Frankly Speaking

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Preserve the liberal spaceThe recent case of Kartika Sari Dewi Shukarno, the Muslim woman who was sentenced to six strokes of the cane for drinking alcohol, marks a crucial point in Malaysia’s handling of personal liberties that will leave a lasting mark on the country’s image internationally.

Even on the religious issue, there are strong opinions about whether a person should be caned for drinking, or whether other means such as education should be employed to encourage compliance with a moral code of conduct.

Indeed, the situation has spawned an animated public debate about various shades of right and wrong in the context of enforcing moral principles. Among the salient points is the relative gravity of drinking as compared with corruption and other vices that can destroy the ethical foundations of society.

In the international business environment, the drinking of alcohol is very much accepted as a social norm. The move to cane Kartika therefore casts Malaysia in a problematic light and poses deep questions about the country’s future social landscape.

The federal government, which has the responsibility of administering the country in the best interests of all its people, must not be afraid to protect a moderate social environment that will encourage a multi-cultural, multi-religious milieu to flourish.

Parliament needs to ponder the implications of the current anxiety over the punishment of Muslims who drink in public. More importantly, it must take steps to address the recurring issues relating to the interpretation of syariah law and its application in the country.

Clearly, the pillars of our guided democracy — the monarchy, parliament, executive and judiciary — need to greatly enhance their engagement with these sensitive issues to prevent the liberal position from being drowned out by zealous moralism.

Kartika’s sentence has been suspended for the time being, but that will not dissolve the knotty issues that are entwined with her predicament.

What’s the advice for?The sale by Lembaga Tabung Angkatan Tentera (LTAT) of its 18.14% stake in Goh Ban Huat Bhd (GBH) to Tan Sri Robert Tan has cast doubts on the relevance of independent advice.

The independent advisers evaluating Tan’s offer of RM1.25 per GBH share had recommended that the fair value of the company was RM2.92 per share based on its assets, which are parcels of land in Segambut.

But Tan in explaining his offer, stated that the only reason the share price of the company had seen some appreciation in value was because of his offer. In substantiating his offer, Tan stated that RM1.25 was a fair value, considering the loss-making ceramics business of GBH and that the management had been disposing of assets to stay afloat.

Considering that LTAT had settled for a price of RM1.50, obviously the advice of independent advisers did not matter to the fund.

Obviously, LTAT’s average cost of GBH was much lower than the fair value of RM2.92 and even Tan’s revised offer price of RM1.50. If the price did not meet its cost, certainly LTAT would not have divested itself of the stake.

But the question is, considering that the fair value is much higher — as stated by the independent adviser — shouldn’t the fund have opted to get a better price for its block of shares?

That would not only have benefited LTAT but also all other shareholders of GBH. The transaction between LTAT and Tan at RM1.50 was almost 50% lower than the revised net asset value of GBH as determined by the independent adviser.

Unless LTAT feels that GBH’s fair price is not RM2.92 as professed by the independent adviser. If that was the case, why did the fund, which has representatives on the board, allow the company to seek independent advice?

Lion Corp’s results not consolidated into LDHBIt is puzzling that Lion Diversified Holdings Bhd (LDHB) did not consolidate the accounts of its “new” subsidiary, Lion Corp Bhd (LCB), into the unaudited group results for the fourth financial quarter ended June 30, 2009.

This is despite a note accompanying LDHB’s results, updating investors on the composition of the group, which said that upon the conversion by the company of RM900 million worth of LCB bonds into shares on Feb 27, 2009, it now owned 59.04% of LCB.

In the announcement, LDHB reported revenue of RM254.15 million for 4Q ended June 30, while LCB reported revenue of RM408.38 million for the period. If LCB’s results were indeed consolidated into that of LDHB, surely the latter’s revenue would be higher.

Meanwhile, LCB’s total borrowings of RM2.97 billion as at June 30 also weren’t reflected in LDHB’s balance sheet, which showed a much smaller total borrowings of RM932.9 million.

Despite holding a 59% stake in LCB, LDHB could still be treating the former as an associated company. Note that in LDHB’s 4Q results, there was a share of losses of RM345.59 million from “associates”, which could possibly reflect LDHB’s portion of the loss at LCB and other associated companies. Of all the companies in LDHB’s stable, only LCB could contribute such a loss to the former.

It is not explained in LDHB’s 4Q results as to why LCB’s accounts were not consolidated. Could it be because of the group’s complex cross-shareholding structure that both companies’ results were separated?

It is worth noting that while LDHB now owns 59.04% of LCB, LCB in turn owns 41% of Lion Industries Corp Bhd (LICB), which in turn owns 20.9% of LDHB plus other ICULS convertible into more shares in LDHB. The shareholdings go one round.

Given the complex group structure and cross-shareholdings, it is never easy to understand the Lion group. And while we are on this subject, perhaps management should shed more light on the way it presents its results.

This article appeared in Corporate page of The Edge Malaysia, Issue 770, Aug 31-Sept 6, 2009.