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Tycoons see their O&G investment value cut by

almost half

Tuesday, 2 December 2014

PETALING JAYA: With the oil and gas (O&G) sector being the
hardest hit in the current market rout, tycoons who own significant
stakes in these companies have seen a huge loss in their net worth.

These tycoons had collectively had their shareholding in these

companies valued at some RM15.89bil when O&G stocks were
trading at their highest prices. The fall in global crude oil prices and
the plunge in the value of O&G stocks on Bursa Malaysia saw the
value of their shareholding cut by almost half to some RM7.86bil

Accelerating the decline in share prices yesterday and the loss in

their net worth was the decision by Petroliam Nasional Bhd
(Petronas) to slash its capital expenditure (capex) by between 15%
and 20% next year.
Petronas capex cut has spooked investors in the local O&G sector as
many companies rely on the national oil company for work. Petronas
huge capex, estimated at RM60bil a year prior to the planned cuts,
was also a buffer for the domestic industry from the onslaught of
crumbling crude oil prices and its effect elsewhere.

The largest of these companies, SapuraKencana Petroleum Bhd, has

seen its share price dip by 48.78% year-to-date. At its peak,
SapuraKencana was trading at RM4.81, translating to a wealth of
RM4.85bil for Tan Sri Shahril Shamsuddins 16.84% stake in the
integrated O&G concern.

SapuraKencana was the most actively traded counter yesterday, falling

10.36% to close at RM2.51. At yesterdays market capitalisation of
RM16.76bil, Shahrils shareholding in the company was valued at

Another major shareholder of SapuraKencana is Tan Sri Mokhzani

Mahathir, whose 10.25% interest has also seen a decline by almost
half its value. At yesterdays price, Mokhzanis stake in
SapuraKencana was valued at RM1.54bil compared to the RM2.95bil
it was worth during its highest level.

Mokhzani had sold a block of 190.3 million shares in SapuraKencana

earlier this year when the stock was trading at around RM4.30 per
share, giving the entire sale a value of RM818.29mil. The shares were
taken up by seven institutions.

Another stock in which Mokhzani has an interest in, Yinson Holdings

Bhd, was also not spared from the bearish sentiment surrounding
O&G stocks. Yinsons share price has declined from its peak to close
at RM2.45 on Dec 1. Based on yesterdays price, Mokhzanis stake in
the company was worth RM235mil.

Billionaire Robert Kuok, T Ananda Krishnan, Tan Sri Ngau Boon

Keat and Tan Sri Quek Leng Chan are also part of the list of value
losers in this O&G stock meltdown.
Kuok owns 80% of PACC Offshore Services Holdings (POSH
Semco), an offshore marine services provider that was listed on the
Singapore Exchange in April 2014 at a price of S$1.15 per share.
POSH Semco closed yesterday at S$0.51, meaning that Kuok has lost
more than half the value of his stake in that company.

Similarly, Anandas worth from his 42.3% shareholding in Bumi

Armada Bhd has gone down by half the value it was during the peak
of its share price. To be noted is that Bumi Armada had undertaken a
rights issue in August this year that has seen the dilution of Anandas
shareholding in the company.

Bumi Armada, Malaysias largest offshore support vessel firm, was

relisted in 2011 at a price of RM3.03 per share. The stock dived into
penny-stock territory yesterday, falling to a low of 98 sen before
ending the day at RM1.01 per share. Based on yesterdays price,
Anandas stake in Bumi Armada was valued at RM2.06bil.

Dialog Group Bhds Ngau, meanwhile, has seen the value of Dialogs
stock fall. His stake was worth RM1.45bil based on yesterdays
closing price of RM1.26. This is about a one-third decline from the
RM2.25bil his 23.2% stake was valued at when the stock had hit a
high of RM1.96.

Stock investors such as Quek and his lieutenant Paul Poh are also
edging into negative territory.

