Short Position
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Short Position
Saturday, 2 April 2016
Ultimatum to Proton
INTERNATIONAL Trade and Industry Minister Datuk Seri Mustapa Mohamed has issued a frank statement about the affairs of Proton Holdings Bhd.
It was frank and blunt. In short, he says the Government cannot continue to assist Proton financially if the company does not make changes to the way it operates.
What the Government wants to see is for Proton to make significant changes to the way it operates. The most important is to find a strategic partner and the company needs to be professionally managed.
The other requirements the company needs to fulfil before the Government contemplates pumping in fresh capital in the way of grants into Proton is for the company to ensure there is no interference in how the company is run, and also to put in place tough measures to ensure the long-term viability of the national car maker.
What the statement by Mustapa shows is that the Government has for some time known what is wrong with Proton. While watching its market share slip and its profitability wane away, it said that Proton needs to boost its exports in order to be sustainable in the way it operates. He says the Perodua model is more sustainable for the Malaysian market.
Vendors of Proton have been asking for assistance in the past and the Government has obliged. Even after giving RM100mil in soft loans to Proton’s vendors, he says a few of them might go out of business in the next three or four months.
The situation for car makers in Malaysia right now is not ideal. Sales are down and for national car makers where linkages run deep, the need for them to buck up is imperative.
Like the minister noted, car companies in Japan and South Korea that started around the same time as Proton have done away with protection of the industry. It is competition that forces companies to adapt and be more competitive in an increasingly globalised way.
What the ministry has said is what industry watchers have known all along what Proton needs to do in order to survive and flourish. Continued protection cannot be the solution because as people’s incomes rise, the options they have in terms of what car to buy open up.
Hence, that is one of the reasons why Proton’s market share has slumped from a high of 74% to around 15% today. With competing auto makers taking advantage of the baby steps of liberalisation the Government has allowed, the non-national makes have increasingly improved their appeal to car buyers in the country.
Hopefully, Proton will make the necessary changes and improve. Malaysians will not mind supporting a company that gives them what they want, but a relationship with buyers is a two-way street.
Talking up AirAsia
AIRASIA Bhd’s plans to sell 559 million new shares at RM1.84 each to an investment vehicle controlled by Tan Sri Tony Fernandes and Datuk Kamarudin Meranun will lift the combined shareholding of its founders tantalisingly close to the mandatory general offer trigger point.
The proposed placement exercise will be subject to other shareholders’ approval.
Under the deal, Fernandes and his long-time business partner Kamarudin through Tune Live Sdn Bhd will pay RM1bil for an additional 16.7% stake in AirAsia.
The new shares will dilute their current vehicle Tune Air Sdn Bhd’s holding from 18.9% to 15.7%, but increase their control of the company’s shares to 32.4%.
Fernandes had previously said that taking the company private was always an option.
AirAsia is definitely no stranger to privatisation talks. By all accounts, speculation about AirAsia going private has surfaced at least five times since the company went public in 2004.
The latest round came about after the stock took a big plunge to below 90 sen in August last year amid a huge sell-off by foreign investors.
It was reported in October that the founders of the company were sounding out to investors about a possible buyout.
Meanwhile, Fernandes pledged to quickly turn around the group’s operation, while saying that the company would continue to explore all available options.
AirAsia in January announced a proposal to raise US$1bil via the sale of multi-currency bonds, but the plan was later dropped due to weak market conditions.
The company yesterday explained that the placement exercise was a quicker and cheaper way for the company to raise funds that would help trim down its debts and pay for its new headquarters.
It would also put AirAsia in a stronger financial position for future fund-raising schemes.
Meanwhile, AirAsia’s performance is already on the mend.
Improved earnings outlook saw its shares doubling their value from their August lows at RM1.83 on Thursday before trading was voluntarily suspended on Friday’s announcement.
Analysts say the commitment shown by its main shareholders could buoy sentiment on the stock, and while privatisation talks may have wound down, it won’t take long before rumours start flying again.
Nay to director’s fees
WHAT seemed like an ordinary AGM to approve the usual stuff came with a twist.
The votes by the majority of shareholders of engineering company YFG Bhd present at the company’s AGM on March 28 approved all but one of the resolutions proposed by the directors of the company. The one that was shot down was the one to approve the director’s fees.
No reason was given as to why shareholders did not approve the proposed director’s fees, but looking at the financial results of the company, YFG has been making losses over the past two years.
For the financial year ended June 30, 2014, YFG lost RM14.4mil. But for its last financial year ended Sept 30, 2015, YFG lost RM46.1mil. It did not help matters when the company announced on Feb 28, 2016 that it had lost RM2.1mil in the first quarter of its 2016 financial year.
YFG is a Practice Note 17 company, a classification in had entered into on Sept 22 last year and has one year from that date to submit a regularisation plan to Bursa Malaysia.
Shareholders were asked to approve director’s fees that were marginally higher for its financial year ended 2015 compared with the previous year. The only difference was that the 2015 financial year was three months longer, as the company had changed its financial year-end.
The challenge now for the company is to get its operations regularised. The court has given a restraining order to the company to regularise its financial performance and operations. How it will go about doing so will be watched by shareholders, but the company is hopeful that it might be able to grow its order book, given the robust nature of the construction sector.
The group in its annual report says it has secured new mechanical and electrical works for the Mass Rapid Transit underground work package for Stadium Merdeka, Bukit Bintang Subway and South Portal, as well as new electrical works for the Women & Children’s Hospital.
