Mar...eID=505983

What about 1Q results? It reported a 56.3% increase in Y-o-Y net profit, even though it had a $1.1m IPO expense! Not really. It included net profit of $2.5m from 4Q17. Stripping away this profit, NSB would be about $0.9m in the red for the previous quarter. Refer to 1Q results here:

http://infopub.sgx.com/FileOpen/Q1-31Dec...eID=489213

It does not make sense for the business conditions of F&B operators to change so sudden. There was no news of massive crab shortage or anything like it. From the 1Q and 2Q results, the cause of the fall in profit can be traced to 3 expense items; cost of goods sold, employee expenses, and other expenses.

How did these items fare before IPO? Let's take a look.

Expense items presented as a percentage of revenue:

-------------------------------------------before IPO---------      ------after IPO----
                                    FY14          FY15          FY16          FY17          HY18
Cost of goods sold:          27.0          22.2           21.1          24.2           30.5        
Employee expenses:        20.9          19.4           20.7          22.6           33.3
Other expenses:              8.8            5.5            5.2             7.8            13.8

Perhaps it was coincidental that costs were going down in years leading up to IPO, from FY14 to FY16, as presented in the IPO prospectus. And then going up immediately after, from FY17 onwards. I don't have a rational explanation. Could they have possibly reduced their reported expenses by paying for some of it through other ‘related but unrelated’ entities? I don't know. But that would be silly because such acts can land the involved in big trouble. In any case, I’m guessing that the expense figures in the near future will look more like the post, rather than pre, IPO figures.


2) If you're thinking that since management has 73% ownership in NSB, they will surely do plenty to turn things around, here's some more figures to ponder over:

During the restructuring exercise prior to IPO, all $16.8m of the retained earnings were paid out of NSB as dividends, leaving it with a $2 share capital. It was then recapitalised with $5.1m, which after taking into account the liabilities, puts equity at $3.9m.

Before the restructuring exercise, from FY14 to FY16, dividends totaling $20.1m were paid out.

During the IPO, 50m vendor shares were sold, giving NSB owners $14m.

Total cash received by NSB owners over the past 3 years: $16.8m - $5.1m + $20.1m + $14m = $45.8m

They could still be highly motivated, even with all that cash. I don't know.


3) Market says NSB is now worth $71m, down from $130m at IPO. For $71m you get a struggling beer business, an unproven food vending business, an as of yet unknown casual dining business, and a restaurant business with changing expense figures that has no good explanation. It also has about $20m of cash. But this cash is earmarked to develop these struggling, unproven, and unknown new businesses. I don't know what kind of cash flows they will produce, so I wouldn't be expecting much of it.

Another way of looking at this is that NSB owners has set themselves up with $45.8m of retirement money, while they use funds from IPO investors to fund their new (and more risky) business ideas. Although IPO investors collectively hold only 27% of the shares, $21m out of $26m (or about 80%) of NSB's share capital was funded by them. Similar moves were also done by other recent IPOs. HRnetGroup, which also took out large 'retirement money' before IPO, also used IPO funds to acquire foreign businesses.


4) The prospectus shows the audited equity of NSB as of 30 June 2017 is $15.3m, which is reproduced numerous times throughout the document. But in reality, the equity is $3.9m, which is its unaudited proforma (reproduced fewer times throughout the document), due to the restructuring as described above in point 2. It can easily mislead and confuse if one is not careful, just like its declaration of 23.6x subscription for its shares. Who could be advising NSB?

The sponsor is RHT Capital.

Which, as I recall, has also been highlighted in:

https://www.valuebuddies.com/thread-395-...#pid147565

https://www.valuebuddies.com/thread-1452...#pid146805


What do you think NSB is worth? And how much will you pay for it?

So the controlling shareholders exited. I wonder what are the plans of the buyers.  

Looking back at karlmarx's excellent posts(including the 1st in the thread), the purpose of the IPO exercise is a valid question indeed, and perhaps also whether options other than IPO were explored by the owners e.g. selling the entire business to a 3rd party. Afterall, there are considerations(e.g. compliance, regulations, flexibility) btw private vs listed companies.

Interestingly, the part on restructuring exercise prior to IPO, is something rarely covered in the investing media. Attention is usually focussed on the financials and the "story".  

----------------

No Signboard controlling shareholders offload all shares for S$500,000; executive chairman resigns
https://www.businesstimes.com.sg/compani...an-resigns
"The company, which has been embroiled in a series of lawsuits, had earlier outlined its plans for the near term, including consolidating its shares six to one, in a bid to improve its business."

[weijian]

So the controlling shareholders exited. I wonder what are the plans of the buyers.  

Looking back at karlmarx's excellent posts(including the 1st in the thread), the purpose of the IPO exercise is a valid question indeed, and perhaps also whether options other than IPO were explored by the owners e.g. selling the entire business to a 3rd party. Afterall, there are considerations(e.g. compliance, regulations, flexibility) btw private vs listed companies.

Interestingly, the part on restructuring exercise prior to IPO, is something rarely covered in the investing media. Attention is usually focussed on the financials and the "story".  

----------------

No Signboard controlling shareholders offload all shares for S$500,000; executive chairman resigns
https://www.businesstimes.com.sg/compani...an-resigns
"The company, which has been embroiled in a series of lawsuits, had earlier outlined its plans for the near term, including consolidating its shares six to one, in a bid to improve its business."

hi dreamybear,

Draining the cash (or property) from the company before it goes public, is actually a very common practice among Asian firms. Some of it do it much earlier, and hence we are not able to see it from the IPO prospectus.

But the majority of them does it, 1-2years before IPO. And so we can see it from the prospectus. For example, right off my head, Hyphens Pharma International did declare 7mil of dividends (out of total 12mil cash) to its owners before it raised 15mil gross proceeds during IPO. The majority shareholders did not sell anything during IPO.

I wouldn't say encashing the money before IPO is necessarily a red flag. After all, I probably would do the same thing - if I were that good to be such a business owner.

[karlmarx]

Yet another sad ending.

Well managed restaurants with a good brand are stable money spinners. When I first looked at NSB, I was wondering if it was indeed such a gem. I did re-consider when the price came down but nothing came of it.

It is indeed not unreasonable to expect IPO vendors to cash-out. But the larger picture which we are always trying to see is whether a company's management are the kind of people we want us stewards of our money.

But I suppose the revelations from NSB's IPO prospectus are not common for companies going public. Perhaps NSB's shareholders were in a hurry to catch the IPO wave then.