Corporate Governance Case Studies edited by Mak Yuen Teen (CPA Aus)

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Annus horribilis for minority shareholders

It’s still a bit early but let’s see how 2018 has gone so far for minority investors on SGX.

In my opinion, it has been a horrible year so far. Thankfully, I am only a small shareholder in a handful of companies, sometimes becoming one so that I can attend shareholder meetings as a proper shareholder to ask questions. But for many others, they may not be quite so lucky.
Another interesting event by Prof Mak to be documented down here..

Administrative oversight, inadvertent omissions, administrative inadvertences: what next?

In the case of Y Ventures, it is interesting that the company announced on 31 August – just 17 days after the incorrect results announcement – that the chief financial officer had resigned “to pursue other career opportunities”. His effective date of resignation was the following day – in other words, he was out in a hurry.
While i do take issue with the way the study is made - it looks for problematic companies and then analyzes them (committing the error of confirmation bias), but the first rule of investing is "Don't Lose Money" and so it might not be a bad thing to commit type 1 errors (false alarms).

Top warning signs of a company in trouble: report

There are at least 16 early warning signs and red flags signalling potential woe in the companies you invest in – and learning what they are could make you a savvier investor.

A new report by corporate governance advocate Mak Yuen Teen purports to help investors spot early signs of trouble, using a model that analyses a company’s business model and its key events and transactions.
I think it’s always more illuminating if one looks at the cash flow

For example having a lot of cash yet have a lot of debt and saying it’s net cash position. Then pay script dividend instead of cash dividend or tap capital markets. Low interest earning despite huge cash. Irrelevant or exorbitant M&A to try to cover the hole

Then there is of course the character of management whether they are for themselves or shareholders. For example a rough rule of thumb is when top management take home more than ⅓ of net profit. Are the structuring always benefit their own vested interest eg placement or rights issue.

Loss of sponsor or ID or auditors or SGX query is generally tad too late
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)
This is probably an open secret, i suppose?

When should cessation of directors and key officers be announced?

Beyond the issue of timeliness of announcement of the cessation of the senior finance executive, it is a concern that in the space of five days, we have seen the departure of the most senior finance executive from four recent Catalist listings. SGX should look into whether any of these cases involved the appointment of a senior finance executive on a fixed term contract, with the aim of ensuring a successful listing after which the senior finance executive will leave. Investors in these companies should certainly keep a close eye on these companies as turnover of senior finance executives is often a warning sign of trouble ahead.
With regards to the compliance listing article below, other than Regco, I think miniority shareholders shd have a better recourse of taking company/company directors to task, instead of the current situation where only investors having huge resources are able to take the lead. Perhaps there cld be an arrangement where local universities' graduating commercial/business lawyers helping in the litigation process as pro bono for their final year project. It wld be win-win, i.e. beneficial to miniority shareholders, our own Singaporean lawyers-to-be(for the real world experience, not just textbook/exam experts) and the investing scene in SG.

We all know WB's famous words to NOT lose money. I think we need a more level playing field.

Speaking of which, I still think removal of quarterly reporting doesn't help in the cause - the more info investors(at least the diligent ones) have, the less probability of losing money. For e.g., I monitor the no. of China franchisees and their China geographical coverage for Best World(BW) in the quarterly report, so if I only get to know the no. of BW's franchisees reduce by 30% 6 months later.... this kind of info is critical enuff for me to reconsider my positions in BW as it cld mean the valuation of the stock has changed fundamentally.


Compliance with SGX listing rules is still poor
First published in Business Times on January 14, 2020
By Chew Yi Hong and Mak Yuen Teen

On Oct 29, 2019, at 7.57 am, Sakae Sushi responded to queries by Singapore Exchange (SGX) issued four days earlier regarding, among other things, the auditors’ basis for disclaimer of opinion and the supplemental information on directors who were seeking re-election......

Time to bite

Without swift enforcement, it would appear that SGX Regco is losing the battle to raise the quality of disclosure and compliance. The last public disciplinary action taken by SGX was in November 2018 and the last such action against an issuer and its directors was in July 2018. In 2019, there has not been a single public disciplinary action taken by the SGX disciplinary committee.

Perhaps SGX Regco should be spending less resources prodding companies and directors to do what they are required to do, and more resources taking them to task.
yeah the removal of quarterly reporting is sad. generally speaking theres no time when having less info is better for investors. anyway sgx will have to try to make it an attractive place for new and existing listings. its sort of an reverse auction where you require less, or at least equal, boxes to be checked for the same thing as other exchanges, be it half yearly reporting or dual class structures or disciplinary/enforcement actions.
Recent cases from Prof Mak :

Medtecs International: Hit by the Disclosure Virus (Feb 19, 2020)

DLF Holdings: Driving Into The Unknown (Feb 27, 2020)
(08-09-2018, 10:51 AM)weijian Wrote:
(20-08-2017, 11:11 AM)CY09 Wrote: Hi Chialc,

Best world, I am not sure yet.

However, if i were to provide A/P Mak Yuen Teen with inputs; they will be" i) an update to Noble incident, ii) Fujian Zhenyun, iii) Universal Recourse- Money Disappearing Act, iv) Pacific Andes Group Structure and the forcing of sale of China Fishery, v) 8I Holdings and vi) The collapse of Rickmers Trust, vii) Sabana REIT tussle, viii) Singholdings, viii) First Ship Lease's sponsor potential sale to Navios and the conditions of dilution (test the knowledge of an investor's interpretation of Singapore's Business Trust Act)

If I were to add a special edition, it will be to investigate how a few REITS have been capable of adding fair value gains in their properties despite suffering from declining rentals and diminishing lease tenure on their local properties. This has boosted the asset value of REITS. And my pondering if they are ever going to reverse these fair value gains

Our SGX scene has  a lot of stories to uncover; it is just how many of us are bothered, have the energy and guts to uncover what the regulators are not seeing

hi CY09,
on hindsight, none of your selection went into vol 6. Big Grin

I am going to make a guess for volume 7. My top picks would be Yuuzoo, Datapulse and Trek2000.

I was spot on for CG volume 7 as Yuuzoo, Datapulse and Trek2000 were in the list! Smile

Noble (guessed by CY09) came out in volume8 and BestWorld is in Volume9!

Volume 7:

Volume 8:

Volume 9:
Posted by Mak Yuen Teen | Jan 4, 2021

Happy New Year!
As part of a new study on shareholder meetings for SGX-listed companies, I am doing a simple survey of investors’ views about virtual AGMs. It should take less than 10 minutes to complete.

If you invest in SGX-listed companies, I would like to invite you to participate in the survey. The aggregate results from the survey will be shared as part of a report expected to be published in the first quarter of 2021.

You can complete the survey using this link:
(click to link)

Stay home and stay safe, everyone.

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