Frankly Speaking

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Injustice rectifiedThe Federal Court ruling last week in favour of Pahang land fraud victim Tan Yin Hong, who had been sued by a bank for an outstanding loan that had been taken in his name, is a truly noteworthy decision.

The judgment, by a five-member bench headed by Chief Justice Tun Zaki Azmi, erases a decade-old aberration of the law arising from a decision of the Federal Court that a person who obtained a land title, albeit fraudulently, had a claim on the property.

With the 2000 judgment in Adorna Properties vs Boonsom Bunyanit, the then Chief Justice Tun Eusoff Chin leading a three-member bench left land owners at the mercy of fraudsters.

As Zaki appropriately noted, "the error committed by the Federal Court in Adorna was so blatant and obvious". It boggles the mind how the apex court of the land could permit such an injustice to be perpetrated.

Until that judgment was discarded by the court last week, property buyers, including investors, had been made to endure a perverse situation in which unscrupulous persons could defraud them of properties they had lawfully acquired.

Indeed, as Zaki said, it was quite well known that this had occurred in a number of cases, where the victims of irregular property transfers were left without legal recourse. Now, the land owners concerned and any such aggrieved parties in future, have the option to seek redress for their losses.

By erasing an ignominious case judgment, the Federal Court has taken a firm step away from a clouded period in the instituition's annals.

What a turnaround! Ho Hup Construction Co Bhd last Friday asked for a three-month extension from Bursa Malaysia to submit a revised restructuring scheme.

While it has yet to officially release the details of the revised scheme, compared to the original proposal announced last October, it seems less painful to shareholders.

Revisions were made to reduce the magnitude of capital reduction, from 95% to 60%. Meanwhile, there will be a bigger rights issue pool for existing shareholders, with 30 million shares instead of 12.75 million shares. More importantly, the size of the placement of new shares to new investors is smaller, hence reducing the impact of dilution to existing shareholders.

On the face of it, the new scheme is better. Fortunately the revision only came late, rather than never. But one could not help but perceive that Ho Hup’s board was only willing to revise the scheme now in order to drum up support ahead of an extraordinary general meeting (EGM) to be held on Feb 4.

The shareholders meeting, called by Ho Hup’s former managing director Datuk Low Tuck Choy, among other things, calls for the removal of the entire board, except for one member.

Low is at loggerheads with Ho Hup’s current board associated with deputy executive chairman Datuk Vincent Lye. Both sides have had heated exchanges through the media.

As a matter of fact, just four days before Ho Hup’s board announced that it would revise its restructuring scheme to make it less painful for shareholders, it had on Jan 18 issued a statement slamming an alternative restructuring scheme proposed by Low.

In the Jan 18 statement, the board had insisted that its original scheme, comprising a steep 95% capital reduction, offers a comprehensive “one-off” total solution to Ho Hup’s current problems. It also said it had “acted in the best interest of all stakeholders in the company in the efforts in restructuring the operation and financial condition of Ho Hup”.

Now, just a week later, the board has changed its mind. Wonder what happened in the days between that prompted the reversal in decision?

Timely disclosure necessary The way some companies carry out their private placement exercises gives rise to some unanswered questions. Take Notion Vtec Bhd’s private placement, which was announced last October and only completed last week with the announcement that the shares have been placed out to Nikon Corp after months of speculation. In the meantime, its share price rose from RM2.52 from the time the exercise was first announced to as high as RM3.52 on Jan 15.

The placement price of RM2.44 was only made known on Jan 6 — a 10% discount from the volume weighted average market price for the five earlier market days.

In Three-A Resources Bhd’s case, it disclosed all the salient information in the same filing when it announced its private placement exercise, including the placee. In its announcement on Oct 5, 2009, Three-A revealed that Wilmar International Ltd was taking up the shares at an issue price of RM0.75 per share, at a 12.63% discount. Nevertheless, by the time the exercise was completed, its share price had risen 52.1%.

Mudajaya Group Bhd’s private placement exercise, which was announced on Jan 6 this year, is a better example. Very quickly, within two weeks, the book building was completed and shares allocated to investors. The issue price was fixed at RM4.80 per share, representing just 4% discount from the five-day volume weighted average price. During this time, its share price barely moved.

The point is, such exercises should be expedited. Sensitive information should be disclosed to all or not at all. In Notion’s case, rumours of Nikon taking a stake had been rife in the market for months before the company finally confirmed the fact. Ambiguity over the issue price likely added fuel to the uptrend in its share price. True to the adage “buy on rumour, sell on news”, Notion’s share price fell after the company confirmed Nikon's investment. 

One can’t help but wonder who are the beneficiaries of such cloak-and-dagger treatment of information.

This article appeared in Capital page of The Edge Malaysia, Issue 790, Jan 25-31, 2010.