Transmile, Uncle Ling... 'Deafening silence'
S. Jayasankaran wrote in Singapore Business Times yesterday about the 'deafening silence' over affairs at Transmile Group Berhad, the listed air cargo company which has former MCA president Ling Liong Sik as its chairman.
The KL-based correspondent said facts about Transmile, whose share price has fallen 36% over the last one week, must be disclosed to reassure investors and save Bursa Malaysia's reputation abroad.
The Singapore business paper claimed that the revelation that Transmile Group may have overstated its profits last year has sent shock waves through the Malaysian bourse.
The Transmile Carnage... SOURCE: Star Online Business, May 14, 2007
For the record, Transmile was sold down to RM8 and change from its peak of RM15 in January (see chart above). Most of the selling came from disgruntled foreign investors, which shouldn't surprise anyone, the Singapore paper said.
It went limit down on May 7 on the opening bell, after the company revealed that its unaudited group financial results for the year ended Dec 31, 2006 announced on Feb 15 were in doubt.
Transmile closed at RM8.35 on May 11. In just four days, the stock lost all the gains made over the past two-and-a-half years, wiping out RM1.2 billion of its market capitalisation.
"Actually, nobody is sure of anything," the Business Times said. "The firm's auditors (Deloitte Touche) have merely stated that they weren't furnished documents supporting certain transactions in the firm's last financial year relating to receivables, related sales and asset additions."
"So, the conjecture is that these figures may have been created out of thin air, and the accounts may have been misstated," the Singapore newspaper said..
According to media reports, Transmile has "an ostensibly superb" track record. It has tycoon Robert Kuok and government-owned Khazanah Nasional as its largest and second largest shareholder.
On last count, said Business Times, Transmile has garnered the support of foreign fund managers who owned over 32% of its equity -- "although the figure is probably down following last week's carnage.
Transmile chairman is Ling Liong Sik, a former transport minister who retired from office only in 2003.
"That's why the market took it hard," said Business Times.
No words from the auditors
May 11, StarBiz reported on market speculation that Kuok will be taking advantage of the current share price weakness to raise his stake in Transmile.
Thus far, Business Times said, Transmile's board seemed to have distanced itself from management. "It appeared to agree with Transmile's auditors Deloitte Touche that there was a problem and has announced a special audit to be carried out by Moores Rawlings".
As at yesterday, there hasn't been any statement from the industry regulator, the Security Commission. Neither have the auditors.
Under securities laws, the auditors are obliged to make a report to the authorities if there were irregularities.
Soh fined
Meanwhile, in an unrelated development, businessman Soh Chee Wen has been fined RM6 million after pleading guilty to two charges of abetting in the submission of false statements to the Kuala Lumpur Stock Exchange (KLSE) relating to 44,592,000 Omega Holdings Bhd shares.
Soh was fined RM3 million in default 30 months' jail on each of the two charges.
WHAT BUSINESS TIMES SAID FURTHER...
Whether the fallout from the affair will affect the whole market is now the question confronting analysts.That must not be allowed to happen, and the only way to ensure that is for the regulators and Transmile's board to tackle the problem squarely.
The board has to give honest answers to the public quickly and the regulators have to throw the book at whoever is responsible for this fiasco if wrongdoing is suspected. Anything less is unsatisfactory because what is at stake here is the international perception of Kuala Lumpur's exchange and its companies.
The Asian financial crisis showed that investors care about corporate governance. In fairness, the regulators have since closed loopholes and generally improved standards across the board. Enforcement has also improved substantially with the Securities Commission (SC) cracking down on suspected cases of market manipulation with a firm hand. It would be a pity if all that went to waste.
So far, Transmile's board, which counts Mr Kuok's nephew Chye among its members, seems to have distanced itself from management. It appeared to agree with Transmile's auditors Deloitte Touche that there was a problem and
has announced a special audit to be carried out by Moores Rawlings.Unfortunately, that is all that's occurred. A deafening silence has shrouded everything else with investors completely in the dark about, say, the magnitude of the problem - or whether there is a problem at all! Indeed, some analysts are asking if the allegedly misstated accounts could stretch back years or is the problem confined to last year only.
Time for answers
The silence stretches in every direction. In fact, the regulators, including the Securities Commission, haven't said anything either. Neither have the auditors. Under securities laws, the auditors are obliged to make a report to the authorities if there were irregularities.
Now is the time for answers because investors have sold down the stock and may have done so for the wrong reasons. They should be told the facts lest they repent at leisure.
The Transmile episode teaches us that nothing is sacrosanct and that Murphy's Law - if anything can go wrong, it will - still rules. That is a terrible lesson for Kuala Lumpur's bourse.
Comments
KLSE is taking hit from the retreat of foreign fund(they have lost confidence on our market transparency!) due to this transmile case.
Posted by: Steve![[TypeKey Profile Page]](http://www.jeffooi.com/nav-commenters.gif)
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May 15, 2007 11:09 AM
From this, we can see that our external auditors are one of the most spineless of regulatory mechanisms in the country. Keeping the of the 'ricebowl'? Should the auditors be 'audited'???
Posted by: susmaryosep![[TypeKey Profile Page]](http://www.jeffooi.com/nav-commenters.gif)
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May 15, 2007 01:14 PM
All these PLCs are well known as resting place and kutip wang sara for all politicians. I lost count the numbers of retired politicians on the board of these PLCs. But then again, for LLS, even when he was in MCA, he did created controvesies and caused split in the Chineses with his "splitting fish head" decision, so I dont expect much sense coming out of him.
Posted by: maggieq![[TypeKey Profile Page]](http://www.jeffooi.com/nav-commenters.gif)
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May 15, 2007 04:28 PM