Short Position
Ultimatum to Proton
INTERNATIONAL Trade and Industry Minister Datuk Seri Mustapa Mohamed has issued a frank statement about the affairs of Proton Holdings Bhd.
It was frank and blunt. In short, he says the Government cannot continue to assist Proton financially if the company does not make changes to the way it operates.
What the Government wants to see is for Proton to make significant changes to the way it operates. The most important is to find a strategic partner and the company needs to be professionally managed.
The other requirements the company needs to fulfil before the Government contemplates pumping in fresh capital in the way of grants into Proton is for the company to ensure there is no interference in how the company is run, and also to put in place tough measures to ensure the long-term viability of the national car maker.
What the statement by Mustapa shows is that the Government has for some time known what is wrong with Proton. While watching its market share slip and its profitability wane away, it said that Proton needs to boost its exports in order to be sustainable in the way it operates. He says the Perodua model is more sustainable for the Malaysian market.
Vendors of Proton have been asking for assistance in the past and the Government has obliged. Even after giving RM100mil in soft loans to Proton’s vendors, he says a few of them might go out of business in the next three or four months.
The situation for car makers in Malaysia right now is not ideal. Sales are down and for national car makers where linkages run deep, the need for them to buck up is imperative.
Like the minister noted, car companies in Japan and South Korea that started around the same time as Proton have done away with protection of the industry. It is competition that forces companies to adapt and be more competitive in an increasingly globalised way.
What the ministry has said is what industry watchers have known all along what Proton needs to do in order to survive and flourish. Continued protection cannot be the solution because as people’s incomes rise, the options they have in terms of what car to buy open up.
Hence, that is one of the reasons why Proton’s market share has slumped from a high of 74% to around 15% today. With competing auto makers taking advantage of the baby steps of liberalisation the Government has allowed, the non-national makes have increasingly improved their appeal to car buyers in the country.
Hopefully, Proton will make the necessary changes and improve. Malaysians will not mind supporting a company that gives them what they want, but a relationship with buyers is a two-way street.
Talking up AirAsia
AIRASIA Bhd’s plans to sell 559 million new shares at RM1.84 each to an investment vehicle controlled by Tan Sri Tony Fernandes and Datuk Kamarudin Meranun will lift the combined shareholding of its founders tantalisingly close to the mandatory general offer trigger point.
The proposed placement exercise will be subject to other shareholders’ approval.
Under the deal, Fernandes and his long-time business partner Kamarudin through Tune Live Sdn Bhd will pay RM1bil for an additional 16.7% stake in AirAsia.
The new shares will dilute their current vehicle Tune Air Sdn Bhd’s holding from 18.9% to 15.7%, but increase their control of the company’s shares to 32.4%.
Fernandes had previously said that taking the company private was always an option.
AirAsia is definitely no stranger to privatisation talks. By all accounts, speculation about AirAsia going private has surfaced at least five times since the company went public in 2004.
The latest round came about after the stock took a big plunge to below 90 sen in August last year amid a huge sell-off by foreign investors.
It was reported in October that the founders of the company were sounding out to investors about a possible buyout.
Meanwhile, Fernandes pledged to quickly turn around the group’s operation, while saying that the company would continue to explore all available options.
AirAsia in January announced a proposal to raise US$1bil via the sale of multi-currency bonds, but the plan was later dropped due to weak market conditions.
The company yesterday explained that the placement exercise was a quicker and cheaper way for the company to raise funds that would help trim down its debts and pay for its new headquarters.
It would also put AirAsia in a stronger financial position for future fund-raising schemes.
Meanwhile, AirAsia’s performance is already on the mend.
Improved earnings outlook saw its shares doubling their value from their August lows at RM1.83 on Thursday before trading was voluntarily suspended on Friday’s announcement.
Analysts say the commitment shown by its main shareholders could buoy sentiment on the stock, and while privatisation talks may have wound down, it won’t take long before rumours start flying again.
Nay to director’s fees
WHAT seemed like an ordinary AGM to approve the usual stuff came with a twist.
The votes by the majority of shareholders of engineering company YFG Bhd present at the company’s AGM on March 28 approved all but one of the resolutions proposed by the directors of the company. The one that was shot down was the one to approve the director’s fees.
No reason was given as to why shareholders did not approve the proposed director’s fees, but looking at the financial results of the company, YFG has been making losses over the past two years.
For the financial year ended June 30, 2014, YFG lost RM14.4mil. But for its last financial year ended Sept 30, 2015, YFG lost RM46.1mil. It did not help matters when the company announced on Feb 28, 2016 that it had lost RM2.1mil in the first quarter of its 2016 financial year.
YFG is a Practice Note 17 company, a classification in had entered into on Sept 22 last year and has one year from that date to submit a regularisation plan to Bursa Malaysia.
Shareholders were asked to approve director’s fees that were marginally higher for its financial year ended 2015 compared with the previous year. The only difference was that the 2015 financial year was three months longer, as the company had changed its financial year-end.
The challenge now for the company is to get its operations regularised. The court has given a restraining order to the company to regularise its financial performance and operations. How it will go about doing so will be watched by shareholders, but the company is hopeful that it might be able to grow its order book, given the robust nature of the construction sector.
The group in its annual report says it has secured new mechanical and electrical works for the Mass Rapid Transit underground work package for Stadium Merdeka, Bukit Bintang Subway and South Portal, as well as new electrical works for the Women & Children’s Hospital.
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