Frankly Speaking

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‘Don’t walk away’Please let me walk. Please let me go.” These were the pleading words of former Port Klang Authority (PKA) general manager Datin Paduka O C Phang, the key figure in the development of the controversial Port Klang Free Zone (PKFZ) project, after a 4½ hour grilling by the Public Accounts Committee (PAC) last week.

As much as we would like to see her enjoy her retirement, she certainly cannot afford that luxury at this critical juncture as the country is roiled by the huge bill that PKFZ has rang up for taxpayers. Phang is probably the only one who knows how PKA undertook a project that had no financial merits.

She is the central executive who represented PKA in dealing with the transport ministers, ministry of finance and, most of all, the main contractor Kuala Dimensi Sdn Bhd (KDSB).

According to PAC, Phang claims she does not know what cash flow means to a project and that PKA did not make any cash flow projections before embarking on the job.

If that was the case, how was Phang appointed to the post of PKA general manager and mandated with the task of handling a project that entailed a cash outlay of more than RM2.5 billion?

On whose recommendation was she entrusted to oversee a multi-billion ringgit project? How did she brief key government officials without knowing what cash flow meant?

Cash flow aside, did it not occur to her why KDSB was both the vendor in the sale of the land and the main contractor to develop the project? Did it not occur to her that putting the project out to tender would have yielded better results? Such matters do not need financial knowledge. It’s corporate governance 101.What’s behind the delay?A big question mark looms over the financial accounts of Golden Plus Holdings Bhd (GPlus) and Pilecon Engineering Bhd, two companies with some valuable assets in their stables.

It has been four months since GPlus and Pilecon announced they were unable to submit their audited accounts for FY2008 ended Dec 31. As a result, they did not release a string of financial statements in the current year of operations.

Following the failure to finalise their 2008 audited accounts, both companies have not released their 2008 annual reports.

On top of that, GPlus’ financial results for 1Q2009 ended March 31, and 2Q2009 ended June 30, have been also delayed.

Pilecon managed to submit its 1Q2009 results on time but failed to submit its 2Q2009 results which were due on Aug 31.

What exactly is the reason for the delay in the submission of accounts? Why the slack in such an important area of their listing obligations? Surely the management of both companies realises the importance of timely financial reporting? Or is there more behind the delay in the accounts than meets the eye?

Both companies have said they are “working closely” with their external auditors to finalise their 2008 audited accounts. However, no reasons were given for the delay and the accounts have yet to be released.

The most recently released financial numbers of the companies show that both of them have improved results.

Pilecon returned to the black in 1Q2009 with an unaudited net profit of RM845,000 compared to a loss of RM708,000 a year ago. GPlus, for its unaudited 2008 results, registered a full-year net profit of RM11 million compared to RM8.2 million in 2007.

GPlus’ stock was suspended on July 31, 2009, while Pilecon’s stock was suspended on Dec 5, 2008.Shareholders should take the management of these companies to task. After all, both companies are sitting on assets that are deemed valuable.

Pilecon has a 25.5% stake in water treatment company Equiventures Sdn Bhd, that sees regular cash flow.GPlus had about RM153.1 million worth of land under development as at Dec 31, 2008. The company was the subject of a boardroom battle due to its attractive property development project in China.

With both companies not really financially distressed, why the delay in getting their books in order? There must be some explanation.Does the MD have the insight? A loss-making quarter, a major shareholder selling down stakes, and a tanking share price — that’s what happening in Vastalux Energy Bhd, just one year after the company made its debut on Bursa Malaysia.

Vastalux, a supportive service provider to the oil and gas industry, dipped into the red for the quarter ended June 30, incurring a net loss of RM1.65 million compared with a net profit of RM6.28 million in the corresponding quarter last year. This was despite revenue coming in substantially higher at RM67 million from RM19.9 million last year. The company attributed the losses to higher costs.

Its share price has tanked since June from a year’s peak of 65.5 sen to a low of 41.5 sen late last month before it recovered slightly to 45.5 sen last Friday.

On top of that, the company’s second shareholder-cum-managing director Nor Sabri Hamzah trimmed his stake in Vastalux. According to a filing with Bursa Malaysia, Nor Sabri has so far sold 7.4 million shares, or 2.43% equity interest, on the open market. His shareholding stood at 19.03% as at Aug 25 compared with 21.46% previously.

This development certainly doesn’t paint a good picture. What are the signs telling us?This article appeared in The Edge Malaysia, Issue 771, Sep 7-13, 2009.