The many changes in Boon Koon


  • Business
  • Saturday, 08 Jul 2017

An image of Bitcoin and US currencies is displayed on a screen as delegates listen to a panel of speakers during the Interpol World Congress in Singapore on July 4, 2017.The three-day conference on fostering innovation for future security challenges is taking place from July 4 to 6. / AFP PHOTO / ROSLAN RAHMAN

THE changes taking place in BOON KOON GROUP BHD are drastic. It is to the extent that minority shareholders who put their money in the company for the automotive business should re-look at their options.

The question is relevant as minority shareholders of the company may want out now that there are changes at several levels.

Firstly at the shareholding level, Datuk Seri Chiau Beng Teik, the founder and deputy executive chairman of CHIN HIN GROUP Bhd, a building material distributor has emerged with a 24.18% stake.

There are now three new board members and crucially, Boon Koon is diversifying out of its core expertise.

Although Chiau’s entry into Boon Koon was not done in a hostile way nor have minority shareholders voiced their concerns, surely there must be a strong case for those who put their money in the company for its automotive business.

While Boon Koon founder Datuk Goh Boon Koon remains a shareholder with a 8.56% stake, Chiau and eldest son Haw Choon together with an associate, Yeo Chun Sing, have all been appointed to the board, thereby giving them considerable say in the loss-making company.

Although there are plans to revive the rebuilt commercial vehicle business, minorities should question the plan to diversify into property development, through Aera Property Group Sdn Bhd, a company owned by the Chiaus, at an EGM to be held later.

At first glance, the deal between Boon Koon and Aera seems solid. For an upfront participation fee of RM20mil, the company gets to benefit from Aera Service Residence, a RM306.1mil leasehold project located in Petaling Jaya.

The gains to Boon Koon will be considerable given that it has been posting losses since at least 2012. It gets 60% of the gross developent profit of the project. This will cushion the company over the project’s lifespan as it gets its house in order where the rebuilt commercial vehicle business is concerned.

But property development is inherently risky, especially in times when the overhang in unsold properties has risen despite the drop in new launches.

Perhaps the new shareholders should shed light on how they plan to revive Boon Koon’s core business.

Also, would Chin Hin, the listed company feature in Boon Koon in future as it’s more of a fit since it’s a building material distributor.

 Land details matter

SINCE the slowdown in the local property market and tightening of the lending guidelines by Bank Negara in November 2013, the concept of making easy money from the quick sale of property or land has since become a rarity.

Such deals are hard to come by even when the numbers, on the face of it, seems to suggest that.

The deal in question is the sale of the 11.233 acres of prime land in Batu 2.5, Jalan Cheras, Kuala Lumpur, by Cordova Land Sdn Bhd to prominent property developer, MAH SING GROUP BHD.

Based on bare headline numbers, Cordova is making a killing by agreeing to dispose the land to Mah Sing after having purchased it from the Kuala Lumpur City Hall (DBKL) on June 22 for RM82.13mil.

Based on announcements earlier this week, Mah Sing is buying over Cordova for RM156.35mil – thus giving Cordova a profit of RM74mil. The sale looks even worse for DBKL if one were to consider that the market value of the land is some RM331mil.

IS DBKL really selling a piece of prime property so cheap?

Close scrutiny reveals that the deal is not so simple after all. There are several obligations to be fulfilled by Cordova before Mah Sing will pay them.

The vendors, who are two individuals, has to ensure that Cordova gets the land free of any encumbrance and would be able to be transferred for financing purposes and others.

Cordova also needs to get all the approvals required for the land to be re-developed for a mixed-development project. The approvals are not only from DBKL but also the Economic Planning Unit.

The land currently has a flat and a surau, the Kompleks Belia Bandaraya and the aged Kuala Lumpur Badminton Stadium built in 1990. Pursuant to the proposed acquisition of the land, Mah Sing will have to reconstruct the surau, Kompleks Belia Bandaraya and badminton stadium.

Hence the re-development of the piece of land is a long haul project. It will take years before the developers can even start working on the available prices of land after re-constructing the facilities.

When it comes to selling property for a sizable profit, there is usually only one mantra for success: “Location, location, location.”

And the Jalan Cheras land in question here, is no exception. Which is probably why Mah Sing is prepared to take the project if all the approvals are done.

The ICO cometh

A growing trend in the tech space, more so in the United States, is the rise of initial coin offerings (ICOs). This is where companies issue cryptocurrencies to investors, bearing some similarities to initial public offerings sans all the regulatory safeguards. But why would anyone want to buy a cryptocurrency from a company instead of shares or debt of that firm? And secondly, what is the legality behind these offerings?

Tech start-ups, mostly in the US, have raised close to US$600mil (RM2.6bil) year-to-date alone. Going by reports, investors buy because they want to participate in the blockchain-themed project that uses these coins or tokens to “fuel” these projects. The buying and selling of these digital currencies is all done online, in quite a different world from traditional stock and bond markets. The advantages of the blockchain and cryptocurrencies are well-documented and do present an interesting future.

That said, Ecobit, what is believed to be Malaysia’s first ICO, has hit a snag. The company says its fundraising is for participation in green-related projects, which benefit communities and token holders. However, Ecobit has since been placed on Bank Negara’s financial consumer alert service on June 23, as “companies and websites which are neither authorised nor approved under the relevant laws and regulations administered by Bank Negara”. A news report also highlighted that a claim by Ecobit that it was working with the United Nations Development Programme is not true. It isn’t even clear whether Ecobit is really running on the much-touted blockchain technology.

Hence, investors looking at these new opportunities in the tech scene should not forget the golden rule of buyer beware.

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Business , short , position , july 8

   

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