A yen for solid, responsible information

In the Yen Global case, IoT can also mean the Insidiousness of Touting

CONSIDER yourself warned. A week ago, Bursa Malaysia urged investors to “exercise caution and to make informed decisions” – that’s sound advice for all seasons, actually – in the trading of Yen Global Bhd shares. In addition, the stock exchange said it would not hesitate to take any other regulatory action to ensure fair and orderly trading of Yen Global shares.

Bursa Malaysia doesn’t make a habit of issuing such warnings. There were only nine between 2011 and last year. This year has four though, the most recent being the one on Yen Global.

Certain things must happen before the exchange considers it necessary to remind investors to be careful about trading in the securities of a listed company.

It begins with the detection of abnormal price movements or trading volumes, or both. Bursa Malaysia then sends an Unusual Market Activity (UMA) query to the listed company, asking it to check with directors, major shareholders and others, to see if the company can find out the cause of the increased activity.

In the Yen Global Case, a UMA query came out on Aug 22 after its share price had risen. The company responded by saying it was not aware of any corporate development or explanation that could have triggered the price surge.

This was Yen Global’s second UMA query this year. The first was issued on Feb 12 as a result of a price and volume spike. The company gave the same reply back then – that it didn’t know what could have been behind the unusual activity.

Apparently, the heightened interest in Yen Global shares died down soon after the Feb 12 UMA query. But that was not the case after the Aug 22 UMA query, prompting Bursa Malaysia to follow up with last week’s warning to investors.

The aim was to alert the public to the fact that the manufacturer and seller of jeans has declared that it had no information as to what could have possibly fuelled the price surge. In other words, whatever it is that has dropped Yen Global into a bubble of market excitement, it didn’t come via a disclosure by the company. On paper, that should give investors ample reason to question the wisdom of buying or selling the shares at a time when there’s apparently no major change in the business.

Then again, what’s the weight of a stock exchange warning when compared to the aggressive storytelling out there about a loss-making jeans company venturing far and away into technology that’s being promoted as the next big thing?

A quiet change of direction

Much has been said and written in recent months about how Yen Global will be an altogether different (and presumably more successful) creature because it will partake in the development of networks that will support the growth of the Internet of Things (IoT).

Here’s how StarBiz explains IoT in a July 11 article: “IoT has been touted as the next big digital revolution, connecting millions of objects using inexpensive microsensors and is expanding the online universe to ordinary pieces of the physical world such as thermostats, cars, door locks, even pet trackers.”

Yen Global doesn’t say it, but it’s obvious that the buzz surrounding its shares, justified or not, has to do with the notion that the company will earn plenty if the IoT takes off.

That’s a big if. But let’s first look at undisputed and publicised facts gleaned from announcements through Bursa Malaysia.

Two substantial shareholders emerged in Yen Global this year.

In June, a wholly-owned subsidiary of Taiwan’s Gemtek Technology Co Ltd acquired a 9.09% stake through a private placement. A month later, it upped its shareholding to 30% in an off-market transaction. Another off-market deal on Aug 3 saw Green Packet Bhd, a Main Market company, picking up a 22% interest in Yen Global.

Listed on the Taiwan Stock Exchange, Gemtek makes telecommunication products, although it prefers to describe itself as a provider of wireless broadband solutions. Its association with Yen Global started with an agreement signed in March that allowed a wholly-owned subsidiary of Yen Global to distribute Gemtek’s products in South-East Asia.

That subsidiary is VLT Wholesale Sdn Bhd, which Yen Global bought on Dec 31 last year for RM100,000. According to Yen Global, VLT is “principally involved in the telecommunications industry, with focus on the information and communications technology sector”. The rationale here is to diversify because the jeans business is going through a rough patch.

“Yen Global views the acquisition as an opportunity to strengthen its financial earnings via its future development of VLT and the expertise from its new director, Lim Boon Hong. Currently, Yen Global’s businesses are very much dependent on consumer demand trends and economic outlook, and the acquisition will balance out this over-reliance and also diversify its risks,” says the company when announcing the purchase of VLT, which is now known as Atilze Digital Sdn Bhd.

Lim was once in Green Packet, having joined in 2006 as special assistant to CEO Puan Chan Cheong. Green Packet’s Annual Report 2012 names Lim as an investor relations point man.

He has also been a director of two ACE Market companies – Ingenuity Consolidated Bhd and The Media Shoppe Bhd. He was appointed an executive director of Yen Global on Nov 24 last year.

Everybody’s talking (except Yen Global)

The last 60 days or so was a fertile period for articles on Yen Global and Atilze. The recurring theme is that IoT is a hugely promising area and that Atilze, with the help of Gemtek and Green Packet, is well-positioned to fare well in that space.

Before the changes were made public, sources had told the media that Gemtek and Green Packet were buying large amounts of Yen Global shares.

In other reports, Gemtek and Green Packet officials shared with reporters their plans for Yen Global.

In July, Atilze said it would partner with Malaysia Digital Economy Corp to build city-wide IoT sensor networks. And on the same day that Bursa Malaysia issued its warning regarding Yen Global, Atilze and Axiata Group Bhd signed a collaboration agreement to “trial, explore, develop and pursue IoT opportunities across South-East Asia”.

Amid all this, Yen Global itself has said close to nothing about its bet on the IoT, conscious perhaps of the listing rules that prohibit promotional disclosure activity. This is something Green Packet is familiar with, having been reprimanded by the stock exchange in 2006 over a press release that highlighted a US fund’s purchase of Green Packet shares.

While Yen Global keeps mum, others are talking up a storm about its IoT prospects. Surely there ought to be limits to this as well. It’s easy to wax lyrical about the potential of some new technology and how a listed company will benefit greatly from it, but even if the new thing turns out to be as wonderful and lucrative as advertised, what is it about the company that gives it an edge in a field that’s bound to be crowded as others (including those with deeper pockets and stronger management) jump on the bandwagon?

When told well, stories excite and entertain us, but let’s not confuse them with facts and reality.

Executive editor Errol Oh worries that the little people who join the chase for the next big thing may end up getting trampled.