Quek had bought his 9% in TH Heavy Engineering Bhd (THHE) in

2013 at a price of 45 sen per share, enjoying gains for most of this
year the stock had hit a high of RM1.03 on Feb 19 this year. THHE
closed yesterdays trade at 40.5 sen a share, giving Quek a paper
worth of RM38mil for his shareholding in the company as opposed to
RM80mil as at the end of last year.

In April, Quek and Poh also took a block of 15.5% in Alam Maritim
Resources Bhd at RM1.35 a share. They are sitting on a paper loss of
some RM80mil today, or a decline of over 40%.

Malaysia's MOL Global says CFO resigned for

personal reasons, shares tumble 45%

Tuesday, 2 December 2014

Malaysian online payments company MOL Global Inc said Chief
Financial Officer Allan Wong resigned last month for personal
reasons, not because of any accounting or financial reporting issues.
MOL Global's shares, which were halted on Nov. 24 after the
company said it would delay its quarterly earnings report, fell as
much as 45 percent to $2.25 after resuming trade on the Nasdaq
The company announced the delay and Wong's departure at the same
time last month, without citing a reason.
The news wiped out more than half of the company's market
value, before trading in the stock was halted by the Nasdaq.

MOL Global, the first Malaysian company to be listed in the United

States, made a lackluster debut in October, after pricing its offering at
the low end of the expected price range.
The company, majority owned by Malaysian billionaire Vincent Tan,
said on Monday it had delayed the third-quarter results because of
accounting errors at its new subsidiary in Vietnam.
MOL Global said revenue rose 5.6 percent from a year earlier to $14.5
million in the three months ended Sept. 30.
MOL Global also said two class-action complaints had been filed
against the company and some officers and directors for allegedly
providing false statements in the IPO registration statement and the
Deutsche Bank, which helped MOL Global to go public, temporarily
suspended its research coverage on the company last week, citing the
delay in reporting third quarter results and the departure of the CFO.
MOL, which has a market capitalization of $276 million, said it was
"working expeditiously" to respond to the exchange's request for
additional information to resume trading.
The company, also known as Money Online, is one of the largest epayment enablers for online goods and services in Southeast Asia by
payment volume.
Tan, who has an estimated worth of $1.3 billion according to the
Forbes magazine, owns about a 45 percent stake in the company. He
has owned Welsh soccer club Cardiff City since 2010.- Reuters


PRINCIPLE 1: Money Has a Time Value
A dollar received today is worth more than a dollar received in
the future.
We can invest the dollar received today to earn interest. Thus, in
the future, you will have more than one dollar, as you will
receive the interest on your investment.
PRINCIPLE 2: There is a Risk-Return Trade-off
We wont take on additional risk unless we expect to be
compensated with additional return.
Higher the risk, higher will be the expected return. Note
expected return may not be equal to the realized rate of return.

PRINCIPLE 3: Cash Flows Are the Source of Value

Profit is an accounting concept and measures a businesss
performance. Cash flow is the amount of cash that can actually
be taken out of the business.
It is possible for a firm to report profits but have no cash.
Financial decisions in a firm should consider incremental cash
flow i.e. the difference between the cash flows the company
will produce with the potential new investment and what it
would make without the investment.
PRINCIPLE 4: Market Prices Reflect Information
Investors react quickly to news/information and decisions made by
Good News ==> Higher stock prices
Bad News ==> Lower stock price
PRINCIPLE 5: Individuals Respond to Incentives
Managers (as agents) respond to incentives they are given in the
workplace. If their incentives are not properly aligned with those of
the firms stockholders (the principal) they may not make decisions
that are consistent with increasing shareholder value leading to agency

The agency problems/costs can be mitigated through:

1. Compensation plans that reward managers when they act to
maximize shareholder wealth
2. Monitoring by the board of directors
3. Monitoring by financial markets (such as auditors, bankers,
security analysts, credit agencies)
4. The underperforming firms seeing their stock prices fall and face
threat of being taken over and have their management teams