Board to focus on repairing damaged reputation
Asiasons is picking up the pieces after a spectacular collapse in its share price. The controlling owners of the company – Datuk Azlan Hashim, Datuk Jared Lim and Ng Teck Wah – have been fighting fire since the freefall of the company’s shares. Comforting investors, stakeholders and employees that nothing has changed within the operations of the company is the No. 1 priority as the company and its owners go about rebuilding their reputation. Below is an extract of an interview with StarBizWeek.
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The Star
19 October 2013
Asiasons is picking up the pieces after a spectacular collapse in its share price. The controlling owners of the company – Datuk Azlan Hashim, Datuk Jared Lim and Ng Teck Wah – have been fighting fire since the freefall of the company’s shares. Comforting investors, stakeholders and employees that nothing has changed within the operations of the company is the No. 1 priority as the company and its owners go about rebuilding their reputation. Below is an extract of an interview with StarBizWeek.
What is the message you want to tell investors and your stakeholders now?
Azlan: We want people to know that Asiasons is actively engaged in the business that it is set out to do, which is managing funds and investing and divesting for a gain.
Lim: It is important that we clarify that as far as our operations and businesses are concerned, there is no undue interference from any third party. There is no other person that owns more than 5% of shares other than ourselves. We own 53%.
What has happened in the share price in the last two weeks, it was not something within our control. The market took a life of its own when we did the oil deal for Black Elk. It was less than a month ago actually. After that, there was nothing we could do about it.
Azlan: Clearly the entire board is very concerned about the events in the last few weeks. We need to establish what actually happened. Come up with a full report of all this for the board.
Personally, as the chairman and shareholder of the company, this is something that is totally unacceptable. We want to know what happened. What’s going on.
Lim: And we must disassociate and de-link the directors, management and company itself from what has happened to the share price.
As you can imagine, our core business is in the form of private equity and investments. We manage monies of families, high net-worths, institutions, funds.
And the way it has been portrayed in the papers, it’s more insinuation more than anything else. Some people would have got the idea that we are involved in this whole share price volatility. That’s extremely damaging for our business.
Azlan: And our reputation. Our business depends on our reputation because we are managing money.
How are you going to repair your damaged reputation, even if it’s possible, considering you’re in a business where everything is about reputation?
Azlan: Sure there is reputation damage. But it’s business as usual. We are talking about timing now. Because some people will require greater clarity before they make commitments and this is to be expected.
So certainly we will need to put in the hard work. It will take time but the damage will be repaired over time. It will be business as usual and our track record that we have painstakingly built up over this time, hopefully, will speak for itself.
Ng: Bear in mind that our business is one that we have always operated with the highest level of integrity. We are custodians to our investors’ funds. We have always exercised diligently whatever exercises we felt necessary to ensure we put our investors’ money to work responsibly. This recent events have questioned that level of integrity that we have.
There have been rumours that we have been under investigation by the SGX, Monetary Board of Singapore and some other regulatory bodies. For the record, we are not under any investigation by any regulatory board.
Things like investigation have a massive dent on the reputation that we have built. We are a regulated business. Reputation is very important for us. So to the question on how we go about repairing this reputational damage, it is obviously slowly and surely.
Lim: It’s all stakeholders, our investors, which there are quite a few. Our business partners. Keep in mind that they decided to partner us or sell their stake to us, in a form of this partnership, to grow their company forward. Our employees. They need to understand what happened.
I think when they hear it directly from us, which is really the sequencing of events, how a large block of shares by a major institutional investor decided to sell down and resulting in a spate of aggressive short selling, resulting in the SGX, and with good intentions, trying to calm the market by having a trading halt.
Then having the designation, leading then to the eventual panic which resulted in the share price collapse. It’s easier then to understand that we are not the cause of it. But, of course, the articles are focused on other issues and not on that sequence.
Azlan: Who sold, who bought, who are the short sellers, these things will come up over time. It’s very easy for someone to check the shareholders list, and see where the movements are. Who triggered the selling etc. But clearly, someone triggered this whole thing off.
From these reports that we are now beginning to see, the trigger was an investment bank. From the reading of what has happened, it would appear that it wasn’t even Asiasons.
The trigger was the other two companies, which were very badly affected too. Asiasons unfortunately endured the side effect of it because of its investments in one of those other companies. We happen to own 8% of LionGold.
Having said that, the investment actually represents a very small part of the value of Asiasons in terms of the investments which we have made.
In your conversations with your stakeholders, they did convey their concerns to you? And what was that?
Lim: The main concern they conveyed was that there is clarification. That there is a de-linking between the share price and the management and Asiasons. Most of our investors understand that as far as the funds are managed, it is completely ring-fenced. Asiasons just manage the funds. So there is no monies to be lost. And whether the share price is 5 Singapore cents or S$5, it doesn’t affect how the funds are being managed.
