Mixed signals on Mudajaya
Things have been rapidly going pear-shaped for Mudajaya Bhd. Once the darling of investors, the company has seen its high-flying stock tank spectacularly following reports of investigations by Securities Commission Malaysia (SC). The situation worsened when it came to light that a “poison pen” letter concerning the company’s prized project in India has started making the rounds among research houses and the investing community.

While even a whiff of suspicion is bad enough, was the situation handled correctly by all concerned? When the news first broke, investors looked to Mudajaya for answers but the company kept mum, only choosing to speak to analysts. It was only later that Mudajaya came out with more details. However, the damage had already been done.

On the other side of the fence, the SC has also not come out to say directly whether Mudajaya is under investigation. By right, the regulatory body should make it clear from the outset whether the company is being queried, rather than leaving the situation ambiguous and investors in limbo about what to do with their shares.

To be fair to Mudajaya, the company was probably concerned about saying the wrong thing too early on and getting into trouble for it. Last Friday, the SC said it was still reviewing the affairs of Mudajaya, but it cannot be stressed enough that this was in response to queries rather than an official statement.

Mudajaya has also come out to say that its board of directors has affirmed that the company has conducted its business in a professional manner. But it would not be a stretch to say that statements from both parties are still vague and offer no comfort.

In the end, it is Mudajaya’s shareholders that will pay the ultimate price. The company’s share price has fallen by some 35.7% since the issue started, and its market cap dropped by RM156 million last Wednesday alone.

Further clarification is needed from both Mudajaya and the SC before investors regain their confidence.

Why wasn’t it disclosed earlier?
It has since come to light that Focus Point Holdings Bhd deferred its listing, scheduled for July 26, because 38 of its 64 eyecare centres were found to have been dispensing contact lenses over the counter without an optometrist or optician who is qualified to prescribe or dispense contact lenses. This was apparently against the regulations.

Focus Point has ceased the prescription and dispensing of contact lenses at its outlets that do not have qualified personnel to do so.

The company will now be listed on Aug 23. Focus Point is extending an option to investors who had subscribed for the initial public offer to exit from their investment should they change their mind following the incident.

To recap, Focus Point’s listing was called off at the eleventh hour and investors were kept in the dark until last Friday. When the company later announced that there was a complaint against it based on the above grounds, many thought the complaint looked insignificant. The thing is, it was not. This development, according to the company, will also cause a dent in earnings, which in turn affects the value of the company and the IPO pricing.

The saving grace is, this was discovered before the listing and an exit option is now granted to investors. Ideally, the matter should have been discovered or disclosed before the regulators approved the IPO. It would have prevented embarrassing situations like the one that Focus Point just went through.

This is a lesson for the management of companies that intend to float their shares. They should ensure all operational rules are complied with and there is full disclosure of information.

Walk the talk on fighting corruption
The allergic reaction from senior members of the Cabinet to a suggestion that they declare their assets publicly speaks volumes about the prevailing view among government leaders on accountability and transparency.

It is revealing that neighbouring Indonesia is making notable progress towards a culture of openness. A 1999 law that aims to eradicate corruption, collusion and nepotism requires state officials to declare their assets prior to assuming their posts and after they leave office.

Compliance with the law has become encouraging under the leadership of reformist president Susilo Bambang Yudhoyono, who has made the fight against corruption a prominent theme of his administration. An emboldened Corruption Eradication Commission (KPK) has succeeded in shaming reluctant lawmakers into declaring their assets by training the media spotlight on them. Recent reports show that just under a quarter of Indonesia’s 560 members of parliament have yet to obey the law, which the KPK seems determined to enforce.

To put things in perspective, it is useful to remember that asset declaration is a matter of course in all mature democracies.

In the UK, the House of Commons Register of Interest provides an annual update of members’ interests under 10 categories, ranging from remunerated directorships to registrable shareholdings and all manner of benefits, gifts and sponsorships in between.

Likewise, in the US, the Centre for Responsive Politics maintains the Personal Financial Disclosures Database which is fully accessible to the public. All members of Congress and White House officials have to file their declaration of assets by May 15 each year. The website is named, interestingly, www.opensecrets.org.

Back home, the people’s representatives on both sides of the political divide have been rather disappointing in this regard. Small wonder that the easily made promises of cleaning up the system are being increasingly dismissed as empty talk.

This article appeared in Forum page of The Edge Malaysia, Issue 818, Aug 9-15, 2010