Short position

by **Cals** Sun 15 Nov 2015, 02:27

[size=11]Saturday, 14 November 2015[/size]

Short position

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Expecto Petroleum: Petronas staff out on the oil rig in the middle of the sea.

Open a Pandora’s box
THE capital expenditure (capex) of Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) has always been a Pandora’s box. It is one of the biggest items in the state’s expenditure but not much is known about how the money is spent.
For instance, over the next five years, it is estimated that the capex of Syabas will be RM4.2bil. The bulk is to go towards repairing pipes to reduce leakages or better known as the rate of non-revenue water in the state.
An idea of how Syabas allocates its expenditure will be made public when its annual report is released – for the first time. This is one of the undertakings that the Selangor government made after taking over the water assets from Puncak Niaga Holdings Bhd on Oct 15.
The takeover of Puncak Niaga has paved the way for the state to control almost two-thirds of the water treatment operations in the state and the entire distribution network extending to Kuala Lumpur and Putrajaya.
After the takeover, the services of two top officials of Syabas have been terminated. This does not come as a surprise because in any takeover, the new owners would want to put their officials in key positions.
While the terminations of key officials are expected, the release of the annual report is something that is unexpected. According to reports, it has never been released so far.
Hence, the details on the budget for repair and maintenance works is largely unknown, and because of the lack of information, the public had generally frowned upon previous proposed tariff rate adjustments.
Since 2008, Syabas has not increased the water tariff. After seven years, the state government has said that the rates would be reviewed but not to the extent of burdening the people.
Whether it is a burden or not will only be known when the review is completed.
But it would certainly help if Air Selangor releases the Syabas annual report soon. Then, there would be better clarity on how the money is spent.
Open a Pandora’s box Prudent spending the key
AS expected, the dividend from Petroliam Nasional Bhd (Petronas) for next year is down to RM16bil, a decline of 38% compared to what it gave the federal government this year.
But the federal government should not feel the pinch because the shortfall would be covered by the increase in the collection from the goods and services tax (GST). This year, the Government expects to collect RM27bil from the GST.
Next year, the amount is expected to be RM39bil, which is RM12bil more than this year. Giving some allowance if the full amount cannot be collected as anticipated, the federal government should have enough to cover the shortfall from Petronas’ dividends.
In this respect, the Government has been right to undertake the implementation of the GST this year. A year ago when the decision was made, nobody would have thought that the price of oil would collapse, but it happened.
Without the collection from the GST, the funding shortfall would be too big and difficult for the country to sustain its economic growth at between 4% and 5%.
Going forward, the price of oil is expected to correct further towards the US$35-per-barrel level. This means the dividends from Petronas would continue to be weak in the next year or two.
At the same time, we cannot expect the collection from the GST to increase significantly, going forward, unless the tax rate is increased from the current 6%. This is something that is hard to fathom. So, prudent spending is the key in the next few years.
Rubik’s Cube

THE strange and numerous board changes at Wintoni Group Bhd do not bode well for the technology firm, already suffering from losses.
Since a few months ago, there have been board resignations, removals and appointments, including instances of an entire board being changed in one day.
And trying to keep up with the board changes at Wintoni is like trying to follow the hand movements of a Rubik’s Cube champion.
This week alone, one executive director, Mohamad Annuar Ariffin, stepped down making him the third director to resign within a period of four weeks.
Annuar, along with Kamal Abdul Aziz, were the only executive directors of Wintoni following their appointment on Sept 10. (Kamal resigned on Oct 30 for personal reasons.)
Sept 10 was watershed: On that day alone, which incidentally was a day before the company’s EGM to remove existing directors, eight directors voluntarily resigned, while a batch of nine new directors were appointed.
As of today, there are six non-executive directors left in Wintoni.
This begs the question: without any executive personnel on the board, who is really responsible for the running of this company?
Wintoni is an automation systems and mobile platform service provider company. But it reported a net loss of RM14.501mil for the first six months ended June 30, 2015, compared with a net profit of RM1.15mil in the corresponding period of 2014.
And what’s complicating matters is that its external auditors had expressed a qualified opinion on the company’s audited financial statements for the financial year 2014, due to its inability to sight certain assets of the company based in the United States.
Wintoni hasn’t offered an update on this situation so far. As if things weren’t complicated enough, yesterday Wintoni disclosed that it had filed an originating summons against Messrs Foong & Partners for failing to hand over to the company documents and records in relation to its EGM held on Sept 11. One wonders what’s next.