What’s up at Xin Hwa?
ANY account of alleged irregularities within a company is bound to be a red flag for investors.
So when logistics firm XIN HWA HOLDINGS BHD said on Thursday that it had been alerted on some financial irregularities and had appointed KPMG Management & Risk Consulting Sdn Bhd to conduct an independent review on the firm, investors dumped the stock.
The stock was down close to 5% post-lunch trading hours yesterday.
But more importantly, what are the irregularities? And is there something major brewing in the company?
Xin Hwa was listed a few years ago amid much fanfare. Its stock did well on its debut. And it has obtained a string of contracts since.
Still, like many of its counterparts, its most recent profits saw a dent amid increasing competition in the domestic logistics scene with net profit falling by nearly 33% year-on-year.
For its most recent quarter ended Sept 30, the firm made a net profit of RM2.03mil, over 30% less compared to more than RM3mil made for the same period a year earlier.
In its announcement to Bursa Malaysia on Thursday, Xin Hwa said the alleged irregularities “relate to some transactions and payments” and that the investigation will commence on Feb 18 and is expected to be completed within 10 weeks.
Investors who believe in the company will just have to wait for the outcome.
To be sure, the last time a listed company said there were “financial irregularities” within its stable of subsidiaries, it was found that some of its key management people could not account for certain transactions and were subsequently sacked.
Tiger Synergy Bhd, a property developer and furniture maker, is a company that isn’t easy to understand.
For starters, its shares often appear on the top volume list of Bursa Malaysia. Oftentimes big blocks of its shares get traded in off market deals.
And yet, nothing substantive seems to be taking place at the company to improve its financial position. It reported losses for its financial year ended June 30, 2018. In fact it has been in the red in the last four financial years. But this week, two news items related to Tiger Synergy surfaced.
Tiger announced it intended to venture into the stockbroking business in Hong Kong. It said it had entered into an agreement with an Australian listed company to buy the latter’s Hong Kong stockbroking unit.
Tiger Synergy has since said that the deal is subject to approvals from the Securities and Futures Commission Hong Kong and the Stock Exchange of Hong Kong.
However what it has not explained is why is a property developer and furniture maker going into the stock broking business in Hong Kong and secondly, what are the chances of the Hong Kong authorities approving Tiger Synergy to become the owner of a financial institution there?
This is considering that all regulators put owners through a strict fit and proper test. The other news item that surfaced this week is that Datuk Tan Wei Lian the major owner and executive chairman of Tiger Synergy, has now bought into troubled tile maker Seacera Group Bhd.
This has got one wondering if Tan’s entry into Seacera is linked to efforts to fix the business of Tiger Synergy?
What is also noteworthy is that as StarBizweek had highlighted a week ago, while there are many suitors for Seacera, not many realise that the crown jewel in that company, namely a piece of land in Semenyih, is tied down by the owners of debt paper.
Not only will these investors have to be paid from any proceeds from that land sale, their consent is also required for any transaction involving that piece of land.
The right mix
THE Economic Action Council (EAC) has been formed to look after the economic and financial affairs of the country, along with ensuring that the welfare of the people is taken care of.
The EAC is needed at a time when gross domestic product grew 4.7% last year and issues are cropping up about the direction of the economy, with consumer and business confidence at a low point, along with increasingly loud grouses over the cost of living.
The 16-member EAC features a diversity of different expertise. There are stalwarts of industry from a cross section of the economy. Upon closer inspection, though, there have been complaints that the composition of the EAC features the old faces that are regurgitated from the cadre of people close to the government.
There are people who are experts in banking, the stock market and other industries that will be needed in crafting the policies to lift the economy to higher growth this year and in the future years.
The issue at hand is, however, the absence of more private-sector participants. In wanting to lift the economy, there have been suggestions that the EAC should have featured more people in the top echelon of the council to understand what the government has espoused in some of its latest policy directions.
The government has championed the need for Malaysia to adopt Industry 4.0, but there is a conspicuous vacuum of experts who are involved directly in driving the next wave of business. The unorthodox opinions, along with the understanding of the new wave of business, are glaringly absent from the list of members of the council.
Furthermore, in wanting to deal with the cost-of-living issues, is there anyone from the EAC who understands intimately the struggles of the plight of the suffering? Knowing the problems many Malaysians are going through while being chauffeur-driven in a luxury car does not cut it.
The EAC, and future government initiatives, must be more down-to-earth in understanding the needs of what is needed for change, economically at least.