THE bull market of 2020 has attracted the vibrancy of many sorts, from the heightened retail participation and also the number of memorandum of agreement (MoU) dished out.
StarBizWeek tracked at least 133 MoUs, memorandum of collaborations and memorandum of agreements inked by listed companies in Malaysia from last March up until yesterday.
A MoU is a non-binding agreement or what the legal world refers to as the gentleman’s agreement, commonly used to signify the willingness of at least two parties to work together in an area of common interest in the future.
Since it is not something that is able to be legally enforced, there are no financial or legal implications involved if both parties fail to find a common ground.
And when one talks about MoUs, many will remember Tan Sri Amin Shah Omar Shah, who was given the moniker “King of MoUs” back then, known for the many MoUs he has inked but hardly any came to fruition.
Being a corporate leader who once led several listed companies, his empire collapsed during the Asian Financial Crisis in 1998 and was even declared bankrupt at one point.
It may seem that things have not improved any further from two decades ago because out of the 133 MoUs tracked over the past year, only about five made actual progress.
Eight have since been terminated while another eight were left to lapse or expire.
The remaining 112, needless to say, share the same updates that there are no “material developments” since the signing or from the latest periodic update.
This once again raises questions on the quality of the MoUs and the deals that corporations aim to strike and their commitments to see it come to fruition.
Some may also view it as a move to gauge the feedback of their investors on their latest proposed ventures and a plus has oftentimes led to a positive movement in share prices as investors take a bet of a positive outcome in the future.
This has also led to a trend of “buy the rumour, sell the news” as what was seen over the past year, where share prices of some companies have risen significantly prior to the announcements, only to plunge after the announcements were made.
As much as the stock market does not make sense at times, it is rather peculiar for the prices of a particular counter to plunge following an optimistic announcement that could lead to stronger top and bottom lines, considering the fact that the stock market is always forward looking.
Coming back to the period tracked by StarBizWeek, Bintai Kinden Corp Bhd has emerged as the “King of MoUs”, with eight under its belt as the construction and engineering firm diversifies into the healthcare industry in light of the Covid-19 pandemic that brought the global economy to a standstill last year.
Seven of the eight were vaccine-related MoUs, from licensing rights to logistics and storage.
Its share price rose 35% to RM1.14 on Dec 3,2020, triggering an unusual market activity (UMA) query from Bursa Malaysia.
There were no recent events that could have led to such a dramatic increase and the closest relatable update would be its MoU inked on Nov 25 with US-based Generex and its subsidiary Nugenerex on further negotiations in the granting of licensing rights to its subsidiary Bintai Healthcare Sdn Bhd for the sole distribution rights to market and supply the synthetic peptide vaccine for to the Australia and New Zealand markets. There seems to be no update on the matter since.
Other active MoU pursuers include Advancecon Holdings Bhd with a tally of six, all for the development of rooftop solar photovoltaic systems.
AT Systematization Bhd also came in tops with six MoUs, and it is notably among the more ambitious companies in trying to diversify from its mainstay of manufacturing and engineering.
It signed MoUs to work on disinfection chambers, to produce parts for fabric mask machines and to work on medical grade mechanical air ventilators but the first two have since been terminated.
Being among the latest entrants to produce gloves, it also signed an MoU to supply nitrile examination gloves.
Meanwhile, there were many other announcements on MoUs that triggered further queries by Bursa Malaysia on the companies’ latest ventures, which even dove deep into the background of directors and individuals that they signed the MoU with and surprisingly, some do not even seem to be in the know of who their counterparts were.
On the whole, is the very basic concept of due diligence forgotten as companies rush to sign MoUs or agreements?
Due diligence may even be too big of a word here when some information is just a Google search away, something that seems like many companies fail to do.
One may also wonder how thoroughly such announcements were vetted given the errors contained in some, which gives a sneak peek into how serious the companies are in their business thought process or rather, just racing to sign MoUs.
While it is impossible to expect all MoUs signed to materialise, the quality of such non-binding agreements has to be upheld.