Azlan: Let’s talk about the people who have given us money, and those who could potentially give us money. Ekuinas for instance. None of the money which they have given us has been drawn down. Ekuinas announced that we were one of their partners where they have allocated some money for us to manage.
How much they did allocate to you?
Lim: Our fund itself is RM125mil. About 80% of that are funds coming from Ekuinas.
Lim: We’ve been very busy talking and engaging them. There are UK, US funds, high net-worth individuals, families.
Azlan: There is also the other dimension of investors, those that we have been working with. Potential new investors.
Lim: Yes, and with what has happened, it makes working with these investors harder, take a little bit more time. Clearly, if they are going to make a commitment, they need everything to be absolutely clean. So we have to work a lot harder. This will result in a delay.
Azlan: This is what makes us very angry. We have worked so hard in the last six years, not just in building the company and track record. We are now in the stage where people are starting to see and accept the company for what it is. And for this thing to happen, it’s totally beyond us.
This may also jeopardise the timing of our deals. We’ve been doing road shows in the United States, Europe and Hong Kong. Meeting dozens of these people. Many of these people who have shown interest are at the point of doing due diligence. As a fund manager, with what has happened, what would you do? You would delay.
With what has happened, it makes it more difficult to do deals, moving forward. The Black Elk deal, for instance, was going to be funded by Asiasons shares at a much higher price.
Lim: There are two aspects to this. In Black Elk’s case, it wasn’t the funds buying, it was the company buying. It’s difficult because we cannot complete the deal with the price that we have signed. So it is unfortunate because our shareholders got a pretty good deal, and now the price is much lower. We have to negotiate.
Having said that, with what has happened, the owners flew in from the United States, stayed in Singapore for a few days. They didn’t want to terminate the deal. It will send a wrong message. They want to do this deal and said we should sit down and restructure the terms. So the deal is not off.
But you lose leverage with what has happened?
Azlan: Yes, definitely. Which is really unfortunate for our shareholders.
But now you can’t do it anymore, because your shares are so much lower.
Lim: We don’t necessarily have to it at S$1. That’s why I said we will reprice the deal when the deal is more stable. Clearly when the shares are designated, forget it. It’s artificially suppressed.
Initially you were negotiating for a 27.5% stake in Black Elk? Are you still looking at that kind of stake?
Lim: We will still try to get a sizeable stake. We are working around the numbers. I think we will still emerge as the single-largest shareholder. We are doing due diligence now. We have the top oil and gas consultants in the world doing it. We would try our best to keep to the original timeline, although it’s not possible now.
We easily have 10 partners whom we work with. Obviously they are all concerned. If the problem is financial in nature, then they will worry whether it will affect the operations of the business going forward.
The first thing we have done is to explain that operationally, nothing has changed. We are still doing what we were originally doing.
Lim: It’s more of our track record in how we manage our funds. Today we have about US$300mil and we are in the midst of fund raising for our second fund which is worth US$250mil. We are halfway through raising this fund.
Private equity wise, we are relatively young at six years. But for our vintage year, it was pre-GFC (global financial crisis of 2008/09). And our funds hit around 25% to 30% every year since vintage year.
We will set back a bit with what has happened with LionGold, but it will still be in the twenties. It will affect some of our returns, but it is not detrimental to our track record.
We have spent the last six years investing in an infrastructure that would put us in a unique position in comparison to other funds.
We are probably the only one, if not in the world, then in this region, where we have 40 odd people, half of which are operational people. These people are in Singapore, Thailand, Indonesia, Malaysia etc.
We have our own consumer platform, our own branding and marketing team, our own digital strategy etc. We have our own team that does licensing. We design our own merchandise ... it’s very operational in nature.
For our fund, we are focused on what we invest in – food and beverage, healthcare, education, lifestyle and entertainment and media.
For example, when we IPO-ed Chaswood. That was at 3.2 times our investment. We divested a little, but are still holding over 60% of it. We have a public target of achieving a return of five times from our original investment cost.
Is that the best investment you have had so far?
Lim: No, Hi-5 for example. We bought over a year ago. We are negotiating one deal right now where a large company is looking to take a minority stake in the company at above five times our cost.
So what about the LionGold investment?
Lim: The Liongold one, we are still up. Even at this price. Two times up or something.
Why didn't you cash out on LionGold when you had the chance?
Lim: We were going to. This was going to be the year we did it. We were in negotiations. We were actually talking to a few anchor investors to take our block.
Had we sold it, that would be our No.1 investment in terms of multiples. It would have been a 10-bagger. But in terms of size, not necessarily. It’s only US$6mil. We went in late 2008.
When a share price drops as drastically as it has, rarely do you see it recovering. Is privatisation a route you guys would consider?
Lim: At this point in time, we are not contemplating privatisation. Our main objective is to find the right formula to complete the Black Elk deal. Mopping up the shares now is not the right way to get the right value for the company. At $2.70 we did not sell, why would we sell now?
Black Elk would be able to boost our earnings. Right now, our earnings are lumpy, and Black Elk would have been able to smoothen it.